Just as your patients can benefit from regularly scheduled check-ups – your business can also profit from regular examinations to ensure it is in good health. It is critical for physician owners to give the proper attention to the business side of their practices.
Throughout the healthcare industry, it is common for physicians to become so preoccupied with patient care, they unintentionally neglect or disregard monitoring their business operations. This can lead to a host of problems, from decreased cash flow to internal control concerns.
If you think your practice would benefit from a business physical, you can do a quick check-up. If you answer “Yes” to any of the following questions – your practice will likely benefit from a business physical.
• Does your practice feel out of control?
• Do you feel trapped by your practice?
• Is your practice losing money?
• Are you worried about retirement?
A medical practice check-up reviews the overall health of the business and usually begins with an examination of a company’s revenue cycle along with the overall practice operations.
Once an assessment is completed, it will show the areas of the practice that need improvement, which makes it easier to determine exactly what owners can do to run a healthy, profitable practice.
There are industry specific benchmarks we can look at to see how your practice compares to similar types of regional and national practices as we look at the external and internal factors of the business that affect the bottom line.
First, look at the overall operation and corporate structure. Look at separation of duties, system controls, and workflow. Next, look at your office space. Does the current space allow you to see the optimum amount of patients? How does the rent to sales ratio compare?
Next, do an evaluation of your overhead costs. Look at insurance costs, bank charges, staffing, and benefits. This is also a good time to review your direct labor ratio and ask the tough questions. How does revenue compare with gross charges, revenue and costs per procedure?
Next, do a thorough analysis of aging accounts receivable.
A medical practice check-up will help adapt a healthy attitude that will keep you on the right track.
It’s challenging to sit down and take the vital signs of your business, but here is a list of important questions to ask:
Do we need to tighten up our accounts receivable collection processes? Are we paying employees too much compared to industry standards? Are we appropriately compensating our physicians? Do we need to evaluate labor costs and employee compensation programs? Would we benefit from a physician assistant? Do we need to improve our workflow systems and/or internal controls? Are we operating under the ideal entity structure for our practice? Are there any aspects of our operations that would be more efficient to outsource such as bookkeeping and payroll?
These questions are performance indicators that are essential to understand your business and know which specific areas of your practice need improvement. When the areas of weakness are identified you will then know where to direct your time, money, and energy to improve your business.
The health of a business is just like a regular health issue – the earlier the problem is detected, the better the outcome.
Sarah J. Fischer, CPA, specializes in Tax planning and preparation services for individuals, and private companies for clients in several industries including auto dealerships, construction, manufacturing and medical practices. She is a member of American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants.