Reviewing end-of-quarter financials is one thing, but there are certain financial reports that practice owners should be reviewing at least on a monthly basis. These include:
#1 Profit & Loss
Your P&L includes a treasure trove of core financial indicators. A monthly review can help you spot any troubling trends in revenue, overhead and net profit.
Action: Create a Profit & Loss statement that displays each revenue and expense line item in dollar amounts as well as percentages. Provide comparisons to previous periods and budget amounts. As an added step, use data from your state medical society or organizations such as the Medical Group Management Association to benchmark your revenue and expenses against similar practices.
Monitor how well you are turning cash over and getting it into the practice each month by reviewing an Aging Report, which measures the percent of your accounts receivable in each “aging bucket.” In an ideal AR scenario, your receivables would fall roughly into the following buckets: 0-30 days = 60 percent, 31-60 days = 20 percent, 61-90 days = 5 percent, 91-120 days = 5 percent, and over 120 days = 10 percent.
Action: If the indicators signal a problem, you’ll want to dig deeper. For instance, if you’re seeing a steady increase in receivables over 90 days, review A/R by individual payer. Try to identify the reasons for the delay by analyzing EOBs for denial patterns.
Write-offs can run the gamut from denials and contractual adjustments to discounts for multiple procedures. Substantial variations to your normal adjustment rate can be a sign of anything from a change in billing patterns to embezzlement.
Action: 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.
#4 Patient Balances
Just as important as what insurance companies owe you is what patients owe you. This has taken on added significance as patients foot more of their healthcare bills.
Action: Skip the alphabetic listing and generate a report by patient account in descending balance order — so that the largest balances will be front and center. Ask for an update from your billing department and/or practice manager on the status of the top 10 or so accounts. Next, review the payment status of patients who are on payment plans. Finally, determine which patient accounts should be sent to collections or written off as bad debt.
Get Out Your Stethoscope
Just as you monitor the vital signs of your patients, you will also need to monitor the signs that reveal your practice's financial health. Have your practice administrator, physician manager or independent advisor conduct monthly monitoring of these key reports. Then, schedule a regular monthly meeting to review and discuss the information with all stakeholders in the practice.
Contact our office to learn more about monitoring your practice’s financial indicators —or for help in understanding what your current indicators are saying.