Pop Quiz: What were you doing during the financial presentation at your last board meeting?
A. Texting your spouse
B. Checking email
C. Stepping out to make a call
D. All of the above
Traditional financial reports of a Balance Sheet and Income Statement were conceived 150 years ago during the Industrial Revolution to facilitate railroad financing. Although their intent is to communicate the financial health of a business, the reports are spoken in the language of accounting, a language foreign to many physicians. Historical by definition, the statements are often presented weeks, if not months, after the fact.
Much like driving while looking in the rear-view mirror, it’s no wonder no one is paying attention!
To address this comprehension void and time lag, many medical practices rely on an assortment of ad hoc financial reports fueled by the PC Revolution: key performance indicators, benchmarking, retrospective RVU analysis to make Henry Ford proud, and the most recent iteration, EHR dashboards designed by software engineers. Although providing number-centric feedback, this data tsunami drowns out the essence of your practice’s financial success and most important asset: physician time.
The following 3 steps wed the concept of physician time with financial management, promoting physician understanding and ownership of financial performance:
Step 1: Doctor Days
Build the foundation of your practice’s financial management, budgets and projections on physician time, or “doctor days”, rather than relying on finance department edicts or RVU-based budgets. Simply put, calendar out doctor days (or half days) by type of service: clinic, ASC and hospital. This process links, in an easy to understand manner, financial performance with the investment of physician time while de-emphasizing esoteric accounting reports.
Applying estimated gross charges and net revenue by doctor day by type of service closes the loop, producing accurate and predictive budgets in the aggregate, and by individual physician, type of service and location. One of payoff is the ability to evaluate the ratio of physician time to various financial and patient care metrics. For example 19% of total physician clinic time is invested at a particular location providing 11% of patient visits.
Implementation of the doctor day model transforms your sclerotic annual budget — typically approved and forgotten two hours before the annual holiday party — into a living document capable of capturing the financial impact of changes in budgeted doctor days, e.g. new physician hire. Married to actual year-to-date numbers, “flex” your budget based on anticipated doctor days, and avoid the 8th Deadly Sin: negative physician compensation and taxable income news after year-end.
Divorced from procedure volume and RVU-driven mock-ups, the doctor day model is an effective tool to evaluate and negotiate value-based contract proposals from payers. Historical fee for service data, converted to doctor days, can be developed to determine an acceptable return on the investment of physician time for anticipated covered lives and patient encounters, the cornerstone of any successful risk sharing contract negotiations. Level the playing field against health plan actuaries, and negotiate with confidence.
Finally, aside from patient care and outcomes considerations, make informed decisions to opt-in or out of government incentive programs based on incremental doctor days required to offset penalties in the event you opt-out. For example, from a time perspective, 1% of 200 doctor days per year is 2 days, or about 1.3 hours per month (20 minutes per week, 4 minutes per day) assuming 100% government payer mix.
Step 2: Real-Time Reports
While the argument has been made that profit margins on many surgical procedures render real-time financial reporting unnecessary for medical practices, common sense and the current healthcare reimbursement environment suggests otherwise. Lack of timely, actionable information masks and enables a multitude of sins: payer and contracting issues, clinic workflow and appointment scheduling, front desk proficiency and business office effectiveness, and yes, unscheduled physician time off.
Follow these rules: Simple, Time, Visual
Rule #1 Simple
Keep reports simple and relevant: production, cash collections, a few key patient care barometers
Rule #2 Time
Present data in terms of time, e.g. cash collections are 1.2 days behind month-to-date budget
Rule #3 Visual
Present information visually with intuitive charts, rather than raw numbers or text explanations
Step 3: On-Line Access
Establish a secure one page Intranet for one-click access to real-time and historical financial reports from a smartphone, tablet or laptop. Notification of time sensitive updates can be pushed out via email or private Twitter feed. Granted, while most physicians prefer to “just practice medicine”, this step democratizes the financial reporting process and fosters a culture of transparency and accountability.
Both the Intranet and real time report templates can be updated and maintained by current staff utilizing Word, Excel and existing practice management software, bypassing cumbersome Sharepoint altogether. Finally, the best kept secret in the EHR industry: pre-loaded and license-free internet browser reporting tools are available for EHRs running on Microsoft’s SQL server platform.
Although these simple steps won’t render traditional financial reports obsolete, taking mind-numbing numbers, meaningless minutiae and disjointed data off the table removes the psychological barriers to financial comprehension, encouraging healthy physician and management dialogue regarding both short-term clinic operation objectives and long term strategic financial planning.
You can now relax guilt-free and text your spouse, check email and make calls during the HR Director’s presentation!
Stop driving by the rear-view mirror using Industrial Age financial management and reporting tools, and embrace the Information Age. You already know where you’ve been. Keep your eyes on the road, your hands upon the wheel: know where you are today (Steps 2 and 3) and where you’re going (Step 1).
Focus on your most important asset, physician time, and strengthen and grow your practice’s financial health by responding to changing circumstances in the here and now, built on the foundation and communicated in the language of time.
Simplicity is indeed the ultimate sophistication.
This article originally appeared in Orthopreneur.
About The Author
Charles Kroll has 20 years of healthcare experience, including 11 years with Minnesota Eye Consultants, P.A., providing financial management and consulting CFO services in fee for service and capitated environments to independent and hospital-affiliated specialty and primary care medical clinics and ASCs in San Diego, Minneapolis and Chicago | Loyola University of Chicago (Finance and Accounting) | Member of the AIPCA since 1989, and Member of the Illinois Medical Group Management Association. Find him online at www.linkedin.com/in/charlespkroll.