Boost Financial Literacy With This Expert Advice
by BillingFreedom | Dec 05, 2024
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Important: Inform physicians so they can monitor the broader consequences of their work closely. |
Ensuring the financial stability — and ideally, growth — of your practice is at the heart of managing the business side of healthcare. It’s also essential that key figures, like physicians, are informed about their financial status to maintain accountability.
According to Karen Bowman, FACMPE, CPC, CPMA, during a session at AAPC’s 2024 HEALTHCON, "The more physicians understand about the financial health of the practice, the better their performance will be."
Financial Strategies for Involving Physicians in Practice Health
Before presenting financial information to physicians, it's crucial first to collect accurate financial data. Karen Bowman suggests several strategies to simplify this process:
- Ensure that accurate insurance fee schedules are integrated into your practice management system.
- Provide front office staff with up-to-date fee schedules to guarantee correct payment collection.
- Require patients to pay copays, coinsurance, deductibles, and any outstanding patient balances at the time of service and collect payments before surgery for surgical patients.
Staying on top of your practice’s finances is essential for improving financial literacy and understanding the financial health of your practice. Involving physicians—who generate the majority of revenue for the practice—in discussions about finances is key, even if their primary focus is medicine rather than business. While they don’t need to become financial experts, there are ways to incorporate them more into the financial aspects of the practice.
Bowman Recommends The Following Strategies
- Provide monthly dashboard reports to the physician.
- Schedule regular monthly meetings to review these reports.
- Ensure that the physician fully understands the financial reports.
Understanding Your Practice’s Financial Health: Key Metrics and Reports
In financial management, as Karen Bowman puts it, “You need to measure it to understand it and understand it to measure it.” To effectively manage your practice’s finances, it's essential to track specific key performance indicators (KPIs) that can help you assess your accounts receivable (AR) and other financial metrics.
Key Indicators of Accounts Receivable
Several key values can shed light on your practice’s financial health:
- Days in AR: The number of days it takes to collect outstanding payments.
- Gross and Net Collection Rates: The efficiency of collecting owed funds.
- Claim Denial Rates: How often claims are denied?
- Bad Debt Ratio: The proportion of outstanding debt deemed uncollectible.
- Posting Lag (AR Aging): There is a delay in processing claims and payments.
These values often have straightforward explanations. For example, bad debt may arise from self-pay patients, and posting lag could result from a coder or biller being on vacation, missing insurance or demographic information, or simply from inefficiencies in processing.
Essential Reports for Financial Clarity
To gain better insight into your practice’s finances, consider running the following reports through your practice management software:
- End-of-Month Reports: Include gross collection, gross payments, and adjustments.
- Procedure Productivity and Transaction Analysis: Evaluate productivity by procedure.
- AR Aging: Track outstanding accounts receivable.
- Denied Claims Report: Understand the volume and reasons for denied claims.
- Referring Physician Report: See which physicians are referring the most patients.
- No-Show Report: Track missed office visits and surgeries.
- Appointment Lag Report: Track new and established patient visits.
Having these reports available allows for more productive communication with physicians. With concrete data, you can respond to their questions, such as, “Why are my numbers down?” A simple explanation might be, “You took three days off, and there were two holidays,” which can make a significant difference in understanding fluctuations.
Analyzing Your Financial Data
With reports in hand, it’s important to analyze and extract meaning from the numbers. Several key financial equations help gauge the practice’s performance:
- Adjusted Charges: Charges minus adjustments (write-offs).
- Gross Collection Percentage: Payments divided by total charges.
- Contractual Adjustments: The amount of adjustments divided by charges.
- Net Collection Payments: Payments are divided by charges after adjustments.
Bowman suggests maintaining reports for each physician or provider and the practice as a whole. Although the numbers may represent a snapshot in time, they provide crucial insight into your practice’s financial health, helping to identify areas for improvement.
Extrapolating Key Questions from Financial and Referral Reports
While some reports, like the referring physician report, may initially seem unnecessary, they provide valuable insights into where your patient referrals are coming from. Tracking this information can help you identify problems if referrals decrease or stop altogether.
A sudden drop in referrals could indicate a breakdown in the referral process. For example, if records for referred patients don’t make it back to the referring physician, it might frustrate them enough to stop sending patients to your practice. This kind of issue can go unnoticed without regularly reviewing referral data.
Analyzing Insurance Coverage
In addition to referrals, it’s important to track the insurance coverage of referred patients. If most referred patients are covered by Medicaid, Medicare, or Medicare Advantage, it’s worth investigating why the referring physician’s commercial patients are not coming to your practice. Understanding this trend could shed light on missed opportunities or indicate potential problems in your service offerings.
Payer Percentage Analysis for Established Patients
Similarly, analyzing the insurance coverage of your established patients through a payer percentage analysis can help you gauge which insurance companies are most common among your patient base. This data can inform your strategy when addressing payer-specific concerns or identifying trends in insurance coverage shifts.
Communication Between Staff and Physicians
Bowman suggests that administrative staff should gather and present these insights to clinicians. Since referring physicians typically have an established relationship with clinicians, they may be more comfortable discussing these issues, ensuring that concerns are addressed directly with those who can help resolve them.
Emphasizing the Importance of Every Penny
Maximizing revenue is essential in any business, but equally important is ensuring that every penny earned is properly collected and accounted for. Savvy managers understand the need to reinvest some of that income into rewarding their most valuable asset: their staff. Trustworthy and reliable employees are worth the investment, which is why salary increases are often a priority.
As Karen Bowman explains, “The money has to come from somewhere because I want to keep those good stuff that I have working for me. So, we’ve given raises, and I’ve got to figure out how to get extra money into the practice. We’ve got to be collecting every penny that we earned — that makes such a difference!”
Understanding exactly how much you've earned, how much you've been reimbursed, and where your money is being spent is crucial to maintaining a motivated team and ensuring the long-term health and success of your practice. Keeping track of every penny makes a significant difference in both staff morale and the financial stability of your practice.
Maximize Your Practice's Financial Health with BillingFreedom's Expert Medical Billing Services
Ensuring the financial health of a medical practice requires expertise in managing the revenue cycle, from copay and deductible collection to addressing underpaid claims and prior authorization challenges. At BillingFreedom, we specialize in streamlining every step of the medical billing process. Our team of experts is dedicated to optimizing accounts receivable management, recovering old accounts, and ensuring timely reimbursement for services rendered. We excel in handling copay, deductible, and coinsurance collections, as well as navigating out-of-pocket costs to improve cash flow. Our comprehensive approach to revenue cycle management (RCM) guarantees accuracy and efficiency, ensuring your practice remains financially stable and poised for growth.
Trust BillingFreedom for reliable, professional medical billing services—contact us today to enhance your practice’s financial performance!
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