Financial Health For Your Practice

May 3, 2014

To download this article, click here: Financial Health

The clinical practice of medicine leaves little time for the business side. Many physicians have trouble finding time to review vital financial details. In a solo practice, the physician often entrusts the business side of his practice to one individual, sometimes a person with little experience! In large groups, the responsibility for management of the group’s finances may lie entirely with the office administrator, who has little oversight from physicians or outside professionals. Physicians who oversee a group practice often delegate their fiduciary responsibility because of time constraints.

Both scenarios can be a formula for disaster. Long-­‐term relationships develop over time; often there are no formal policies in place, and employees may develop a sense of entitlement. This feeling of entitlement can easily lead to mishandling of your practice’s funds.

So here are some warning signs and remedies for your physician practice.

Direct questions about revenue (or lack of it) are often met with excuses

Medicare and commercial payors can affect the revenue cycle; declining reimbursements are a fact, but employees often use payors as a scapegoat for poor operational issues that may plague your practice. A competent business manager should be able to predict with a fair amount of accuracy your expected revenue each month; as well, he/she can estimate a decline in revenue if there are changes in your patient load, a payment interruption from a particular payor, contractual changes, or CPT changes.

You should demand documentation and facts to support monthly financial reports. If you use a billing service, they can provide detail that will supplement your monthly financials, and your CPA will easily be able to reconcile practice results to the financials.

Bank statements and general ledger are not presented for review

Physicians are busy! They don’t want to look at bank statements, canceled checks, or online bank statements: “Oh, I let Mary handle all of that.” Not holding your employees accountable is an invitation to entitlement and embezzlement.

Even if you don’t have time to look at the bank statements each month, make sure that you have your employee e-­‐mail these documents to you or print them off for your review. This simple exercise will make an employee think twice before misappropriating your money.

No check signing procedures; no review of online payments

Multi-physician practices suffer the most here. The administrator avoids confrontation and questions by taking checks to various physicians in a group for signature. He/she knows which doctors to avoid. Doctors don’t communicate with each other about expenditures. No one physician is responsible for oversight and reporting. No one physician reviews all expenditures on a monthly or quarterly basis. Payments are made at the discretion of the administrator; vendors and employees can all benefit at the expense of the physician group.

Limit the number of physician check signers in your practice. Appoint a physician treasurer to review all expenses monthly. Do not let employees in your practice sign checks or conduct online business without your authorization. Require separate user id’s for each individual and have one for yourself so that you can sign in and review online activity for all accounts. This issue not only affects group practices, but solo practices as well.

Do you know your employees?

Failure to review hiring practices or delegating the human resource function to one individual can lead to trouble. Does your practice have an organizational chart or a family tree?! Is there a handbook or policy manual that is being followed to determine pay rates, increases, bonuses, disciplinary action, and termination? Do you know how much vacation and sick leave your employees receive?

Review your payroll from time to time. Look at the pay rates, question the distribution of bonuses, overtime pay, and salary increases. I interviewed a group recently where nobody ever ran out of sick leave! They “loaned” it to each other off the record!

Physician leadership and staff relationships

While a close working relationship develops over time between physicians and administrative staff, be aware of unhealthy and unusually close relationships. Physicians who take responsibility for finances in a group practice have a fiduciary responsibility to their partners.

People who handle your finances should be accountable to more than one person in the group. Hire an independent professional to conduct a one-­‐time audit and make sure someone independent is reviewing your books on a regular basis. Group practices should rotate leadership responsibilities. Don’t be complacent and let one physician oversee your finances year after year with the same individuals who are responsible for a vital part of your practice.

To download this article, click here: Financial Health

Previous post:

Next post: