As a healthcare practitioner, your day is filled with reviewing test results and medical histories and meeting with your patients. Financial reviews may be the furthest thing from your mind.
However, ensuring the good health of your practice also requires regular attention. Are your procedures as efficient as they can be? Is your staff spending too much time on tasks that could be managed a different way? What about your billing system? It’s difficult to know the answers to these questions and reach your financial goals unless you periodically review and update your operations.
A good way to begin assessing the health of your practice is to conduct an assessment. The following six considerations should help you get started.
1. Track Your Practice’s Workflow
First, you should verify that your practice has high-quality, streamlined reporting procedures in place that allow employees to log important information without disrupting their core duties. Dedicating too much time to inefficient reporting and paperwork filing can slow down operations and impact patient results. Utilize software solutions that make it easier to track customer visits and diagnoses, prescriptions and other important data with minimal interruption to the medical practice’s operations.
Another way to measure your practice’s workflow is to review employee responsibilities. Assess who is responsible for which aspects of the practice’s day-to-day tasks and reassign tasks as needed to eliminate duplication. Keep employees updated on office assignments so that everyone understands the appropriate point of contact in each area. Provide cross-training opportunities and assign an alternate to handle operations in case the primary employee is absent.
2. Measure Your Practice Against Industry Benchmarks
Do your patients encounter longer than average wait times? Does your practice have too much overhead? Consider hiring a professional firm that can assess your practice’s management and outcomes against other practices to compare profits, the number of staff per patient and accounts receivable. Understanding how your practice compares to industry averages can help you know whether there is a need to reorganize staff and dedicate more resources to certain parts of the practice.
3. Conduct Regular Financial Assessments
A lot more goes into reviewing a medical practice’s financial health than looking at the year’s final tax bill or profit margin. The practice should regularly monitor total charges and collections per patient visit, gross and net revenue broken down by type of care or service provided, how long bills remain in accounts receivable and insurance reimbursement wait times. Make sure your accounting team has the data and resources it requires to perform these assessments and identify where the practice might be wasting money. Don't have an accounting team? Consider working with a CPA who knows your industry.
4. Attract and Retain Talent
A successful medical practice depends on quality care providers and talented supporting staff. Doctors, nurses, physician assistants, front desk representatives, administrators and other employees all play a key role in your practice's operations.
If your practice has a high rate of turnover or you have difficulty filling open positions, you may need to change office culture or offer more competitive compensation and benefits packages. If you aren’t sure about how employees view the work environment at your practice, you might consider hiring an outside consultant to recommend changes.
5. Review Your Capital Assets
Along with human talent, a medical practice should keep and maintain good facilities, medical equipment and information technology tools to maximize productivity and quality of care. Depending on how long a medical device has been in use and what new models are available, the practice may want to evaluate the return on investment from medical equipment upgrades.
6. Stay Up-to-Date on Policy Changes
Tax reform and regulatory changes create additional financial challenges and opportunities for medical practices. The new tax law enacted in 2017 may change the tax planning strategies practices like yours decide to use in the years ahead.
The Tax Cuts and Jobs Act (TCJA) introduced many changes that can significantly affect the taxation of your practice and your individual income. Changes in the corporate tax rates and the new 20% Qualified Business Income Deduction mean you should assess whether your current entity structure remains a good fit. Doctors will want to consider and plan for how they individually will be affected by the many changes happening via tax reform. It's essential to work with an accounting expert to understand your best strategy going forward.
These are just some of the many things you need to consider as you review the current and future state of your practice. A thorough financial review with regular check-ins will help ensure your practice is in sound shape so you can focus on the health of your patients.
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