Posts Tagged profit

How Can You Use Financial Metrics to Improve Profitability?

How Can You Use Financial Metrics to Improve Profitability?

There are many factors that can help your practice maintain financial profitability. It is especially important to review the structure of your financial statements to properly assess and optimize the health of your practice. Recently, we sat down with one of our healthcare experts, Miko Kulovitz, to discuss how important financial reporting can be to practice and what you can do to improve it.  We have outlined our conversation here:

Question: What are some of the common changes you recommend for a medical practice when you first look at its financial statements?

Answer: When we first look at the financial statements, we want to determine the health of the practice. Are they doing well? Are there areas we could improve? And those financial statements don’t always give us the information we need. A majority of practices use accounting software that is similar to QuickBooks, and that set-up isn’t always the best set-up that is going to show the medical practice how the financials need to be arranged. So when we come in, we’ll typically start with the construction of the financial statements and consider if the information is put together in a way that’s going to be useful to the physicians in making decisions and really driving the practice.

Question:  What does that generally look like?

Answer: We really want to be able to see what the operating net income is, aside from the physician expenses. We also want to be able to track by location how each division is doing. We want to see the profitability by provider. So there are a number of metrics that we need to make sure that we can track and have the financial statements divided in a way that presents that information to us.

Question: What are some of the financial metrics and practice profitability metrics that you like to monitor when you begin working with a practice?

Answer: There are a lot of key metrics that we review⁠—from the financials to the revenue cycle management. We want to look at the practice as a whole, see how it is doing and find out how it stacks up to peers on a state level and a national level. We really want to make sure that a practice’s metrics are in line with what other practices of a similar size and specialty are doing.

We also want to make sure that A/R aging is the youngest that it can be. We don’t want A/R to age into older categories because that makes it a lot harder to collect, and we want to see the days in A/R. We want to make sure that money is collected as fast as possible and that the cash flow cycle is healthy. We want to look at the financial statements and see what the overhead percentage is. We want to look at those individual expense categories and see if the larger items, such as the salary, benefits and medical supplies, are in line with what we are expecting to see. And because we work with financial statements of physician practices on a daily basis, we know what those parameters are; so, those anomalies will often stand out to us and help us pose the right questions so we can do the research and see if there are things that we need to explain further.

Question: When you work with medical practices, one of the key things that the physicians are focused on is the compensation formula. Could you make some comments about the common compensation formula structures that you see and what is effective in a practice?

Answer: There is no one-size-fits-all method to compensating the physician. Every practice is different, every specialty is different. So, we really want to take a look at what makes the most sense for that particular practice. The compensation model should be set up in a manner that incentivizes the behavior that’s best for the practice and also rewards the physicians for the work that they are doing. We want to make sure that the compensation model is compliant with Stark Law, that there are no issues that would be a detriment to the practice and that the compensation model is fair. A lot of times, there are issues in which the model is not achieving the goals that the practice wants to achieve, so we really want to take a look to see if this model is performing as we need it to perform and if it is accomplishing those goals.

Question: I would assume a single-physician practice compensation model is not really a big deal. When you get larger and larger, are there some creative ways you’ve seen practices compensate their physicians?

Answer: Again, there are many different ways to do that. The main thing is to focus on the revenues, allocate those appropriately and make sure that the practice is compliant. Also, with the overhead, it’s going to be a matter of the practice’s preferences and what makes the most sense. Some practices split overhead evenly, and some might allocate a percentage of variable or percentage of fixed. Again, there are many ways to slice that. It is really important that we talk to the physicians and get to know the practice to be able to help guide them in a direction for what plan is going to work best for them.

Article contributed by Miko Kulovitz, Healthcare Senior Manager, Warren Averett Healthcare Consulting Group. Warren Averett is an official Gold Partner with the Medical Association.

Posted in: Management

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Paying More Money Is Not the Best Way to Retain Great Staff

Paying More Money Is Not the Best Way to Retain Great Staff

Medical practices are painfully in need of keeping their top employees. The time, costs and dangers of recruiting replacement personnel are just part of the issue. Loss of key team members negatively impacts patient care, practice profitability, and staff morale. All administrators agree the retention of a trained, well-performing and mutually cooperative staff is a key to success in medicine. How do you increase your prospects of keeping your “keepers” so that you lose only the ones who needed to go anyway? There are three secrets to success in this area and none require pay raises or bonuses.

Most important is to show them that you respect them. Make them feel valued by your praise of their efforts and character. Try to “catch” them doing something good. Take an employee to the office of another physician in the group and praise some special thing they did recently. Prompt the physicians about special employee efforts and send them off to find and praise the staff member. Write key staff notes of thanks for their sacrificial efforts. Set aside time each week to praise one to three members of your team. Conduct “stay interviews” with select team members. Also, the physicians and practice leadership should be aware of the circumstances in their life. Do they have a child excelling at academics or athletics, are they planning a special vacation, are they approaching empty nest status, are they caregivers to parents or other family members, do they have a special hobby they enjoy discussing, are they saving for a major purchase like a vehicle, boat, or home?

Caring about the lives of your team affirms their value to you. Giving them a $500 bonus deposited into their joint checking account is a currency over which they may have limited control and when it is spent, it is forgotten. Giving them a handwritten note or sincere verbal praise is a “currency” they can keep for their very own and use again and again as they replay the message in their minds. The praise costs your practice a little of your time and a modicum of empathy.

After a culture of merited praise is established, it is easier to correct or discipline them when necessary. Ignoring mistakes or poor conduct is a sign of not caring about the person. Think of the influential family members, teachers and coaches in your life. Weren’t they candid with you about times when your efforts were not your best? If the staff rest in the certainty of your gratefulness for them, they can handle the truth about poor performance from you better. Always praise their character and criticize their actions. In other words, speak to the actions, but don’t attack their character. Avoid a “compliment sandwich” where you say something nice, slip in the problem, and then end with another positive. Be brief, be clear, be firm, but be nice.

New employees need some corrective discussion as early in their employment as possible. Not only is there usually an area for enhancement, but it establishes that you will exercise the right to address them when you deem necessary. For the millennials in your office, this discipline may come as a great shock. They were raised in an era when every child received a participation trophy just for showing up, and as children, they were assured they could be anything they wanted to be. If there were problems at school, their parents went to the school and took care of it for them. Now you are telling them they are special but not in a good way, and their only trophy may be dismissal if the behavior continues. This might be a difficult message to absorb, but you owe it to the great staff to communicate it in a timely manner.

At a recent practice management roundtable, we discussed the fact that some medical staff members underperform until the leadership assigns part of their duties to the better performing staff, so that things get done. Permitting this transfer of work, is unfair to all staff and must be remedied.

With a balance of praise and discipline in place, have some fun at work! Every holiday is a good time to have fun. At Christmas, let them have a contest to decorate a door. For Thanksgiving let them write something about each member of their work area for which they are thankful. Compile the results and share with the staff in a lunch meeting. Halloween, the start of football season, Groundhog Day and anything else is a reason to celebrate. Have each bring a baby photo of themselves, and let the team guess which baby is the staff member, let them send in photos of what they did this summer and have a collage review in the fall of the pictures with narrative by each staff to share the joy, take them bowling, have a new baby “pool” where all can guess the delivery details of an expectant mother on the team, and select secret pals among the staff with a low limit on any expenditures. The point is to permit them to have fun at work. You do not have to entertain them, just give them permission to entertain themselves.

It is essential medical practices provide a fair salary and benefit structure to their staff. Underpaying your people is not compensated by the provision of a good work environment. However, remember people accept a job for the initial pay and benefits, but they remain in a position because they feel appreciated, know their best efforts are expected, and they are encouraged to have fun at their work. Make your practice a place where these three things are true, and you will have a stable, patient-caring and happy staff. It will make everything else you have to do so much more enjoyable.

Article contributed by Sae Evans, Maddox Casey and Jim Stroud, Members, Warren Averett Healthcare Consulting Group. Warren Averett is an official Gold Partner with the Medical Association.

Posted in: Management

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