Find the right accountant: How to save your practice money

A good accountant can do physicians' taxes and possibly save them some money. But a great one can be a medical practice's right arm, helping it run with far greater efficiency and improving its bottom line in ways that doctors might never have predicted.

Sometimes what an accountant does for a medical practice can resemble sleuthing. Mark Master, a Jenkintown, Pa.-based CPA whose clients are predominantly medical practices, recalled a recent case when he spotted a stream of money covertly trickling out a physician's door -- one that turned out to involve betrayal by a trusted employee.

The physician had told his bookkeeper to put all routine purchases, such as office products and x-ray supplies, on the physician's credit card so he could amass frequent-flyer points. The employee did -- but also used the card to buy herself a washer, dryer and air conditioner at a chain electronics store, steaks at a wholesale buying club and much more. Her purchases, totaling about $9,000, occurred over the course of about eight months, and the physician never asked to review the credit card bill.

"It probably happens a lot more than we know," says Master, who added that the employee committing the embezzlement was ultimately fired, prosecuted and convicted. "The hardest problem we have with docs is the ones who say, 'I don't want to get involved in the day-to-day running of the office -- Gladys will take care of it.' "

In other instances, what an accountant unearths might be less dramatic but still save physicians a lot of cash over time. Alan Matarasso, MD, a New York plastic surgeon, long had relied on a CPA to figure out his practice's taxes, give guidance on salaries and other personnel matters, and advice on investments. But he said he reaped an unexpected reward when the CPA told him his office telephone bills were too high, and that he should switch to a local reseller of phone services at discounted rates.

The result: savings in the neighborhood of $10,000 a year.

"That's just an annuity for the doctors," says William Lewis, a CPA in Eatontown, N.J., whose clients include Dr. Matarasso and some 100 other physician practices.

How can a doctor find an accountant who will go the extra mile to find and plug holes through which the practice is losing revenue? It's not a search to be entrusted to the Yellow Pages, nor is it even a matter of simply asking colleagues for a recommendation. Hiring accountants with the skills, credentials, experience, temperament and energy level necessary to assure you long-term benefit might be a challenge. But financial experts say it's an investment that can yield big returns for a practice of any size.

Specialists in medicine

Although it might not be necessary to hire an accountant who specializes in physician practices if your needs are simple, or if personal tax services are all you want, several doctors said they have received the best advice from accountants who deal predominantly with physicians as clients.

"The whole practice of medicine is complicated, and reimbursements are not as high as they once were," says Ahmed Mohiddin, MD, a cardiologist and internist in Brookline, Mass., who has used several CPAs over his 33-year career. "You need someone who advises a lot of doctors."

The main thing physicians should look for in hiring accountants, beyond knowledge and experience, is a feeling of comfort when talking with them -- a sense of confidence that they can be approached easily, will answer questions honestly and sincerely, and will eagerly and promptly return calls, practice management experts say.

The physician also should feel secure that the accountant, while clever and innovative, isn't taking brash steps such as questionable tax shelters and excessive deductions. The doctor should trust the accountant well enough to believe that he or she will choose less risky avenues even if it means saving the practice less. Of course, the physician should review all decisions made by the accountant, to be doubly safe.

"If you have a bad accountant and you get bad advice, believe me, you're in a lot of trouble," says Vinary Kumar, MD, an internist in Marlboro, Mass., one of three medical directors of a 35-physician practice. "Most [accountants] will tell you there are 'gray' areas, and then you have to pick and choose. [But] when he screws up, it's my responsibility, too, so I have to make sure the person I've hired is competent and knows what he's doing."

Many physicians find their accountants through word of mouth, by asking fellow physicians for a name. While this method can work out well for many, it might not always be the best approach, says Gorman Jones, MD, an internist in Birmingham, Ala., who was a CPA before entering medicine.

Physicians scouting for a good accountant can get the most authoritative recommendation from outside their circle of colleagues, Dr. Jones says. "When physicians are looking for business help they tend to look to other physicians, but ... the right people to ask are financial people, like bankers and attorneys," he says. "The physician is generally not in a good position to judge the technical expertise of the accountant, just as the patient isn't in a good position to judge the technical expertise of a physician."

Look also for the following traits when interviewing CPAs and accountants:

Good listening skills. The best accountants are quick studies, asking probing questions on matters ranging from your practice operations and financial goals to your children's future education and your retirement plans. These questions might be blunt and quite personal, but a physician should welcome them. "Whoever doesn't ask questions that really hit you between the eyes is not someone to hire," says James Metzler, vice president of the American Institute of Certified Public Accountants.

Energy. A good accountant finds ways to recommend changes in the practice to help improve its future cost efficiency, rather than just looking at the recent history of the business at tax time.

Warmth and a sense of humor. Physicians can better relate to accountants, and feel they're approachable, when they do their job seriously without being deadly serious, says Jan Neri, a CPA in West Hartford, Conn. "You want to have someone who has a personality," she says. "You have to have someone you can talk to. You don't want to have a geek for an accountant."

The matter of money

Before hiring any accountant, a physician should know exactly how accounting fees will be calculated, and what the physician will and won't be charged for. "It's a fair question for any client to ask, 'What's it going to cost me?' " Metzler says.

Many accountants bill on a simple, standard hourly rate, with fractional charges for tasks that take less than an hour. Billing is based on the previous month's charges. But Metzler says accountants are increasingly billing on a fixed-fee basis, by which a total estimated cost of doing business with a doctor per year is calculated, based on previous years' experience. This sum is then divided by 12 for a equal monthly bills.

"Doctors should understand how they will be charged," says Judy Aburmishan, a CPA in Bannockburn, Ill., who specializes in medical practices. "Is it a retainer or a guaranteed [rate]? It may be a monthly estimate, but if more work is required than expected for a retainer, there could be an extra charge. This is not capitation, and sometimes doctors don't understand the billing relationship. Get the accountant to explain the billing."

Physicians are commonly asked to sign an engagement letter with an accounting firm that outlines the scope of work that both sides agree upon, what the physician's and accountant's responsibilities are, the period the agreement will be in force, and the fees, Metzler says. It also can specify who at the accounting firm will work on the account if a doctor has a preference for a specific professional. Both sides should agree on a new engagement letter annually, he says.

How much a medical practice should expect to pay an accountant depends on the range and complexity of services rendered, but a typical large practice might spend $12,000 to $60,000 a year for a CPA who does extensive management services, Neri says. The average rate for CPAs is about $125 per hour, but $85 for a paraprofessional or $275 for a full partner, she estimates.

Because doctors often don't want to feel they're being charged for every call they make to an accountant, no matter how simple, many accountants do not bill physicians for brief calls on general matters, Metzler adds.

"There should be some comfort [for] that physician to pick up the phone without the fear of being billed inappropriately," he says. "You want to encourage your client to call you."

Indeed, many accountants and CPAs say that, considering how competitive their field is, there's probably no reason for doctors to feel nickel-and-dimed for every routine financial question they ask. Nor, they say, should an accountant lack the flexibility to chat with a physician on the phone or at the practice whenever the doctor can squeeze in the time.

"Accounting is starting to become a commodity," Master says. "You have to differentiate yourself from other accountants, especially in that [clients] are able to reach you. I carry a cell phone and give out my cell phone number, and don't consider it to be a 9-to-5 job. I can meet with doctors at 6 [a.m.] before rounds, or late at night at 8:30 after they're done in the operating room."

But neither should physicians be unnerved by the reality that most accountants are precise people, and do keep careful track of the time they work, Aburmishan says. That's true no matter how the bill is ultimately tallied and totaled.

"I try to explain to doctors we're just like attorneys," she says. "All we sell is time. We're not selling a product. All we're selling is knowledge and advice."