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Practice Management (#9) Overview of Financials for Practice

We are entering a post-industrial age with a very different economy and needs for a different view of wealth. What does this mean for us?

Julie Johnson

on 12 July 2011

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Transcript of Practice Management (#9) Overview of Financials for Practice

Patient Fee Collections Accounting Systems Workspace for Full Version Agricultural Economies Natural Economies Wealth Motivation Economics Industrial Economies Information Economies Expressive Capacities
Spiral Dynamics Physics Info as anti-entropic Evolution Commercial,
Natural Note: This is supposed to be a pretty fast-paced presentation. You can use the forward/back arrow keys on your keyboard to keep it moving along. Define each employee's role in collections Develop a financial policy & stick to it! What portion of the practice income will be indemnity, co-payments, deductibles, or cash?
The schedule and written policy must accommodate fees that are reasonable and customary and reimbursable under indemnity plans, HMOs, PPO's, etc. There is some anecdotal evidence of a correlation between a patient suing a doctor for malpractice because they feel they are being pressured for collection.
There are also legal ramifications regarding professional discounts in different government regulations and also the effort that must be made to collect amounts due from patients to avoid a perception of discounting or rebating fees. If the patient understands the payment policy up front, the room for hurt feelings is minimized. Collect co-pay & deductibles at time of service Verify insurance information immediately to determine eligibility:
Complete ID number
Social security number
Copy of insurance card Should patients sign a financial policy form along with other intake paperwork? Definition of Common Collection Terms Adjustment to Charges - Services rendered which are ineligible for collection. Adjustment to charges include, but are not limited to, professional courtesy discount, service in kind or barter or the portion of actual charges that exceed usual, customary or reasonable charges.

Ancillary Services - Clinical services that are administered in addition to the manipulation, such as x-ray, supportive therapy, orthotic devices and nutritional supplements.

Average Charge per Office Visit - The average services rendered. The average charge per office visit is a function of the office fee structure, the number of new patients and ancillary services.

Average Charge per Office Visit - Gross Billings/Total Office Visits

Capitation - A single fee for patient services. Capitation is the opposite of fee for service.

Cash Method Accounting - An accounting method that recognizes income when collected and expenses when paid.

Census - The patient population of the practice. The daily census is the number of patients under treatment, the active census is the number of patients seen within the past 12 months and the total census is the number of active and inactive patient charts.

Catchment Area - The service area of a chiropractic practice. The primary catchment area is the geographical area where 75% of patients either work or live.

Collections - Income collected.

Collection Ratio - The portion of the gross billings eligible for collection.

Collection Ratio - Collections / (Gross Billings - Adjustments to Charges)

Customary Fee - Fee by a given geographical area for each equally qualified provider. Can be defined by area or Zip Code.

Fixed Rate - A reimbursement rate established by State or Federal Government.

Intensive Office Visits - When the patient is seen more than one time per week.

Length of Stay (LOS) - The function of the inter-relationship of practice development and patient management, which indicates the clinical focus of the practice and accurately gauges patient retention. This takes into account the relationship between acute and rehabilitative care and well care.

LOS - (Office Visits - Well care Visits) / New Patients per Month

No-Show - A Patient who does not show up for a scheduled appointment. The No-Show ratio is calculated as follows:

No-Show Office Appointments / Total Scheduled Office Appointments

Payor Profile - Gross billings allocated according to source of reimbursement, i.e., Blue Cross/Blue Shield, Medicare, Personal Injury, Worker's Compensation, Managed Care, General Group Insurance, Cash.

Reasonable Fee - The average of the customary fee (usually between 75-90%) determined by the insurance company.

Reschedule Ratio - The percentage of no show patients that reschedule appointed office visits within a week.

Reactivated Patient - An inactive patient that reinstates or reactivates patient service.

Scheduled Benefit - A set fee usually written into a contract limiting the coverage. Usually limited by number of visits or dollar amount.

Service Mix - Gross billings allocated according to patient care, e.g., New Patient, Chiropractic Manipulative Therapy (CMT), supportive care, X-ray, and other services.

Services Rendered - The total value of the actual charges billed for patient care activities. Services rendered can also be called production or gross billings.

Usual Fee - The fee you normally charge for a specific service.
Accounts receivable
Accounts payable
Cost accounting
Monthly reporting
Inventory control
Fixed assets
System to tie patient record system to prepare statements & post them to patient accounting record
Claims Processing: claims filed & paid electronically need to be tracked & posted to patient account
Need ability to produce financial statements
Accounting software should have compatibility with other software programs

How do you choose best accounting system?
Ask other doctors
Contact state association for recommendations: www.cocsa.org
Chiropractic Economics: www.chiroeco.com - they have an annual review of software
Quickbooks: www.inuit.com
Practice Support Team: YOUR lawyer, accountant Collection Rate Goal: 95% or above Merchant Account:
Allows you to accept credit card payments Overview of Patient Fee Collections & Accounting Practices Claims Processing Requirements:
Part of a HMO, PPO, etc
May require electronic submission
Go to their website
Medicare: www.cms.gov
Practice Budget It's all about establishing a financial plan projecting revenue & expenses for a period of time.... Where & how will fees be billed & how will expenses occur? Microsoft.com
StartingIntoPractice.com Cash Flow Projections All about TIMING The Breakeven Point When the practice generates enough income to pay all of its bills. Calculate your financial needs using an online calculator:

Must determine:
Cash Flow
Breakeven Point
Monthly Profits
Investment Required
Money at Risk

If monthly expenses are $10,000 then you need to collect IN HAND $10,000 - not just bill $10,000! Cash In = Cash Out Personal Budget
Full transcript