Reading Medical Practice Financial Reports for Fun and Profit…Well, Mostly Profit…
Financial reporting is your primary tool for understanding and improving financial performance. But if you’re a physician or medical practice manager, chances are you haven’t had a lot of training on how to read and use financial reports. And for those who review these reports at all, it usually means spending several unpleasant weekend hours poring over reams of billing data trying to discern some useful nuggets of information about your practice.
In this post, we offer an alternative approach to that tedious process. We offer some guidance on how to think about financial reports and what to look for. With a little practice (and some help from your billing staff), you can create reports that quickly and efficiently tell you both how your practice is performing and what you need to do to make improvements.
Let’s Start with the Questions.
Before you even look at a report, take a moment to think about the questions you’d like answered. As an executive or practice manager, these should be questions that illuminate the overall financial health of the practice. For example:
How much do we collect in a typical month?
How many patients do we see each month?
Are we being paid in a timely fashion?
Is the financial performance of our practice improving or declining?
Note that these are high-level, “foundational” questions; these are the issues that determine the financial performance of your practice. And when the answers to these questions are unsatisfactory, they often point you directly at the issues that need to be corrected.
What Reports Will Answer These Questions?
Billing software and reporting capability varies by practice. So let’s highlight some general concepts about the types of reports you’re looking for:
1. Start with the “general” and move to the “specific.”
Notice that missing from the list of questions above is the very common question of “Did that big surgery I performed on Ms. Jones last month get paid?” Because while you may be very interested in that answer, the question is far too specific: the outcome of that or any other single claim tells you almost nothing about the overall financial performance of your practice.
Start instead with reports that show general high-level information – like collections per month or number of patients per month. The report below is a good example:
Notice how you can quickly and easily see many of the important metrics for your practice:
how many patients you saw last month;
how much you charged last month;
how much you collected last month;
Knowing these metrics is a critical first step to understanding the financial performance of your practice and serves as the starting point for a deeper dive into your reports.
2. Look for Trends.
The report above shows not just last month’s performance, but last month’s performance in a broader context. For example, we see not only that the practice saw 544 patients in June, 2018, but also how that compared to previous months. In fact, we can see that at least over the past 3 months, patient visits have been fairly steady.
Now let’s expand the report to include last year’s data:
By adding in last year’s data to show an even broader context, we gain further insights. For example, simple math reveals that between January and June, 2018, patient visits were down by almost 5% over the same period last year. And payments were also down over the same period last year – though by not quite as much (about 2.5%). These trends tell us that while the practice’s patient load is fairly consistent, there is a slow and slight decline in patient visits. Now that you know this, you can monitor the trend over time and take corrective action if needed.
3. After trends, look for anomalies.
Once you have a general sense of how things are going, look for issues that stand out. For example – what in the world happened to payments in April, 2018? It’s true that patient visits declined from the previous month, but they were still similar to May and June, yet the payments were much lower. And what happened to patient visits in February,2018? January, 2018 had the highest number of patient visits ever – yet February came in at the 2nd lowest ever?
4. Finally, ask more questions.
Once you’ve looked at key metrics, identified some trends in your practice, and noticed some anomalies, you can start asking additional questions. And the first question is usually the simplest question of all: “Why?”
Why did payments drop off in April, 2018?
Why did patient visits so abruptly decline in February, 2018?
Why are patient visits declining over the previous year?
Answering these questions will take some more work, probably require some conversations with billing staff, and likely require some additional detailed reports. But now you know exactly what you’re looking for. And because you started with specific questions that go to the heart of your finances, you know that correcting the issues that you found will have the most powerful impact possible in improving the financial performance of your practice. And perhaps most importantly, this approach takes a fraction of the time needed to pore over detailed billing reports – and lets you rescue the rest of your weekend for something a lot more fun than reading financial reports.
Extra Credit:
If you’re still reading at this point, then you deserve extra credit just for getting here. But the real extra credit question is the following:
The report doesn’t reveal exactly why payments in April, 2018 were so low, but it provides some pretty good clues about what most likely happened. And you can probably confirm the answer with a short conversation with a certain staff-member or two. Can you tell what it is?
[If you’d like to know or to share your answer, please do not hesitate to email me at rwilson@emedpartners.com].
Rusty Wilson is the founder and principal of eMed Partners, a full-service medical billing company for physicians and medical practices.
For more about our billing services: http://emedpartners.com/
To follow Rusty on LinkedIn: https://www.linkedin.com/in/rusty-wilson-520206/