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Five reports and a dashboard: Review this data every month
Running a practice without looking at financial reports is like diagnosing a patient without checking blood pressure or ordering blood work: Chances are, you are going to miss something important. Truth is, it is impossible to identify or make sound business decisions without first looking at some data.
Practice management systems spit out a dizzying array of reports. But for busy physicians and managers, reviewing these five reports is like taking a practice’s vital signs every month. If things look good, you are healthy. If something is off, it is time to investigate. Aim to review these five reports by the 7th of the month, for the previous month’s data.
Profit and loss statement
This report provides a high-level view of the practice’s overall financial health. A well-constructed profit and loss statement (P&L) shows revenue and expenses, in dollars and percentages, against previous periods and the current budget. If you have ancillary lines of business, such as products/supplements, physical therapy or an office-based OR or lab, ask the accountant to break each out as a separate unit or “cost center.” That way, you can review the financial performance of each unit, separately from the overall practice.
Aged accounts receivable report
This report shows the total amount of money the practice is owed, by patients and payors. It displays the dollars in 30, 60, 90, 120 and 120+ categories to indicate the age of the receivable. Generate the aged accounts receivable (A/R) report by payor type, with insurance and patient balances shown separately for each plan. In a well-managed practice, less than 20% of the total should be 90 days old or older.
Patient receivables
The rise in patient deductible amounts is making this report more important than ever. The amount of patient receivables is a litmus test of how much opportunity exists for improved collections at the time of service. Patient receivables are “real money,” meaning the claim has adjudicated and the amount is due from the patient, unlike insurance A/R which is recorded at gross charges.
Adjustments
Adjustments are the detailed categories to which staff post the amount between an actual payment and your standard fee (a.k.a., “the charge”). These include contractual adjustments and multiple procedure discounts of course, but also adjustments for denials (such as patient ineligible or coding error), and A/R clean up actions (such as bad debt and small balance adjustments).
It is important that adjustment categories are detailed. Miscellaneous write-off or administrative adjustment do not provide any information about the reason for the adjustment and make it easy to adjust amounts off inaccurately and unscrupulously.
Credit Balances
This report indicates overpayments from patients and insurance companies. If balances are researched and refunds made continuously, the report total should be close to $0.00.
In addition to these reports, a dashboard makes the review of performance metrics, such as days in receivable and net collection ratio, fast and easy. Use a simple format, such as the sample below. A quick check of the dashboard each month helps physicians and managers identify whether the practice is on track or in need of a course correction, before the situation becomes acute.
Cheyenne Brinson, MBA, CPA , is a Chicago-based, senior consultant with KarenZupko & Associates Inc., a consulting and education firm that has been helping physicians increase revenue, optimize efficiency, reduce risk and improve the patient experience for more than 30 years. Her motto is, “You can’t manage what you do not measure,” and her projects focus on boosting the bottom line, using data to make decisions and streamlining workflow through the use of automation and better processes.