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Please note: Our offices will be closed on May 20th for IT upgrades. Limited availability from May 21-24 due to team training. We may experience short delays in accessing records and responding to inquiries.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please note: Our offices will be closed on May 20th for IT upgrades. Limited availability from May 21-24 due to team training. We may experience short delays in accessing records and responding to inquiries.
The adage, “where there’s smoke, there’s fire” holds particularly true when it comes to practice finances. Problem signs — from lagging collections to soaring overhead — may start off at a simmer, but can quickly reach full boil. The trick is to look for the smoke so you can put out the fire before it rages out of control.
Your receivables drop — A drop in accounts receivable can be a smoke signal that production is lagging. The trick is to determine if the production hit is temporary (a dip in charges from a physician who has been away on vacation) or if it is something much more serious, such as a loss of referrals.
Put out the fire: Set up your monthly AR summary to show the trends month-to-month as well as year-to-year.
Your collections dwindle — You may be able to see this one coming if you spot an increase in receivables over 90 days old. Here, the culprit could be anything from delayed claim submissions to denials and poor follow-up.
Put out the fire: The best defense is a detailed accounts receivable report that includes not only overall aging, but also aging of patient receivables and insurance receivables.
Your overhead soars — Salaries increase and the cost of supplies inevitably rises. But what is not inevitable are sharp and unexplained increases in practice overhead. Soaring costs demand investigation. Yet, it’s important to remember that revenue also factors in to the overhead equation. Declining revenues are sometimes the culprit behind inflated overhead.
Put out the fire: Benchmark average overhead for your geographic area as well as your area of practice. Break practice expenses into categories (salaries, supplies, rent, etc.) and compare costs from month-to-month and year-to-year.
Your adjustments jump — Over time, a pattern should emerge and your practice’s typical adjustment rate should become obvious. Be wary of any major variation, which can be a sign of anything from changes in billing patterns or payer mix to embezzlement or a recurring data entry error.
Put out the fire: Depending on your billing cycles and productivity, adjustments can follow charges by two to eight weeks. To accommodate for this, compare the current month’s adjustments to charges and collections from the prior month or even the month before.
You start seeing late charges and penalties — A medical practice that can’t pay its bills within 30 days may be suffering from serious cash flow issues. Getting dinged with late charges and penalties is compelling proof.
Put out the fire: Review practice bank statements for any unusual or unexpected withdrawals to rule out fraud. Then, conduct a cash flow analysis to determine where the bottleneck is occurring.
Your practice finances will let you know when trouble is brewing — if you know what to look for. Your best bet for spotting the smoke is with a regular process of monitoring and review. Start by establishing a basic dashboard* of relevant metrics and key indicators — and keep an eye out for any variances.
Then, put a practice administrator, physician manager or outside accountant on the job of monitoring the practice’s financial indicators on a monthly basis. Finally, schedule a regular meeting to review and discuss the information with all stakeholders in the practice.
Need help monitoring your practice’s financial indicators? Our experienced accounting professionals can help.
* An electronic dashboard could prove very useful to your practice. To learn about dashboards and see an example, click here.
Stay on top of filing and reporting deadlines with our tax calendar! Our tax calendar includes dates categorized by employers, individuals, partnerships, corporations and more to keep you on track.
Lenders say that physicians have shown more interest in owning real estate lately than in the past. Why?
You build equity. Plain and simple, when you sell your building, you get something. Over the long term, the property can be worth more than the actual practice itself.
You lock in your cost of occupancy. Rents will always go up, but your mortgage payment won’t. This may result in higher profits in years to come when you’re likely paying less than market rental rates to occupy your facilities.
You enjoy flexibility when selling your practice. When it comes time to retire, you can include the property as part of the practice’s assets or keep the property and lease it to the new owner. These rent payments can then provide a steady retirement income.
You can replace some salary with rent payments and pay less payroll tax. Because rent is considered to be non-earned income, you can reduce your salary by the amount of rent you collect and save on payroll taxes.
Although most financial experts agree that it makes more sense to buy a home than rent an apartment, the pros and cons of office ownership aren’t quite so clear-cut. Physicians and dentists need to weigh a variety of factors when making this important decision, including:
Once you buy the property, you’ve obviously lost some flexibility if you need to move later. For this reason, purchasing may not be the best option for fast-growth practices or practices that have a hard time forecasting their space needs.
But if yours is a mature practice and you’re confident that you can take a long-term perspective, then purchasing your business facilities could be a beneficial move. And with interest rates still at lows not seen in over a generation, this could be a truly unique opportunity to lock in a low cost of occupancy for years to come.
Who better to discuss your long-term financial goals with than your accountant? Our experienced professionals can “run the numbers” and help you decide whether purchasing or leasing makes the most sense for your practice.
Make no mistake; dentistry is one of the most overhead-intensive professions. According to Dental Economics Magazine, overhead as a percentage of practice revenue runs upwards of 73 percent for the average American dentist.
Untamed, this “cost of doing business” can take a big bite out of net profits, making practice owners feel they are not earning enough for their efforts.
Of course, you could ramp up production. But that requires working harder.
Or, you could take steps to tame your overhead. Here, the idea is that a dollar saved in practice expenses is a dollar earned. With that in mind, consider how you can reduce costs in these key expense categories:
Supplies – If you look, you’ll probably find the overhead beast lurking in your supply room. Are you using disposable safety glasses and bite blocks for X-rays? Supplies that can be sterilized and reused might be a more cost-effective alternative. At the same time, review supply costs in terms of a desired percentage of production. For example, if you want to keep dental-supply costs within a range of 4 to 5 percent — and you produced $30,000 last month — your cost of supplies should not have exceeded $1,200. Use $1,200 as your target amount for the next month, and track your progress.
Lab Costs – Cost isn’t the only factor in working with a dental lab. The critical question really is whether the lab provides quality products that you don’t have to send back for adjustment again and again. Likewise, are the lab fees reasonable in terms of the revenue you generate for the procedure?
Staffing – Nothing drains overhead like poorly performing staff. Make sure you’re getting value for the salaries you pay. That starts with investing time and money in the training your staff needs to perform at the top of their game. You can also look at shifting some portion of salary (which is a fixed overhead expense) and making it a variable, performance-based expense. With a production-based bonus system, for example, salaries increase only when staff members work harder and more efficiently.
Occupancy — Are you paying rent at a reasonable rate for your location? With communities and demographics changing so rapidly, it might be smart to only commit to a lease for 5 years or less — and negotiate for extension options. At the end of the lease you could determine if the location of the office is still attractive.
The bottom line is that when you cut overhead, you increase your take-home profit — day after day, year after year. Take the time to review your financial statements and analyze overhead costs at least quarterly and annually.
Contact our office today for help in getting a handle on your current practice overhead, as well as establishing target overhead percentages.
Stay on top of filing and reporting deadlines with our tax calendar! Our tax calendar includes dates categorized by employers, individuals, partnerships, corporations and more to keep you on track.
Second in a series
The shift is on as healthcare providers are increasingly being incentivized to provide high-quality care at a lower cost.
Ultimately, the goal is delivery of healthcare that provides patients with:
– the best outcomes,
– from the most appropriate treatment,
– by the right kind of provider,
– at the right time, and
– in the most appropriate setting.
Under a value-based payment model, physicians are rewarded for good work — not just good workloads. Current value-based payment models include:
Bundled Payments — One payment is made for the entire range of services provided around a particular episode of care. Payment is typically paid to one entity (e.g., a hospital), which then pays the participating physicians from that bundle.
Shared Savings Arrangements — A physician is rewarded if patients have better-than-average quality/cost outcomes, and is penalized for excessive costs and poor outcomes.
Value-Based Payment Modifier — The Value Modifier provides for differential payment to a physician or group of physicians under the Medicare Physician Fee Schedule (PFS) based upon the quality of care furnished compared to the cost of care during a particular performance period.
As providers consider entering into value-based and/or risk-sharing arrangements, they will certainly need to focus on the details. In particular, physicians are well advised to evaluate these critical factors:
It is estimated that in the next 10 years, 50 percent of physician compensation will come from value-based care payment models. Physicians who think through the issues and opportunities now will be better prepared for success in the value-based world.
Value-based care is a complex issue requiring careful analysis of its potential impact on physician practices. Please look for our continuing blog articles on this topic.
For the most part, the Affordable Care Act has flown under the radar of many dental professionals. Yet the reality is that “Obamacare” includes provisions that will impact the dental profession. Make time now to bone up on the ACA’s potential impact to your practice’s bottom line.
Under the ACA, pediatric oral care benefits are considered to be “essential health benefits” that must be covered by all insurance policies, whether purchased through the insurance exchange or not.
Each state determines what will be covered as part of essential health benefits. In Colorado, for example, all children ages 0 to 18 years must have dental coverage through the purchase of a pediatric dental benefit, or by enrolling in Child Health Plan Plus (CHP+) or Medicaid. Currently, the Colorado health insurance exchange offers 14 dental plans through five carriers.
Note that dental benefits can be purchased as a “stand-alone” dental plan or through a dental plan that is “embedded” into the general medical coverage. This means that your office administrator and billing staff will need to learn how to file claims for dental coverage embedded within a general medical insurance policy.
Plain and simple, the Affordable Care Act will increase the number of patients who are eligible for dental services. According to the American Dental Association, expansion of dental benefits under the ACA (including Medicaid expansion) will generate some 11 million pediatric dental visits and 1.7 million adult dental visits.
This means you’ll need to gear up for two distinct challenges:
Many dentists find that there are far fewer administrative issues and fewer disputes over payment when working with Medicaid than with private insurance providers. According to Colorado’s Cavity Free at Three initiative, the state is considered to be one of the best for doing business with the Medicaid population. The state is responsive to concerns, reimburses for services quickly, and doesn’t require a lot of wait time for prior authorizations.
Dental practices would be well served to perform a financial analysis of the ACA’s impact on their bottom line. That would include determining if accepting this new crop of dental patients makes financial sense — as well as deciding how many new patients to accept if it does.
For example, dental practices that are used to collecting at the time of service will need to adjust to the often-lengthy claims process. They will also incur costs to hire or train staff who are experienced in filing medical claims. (Filing a “clean claim” can mean the difference between a profitable visit and one that drains the bottom line.)
Dentists also need to keep in mind that the new 2.3 percent medical device excise tax imposed by the ACA may well drive up their costs. The tax is imposed on the manufacturers of medical devices, yet many believe that these costs will be passed down to the dentist and eventually the patients they serve.
According to the ADA, the Affordable Care Act may increase dental spending by $4 billion, with the largest effect seen in the Medicaid population. Ultimately, practices that are prepared to handle these newly insured patients could benefit. Please feel free to contact our office for assistance with performing a financial forecast to understand how the Affordable Care Act could affect your practice.
First in a Series
As healthcare reform inevitably moves forward, the concept of value-based care is one that physicians cannot afford to ignore.
At its core, value-based care focuses on rewarding good work rather than good workloads. It represents a wholesale shift by the federal government and private payers from paying for procedures and volume, to paying for outcomes and value.
What is driving the evolution to value-based care? In essence, employers, health plans and the federal government have expressed serious concerns related to:
– Perceptions of unsustainable costs
– Recognition that fee-for-service drives volume, not value
– Awareness of the potential for savings
– Current poor performance on quality indicators
These stakeholders have a desire for more value for the money spent.
Value-based care utilizes new payment models to reward better results in terms of cost, quality and outcome measures. These new payment methodologies include:
Accountable Care Organizations — The Affordable Care Act included a Medicare provision that allows healthcare providers to participate in accountable care organizations (ACOs). Utilizing shared savings/risk models, ACOs are incentivized to enhance quality, improve beneficiary outcomes and increase the value of care for a defined population across a broad scope of services.
Bundled Payments — Value-based care also seeks to incentivize coordination of care through bundled payments. For example, a cardiology group may partner with its local hospital to ensure coordinated care for patients admitted for angioplasty. The relationship might involve the hospital, the hospitalist, the discharge nurse, the cardiologist and even the primary care physician. A single payment is divvied up among the providers, with positive outcomes rewarded and negative ones penalized (legislation reduces Medicare payments for potentially preventable hospital readmissions).
Outcomes-based Reimbursement — This pay-for-performance financial model links a portion of a provider’s revenue to a quantifiable performance standard that reflects process or outcome criteria.
Patient Center Medical Home —In this financial model, a group of primary care providers agree to accept responsibility for managing the health of and delivering services to a defined population for a per-patient payment.
Another component of value-based care is what pundits are calling “show-me medicine.” Healthcare providers will increasingly be incentivized to track outcomes and quality metrics and, at some point, will be penalized for not participating in quality reporting programs (e.g., Medicare’s Physician Quality Reporting Initiative). Ultimately, payers will reward positive outcomes and adherence to best practices.
It is estimated that 50 percent of physician compensation in the next 10 years will be value-based. As that happens, physicians will certainly face new issues and opportunities.
Opportunities will arise because physicians are so integral to health care delivery and health care stakeholders will be concerned with physician success in a value-based world. As a result, physicians will have critical choices to consider. They will want to work with healthcare partners that fully and fairly enable an equitable approach to compensation. Equally attractive to physicians will be hospitals and health systems that provide clinical and business resources that promote effective collaboration — everything from care coordination and patient engagement tools to predictive models for health outcomes.
Value-based care is a complex issue requiring careful analysis of its potential impact on physician practices. Please look for our continuing blog articles on this topic.
