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Practice Management Alert

Best Practices:

Try These Tips for Boosting Financial Literacy

Published on Tue Jun 18, 2024

Hint: Make sure you involve physicians, so they understand the ripples of their work.

Making sure your practice is financially stable — and, ideally, growing — is the crux of the business side of healthcare. And making sure key contributors to the bottom line, like physicians, know what’s going on, is important for accountability.

“The more the physician knows about the financial health of the practice, the better they will be,” says Karen Bowman, FACMPE, CPC, CPMA, in a session at AAPC’s 2024 HEALTHCON.

Remember These Strategies

Before you can present a physician with the numbers, you need to gather the financial information! There are some tricks you can use to simplify the data collection, Bowman says:

  • Make sure you have accurate insurance fee schedules integrated into your practice management system.
  • Provide front office staff with fee schedules to make sure they’re collecting the correct payments.
  • Require patients to pay copays, coinsurance, deductibles, and any patient balances at the time of service, and if you have surgical patients, collect those payments before the surgery.

Staying on top of your practice’s finances is a key way to boost your financial literacy and know what’s going on. Make sure you’re involving physicians — whose services bring

in most of the money to a practice — in discussions and updates about the financial health of the practice, even if the physicians you work with care more about medicine than business. You don’t need to ask them to hang up their white coats for custom suits, but there are some strategies to bring them deeper into the financial fold.

Bowman suggests these three tips:

  • Provide monthly dashboard reports to the physician.
  • Schedule monthly meetings to go over dashboard reports.
  • Ensure physician understands all reports.

Get Into the Financial Nitty-Gritty

In terms of finances, “You need to measure it to understand it and understand it to measure it,” Bowman says.

Some of the key indicators of your practice’s accounts receivable (A/R) are evident in certain values: the days “in” AR, gross and net collection rates, claim denial rates, bad debt ratio, and posting lag. There may be some simple explanations for some of the values. For example, bad debt may come from patients who are self-pay, and posting lag may be due to a coder or biller being on vacation and work just not getting done.

Here are some of the reports you can run through your office’s practice management software to better understand the numbers, Bowman says:

  • End-of-month reports with gross collection, gross payments, and adjustments
  • Procedure productivity and transaction analysis
  • Denied claims report
  • Referring physician report
  • No-show report; track office visits and surgeries
  • Appointment lag report: Track new and established patient visits

Having this information at hand can make your communication with physicians easier, because you have actual data with which to answer their questions.

“When you have that physician say, ‘Why are my numbers down?’ ‘Well, you took three days off, and there were two holidays.’ That makes a big difference, right?” Bowman says.

As for the reports, there is flexibility in what you look at, but think of each report as a perspective, and try to get as many perspectives as you can.

“You all can do it anyway you want to do it, and you’re probably doing it right now,” Bowman says. At the practice where she works they “look at total, patient charges, and the number of visits that we have, and that could include surgical visits and [evaluation and management] E/M visits and everything, the gross charges, the total payments, and total adjustments. Look at your bad debt ratio, too,” Bowman says.

Once you have all of these numbers in hand, you still need to know how to extract meaning from them. Here are the some of the important equations that will help you understand how your practice is actually doing on the financial front.

“Look at your adjusted charges: These are after write-offs. It’s charges minus the adjustments. Your gross collection percentage: Payments divided by the charges. Contractual adjustments divided by the charges. Net collection payments: divide by the charges minus the adjustments,” Bowman explains.

“For accounts receivable: I have a report for each one of my physicians or my providers, and then I have one for the practice as a whole, and they all populate into that,” she says. Lots of factors affect your accounts receivable (A/R), and the number may function more as a snapshot of a moment rather than a fuller depiction of any patterns or trends.

Extrapolate Some Important Questions

Some reports, like referring physician reports, may seem kind of random to keep track of. These specific reports can provide some context about where your referrals are coming from.

Such reports can reveal an issue if your referrals become less frequent or stop completely.

For example, a change in referral numbers may reveal a breakdown in the referral process. For example, situations arise where the records for the referred patient don’t make it back to the referring physician, and that may be aggravating enough for the referring physician that they stop referring to your office, Bowman says.

Also, don’t forget to see what insurance the referred patients use. If referred patients are mostly covered by Medicaid or Medicare or Medicare Advantage, then you may wonder where the referring physician’s commercial patients are heading — and why they aren’t coming to your practice.

Bowman encourages the administrative staff to find this data and present it to clinicians, and then encourage them to bring it up with the referring physicians, because they usually often have an established relationship where such questions may not be uncomfortable to ask.

Similarly, you should look at the insurance coverage of your established patients via a payer percentage analysis.

Emphasize How Every Penny Matters

Most businesses want to bring in as much money as possible, and savvy managers allot some of that money to go to bumping staff pay, because reliable, trustworthy employees are worth the investment.

“So, the money has to come from somewhere, because I want to keep those good staff 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!” Bowman says.

Knowing exactly what you’ve earned, how much you’ve been reimbursed for that work, and how you’re spending your money is crucial to happy — or at least less stressed — staff, as well as for the health and longevity of your practice.

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