Keeping your finger on the pulse of your practice

Question: I know as the physician owner of my practice it is important to keep a finger on the pulse of what's going on financially and operationally in my office. However, I am so busy with treating patients and the associated paperwork, I don't seem to have time to look at the big picture, much less the day-to-day happenings in my office. Can you recommend any ways to do this?

Answer: You are right to be concerned about this issue. Many times we encounter doctors who do not come to the realization, until it is too late, that they really don't know what goes on in their practices. These situations could be the unexpected departure of an office manager or a key employee, a call from a disgruntled patient or unexpected cash-flow problems.

The reality is that you don't have to spend a lot of time in the financial and operations areas of your practice if you implement the appropriate tools, reports and processes.

There are at least three tools that need to be implemented effectively to maintain (or increase) the profitability of your practice:

• An effective telephone system.
• Sound financial policies.
• An effective practice management/billing system.

Typically, the patient's encounter with the office begins with a phone call. Often, it is the telephone system, not the person answering the call, that causes a patient to become frustrated.

Areas to look at include too many rings before the phone system picks up the call, too many routing options, unclear instructions, and the number of calls that get put into voicemail.

The office staff's ability to transfer calls, page other staff members and access messages easily is also a concern that should be addressed with your telephone system vendor.

We find that while most of the practices we work with have a financial policy, very few adhere to them. A financial policy includes such items as payment terms and responsibilities, acceptable methods of payment and availability of payment plans.

It is imperative that the physician owners review their policy for completeness and effectiveness. Everyone in the office should read the policy and commit to adhering to it. Copies of the policy should be readily accessible to patients, and every patient should be asked to sign a copy confirming that they have read it and will abide by it. This copy should be placed at the back of the patient's chart.

Like the telephone system, the presence of an effective practice management/billing system is a customer service tool as well as an internal productivity tool.

Easy access to accurate patient information is an important aspect of quality patient care and service. An effective system allows the office staff to enjoy process efficiencies and streamline their work. It should generate statements that are easy for the patient to understand and reports that the physician owners and management may use to monitor activity and make projections for future growth.

Generating reports

Typically, your practice management/billing system has the ability to generate a great deal of management information. However, there are at least 10 key performance indicators that physician owners should have at their fingertips. The areas of interest are related primarily to profitability and productivity and include:

• Gross charges.
• Gross collection rate.
• Net (adjusted) collection rate.
• Gross number of days in accounts receivable.
• Accounts receivable greater than 90 days.
• Cash flow (amount of cash coming into and going out of the practice each month).
• Overhead expense ratio (operating costs).
• Patient visits per physician per day.
• Co-payment rate.
• Payer mix.

These key performance indicators should be reviewed every month with the other physician owners and the office administrator. Any variances from month to month should be explained and corrective action taken if necessary.

The practice should also conduct a patient satisfaction survey on a regular basis. The findings should be presented to the physician owners on a semiannual basis.

Next, there are three process areas that if not performed effectively can quietly whittle away your revenues and profitability.

These process areas are:

• Internal controls and cash management.
• Billing and accounts receivable.
• Registration and appointment scheduling.

All payments the practice receives, whether via mail or over the counter, should be documented and accounted for on a daily basis.

There must be daily reconciliations between the actual charges and payments and the source documents (superbills, explanation of benefits or payment stubs), which are then totaled and reconciled to daily cash logs, to billing system daily reports and to the actual deposit that is taken to the bank and entered into the practice's general ledger. At the end of the month, all payments in the bank should be reconciled to the billing system revenue reports. Any discrepancies, regardless of the amount, need to be accounted for.

The practice should establish benchmarks for timeliness and quality of billings. And, most important, achievement of these benchmarks should be monitored.

The benchmarks, which may include accuracy of patient information forms, data input accuracy, number of superbills entered per day and number of claims processed per week, may be established internally, based on practice experience or with the help of published benchmarks.

Other processes that need to be monitored include insurance and patient account follow-up. Most practice management/billing systems provide tools and reports to assist you in designing these processes in an effective manner.

The registration and appointment scheduling processes are probably the most critical of all because those processes may impact the number of patients seen by the practice and how quickly the practice gets paid.

Time and resources should be allocated to ensure that the right people are staffing these processes, and that they have whatever it takes to make sure that the processes produce accurate results, are streamlined and professional-looking to the patients.