The Business of Medical Practice Financials
Every month, I have a financial ritual I go through. It has taken me 20 plus years to perfect, but I want to share what I consider important and what I look at every month so you can see if the same optics might help you. Financial Meetings: I have two finance meetings per month. I started with one, and it was very basic in the beginning. If you don’t have any, I recommend setting aside one day a month to meet with your team, your CPA or accountant and/or your banker and just start. It will become more and more apparent which things you should talk about. It is important to become educated on the financials of your business. Today, this is what mine look like. First Meeting: Look at overall financial health. Dissect by revenue stream and by clinic. Look at expenses and strategies to decrease. KEY: What actions do we need to take to move these numbers?
Second Meeting: Big picture planning. Where can we improve? How do we make our ratios better? How can we increase revenue by: Increasing number of visits? Increasing price per visit? Increasing number of returns? Tax strategies. KEY: What actions do we need to take to move in the right direction? Critical Drivers: These are key activities I track on a daily, weekly, and monthly basis. They give me a dashboard of the activities in my company and where we need to be to keep our clinics healthy. Daily Number of patients by type and clinic Daily deposits and expenses Weekly Patients by graph: Similar information as the daily report but in graph format. Billing report by week: Update weekly on our collections and any problems. Weekly reports from each of the people who report to me: What are they working on, progress, what’s working, what’s not, where can I serve them? Marketing report: What we are doing for marketing at each location? Monthly Provider report: Outlined below. Financials: Outlined below. Contracting report: Any contracts coming up for renewal or any issues. Clinic efficiency report: Patients per hour, wait times, etc. HR report: Any personnel problems we may be having, recruiting, raises, birthdays and anniversaries. Future revenue: These are things we are doing which do not show up on the balance sheet but we think may provide great value. Client relations: What have we done for them lately? 10x factor: How do we WOW our customers? Unwritten agreements and written agreements with clients Physical plant report: Maintenance needed, etc. My financial analysis is somewhat sophisticated but easy to learn. If you do not understand these terms, please see my webinar series on financial terms. Basically these are the things I look at each month. Sometimes more and sometimes less but this gives the basic idea.
Financial Statements: I look at my balance sheet, my profit and loss statement, and my cash flow statement. I do this for our entire business and for each clinic individually. Spending time here and understanding the nuances of the individual statements and how they fit together to create the big picture is key to keeping the health of our business. Key Performance Indicators: These are financial formulas I follow on a monthly basis to see how we are doing. These include our gross margin, gross margin percentage, and operating cash generated. Then I calculate our effectiveness by dividing sales/assets and efficiency by COGS/assets, payroll/sales, and sales/number of employees. I then look at my return on assets, payroll, and employees, and net profits/assets, payroll, and employees. Aging A/R Report and Billing Report: Look at this by total, by payer, and by clinic. What are the average A/R days? Any contract or billing issues with any particular payer? Coding analysis report. Provider Report: Patients per hour. Revenue per patient by provider. Collections per patient by provider. Debt Schedule: Is it tracking where it should and should we make any adjustments to our payoffs or payments? Living Every Minute