The only thing constant about the healthcare industry is change. Unfortunately, this change comes at a cost. Robbie Connell, CPA and Tax Manager with BKD’s San Antonio office, works with several independently owned physician practices. She has seen that practice overhead continues to increase due to the administrative burden of complying with new reform and regulations and often, reimbursements don’t mirror this cost increase, resulting in a declining bottom line. Staff salaries and benefits are typically the largest overhead category of this service-driven industry, so it comes as no surprise that as the cost of doing business increases, the workforce becomes a big target for practices looking to cut costs. According to Lydia Ostermeier MSN, RN, CHCR, many healthcare finance and administration positions were opened late last year, but there was a slowdown in filling these positions. Due to financial constraints, a lot of executive positions were put on hold as the necessity of filling these positions was determined.[1]
Healthcare groups seek to hire professionals with experience and insight into the ever-changing environment. Physicians are interested in saving lives and helping their patients, and most do not have the time to devote to the finances, or the desire to read financial reports. All groups struggle with hiring the right people, but small and even mid-sized groups are at a larger disadvantage because they have limited resources and often times cannot afford to have a financial staff large enough to adequately separate duties and implement internal controls. Unfortunately, this opens up the opportunity for theft. According to a study published by the Medical Group Management Association in 2010, almost 75% of the groups reporting $100,000 or more in theft came from groups with 10 or fewer physicians.[2]
In addition to monitoring its own finances, groups should keep an eye on, and compare themselves to, benchmarks. Benchmarking allows a practice to establish and track performance goals, monitor their revenue and overhead as compared to industry norms and then use this information to make informed decisions. The key to financial management success is using the financial reports and key practice indicators effectively. Thus, it is important for practices to review their financial reports, key practice indicator reports and periodic dashboards to evaluate if these reports are giving the practice the best possible information with which to make decisions.
For some small or mid-sized groups, outsourcing higher level financial functions might be an attractive alternative. These services can range from training in-house financial staff, assistance with monthly or quarterly closing of the books, financial analysis of internally produced reports and serving as a sounding board for management decisions and explaining the financial and tax implications of those decisions. One of the keys to make outsourcing cost effective is to leverage the talents of your vendor. If your vendor has experience in the industry, they can bring added industry expertise to the table and, if you can gain access to a team of financial experts at various levels of experience without the full time salary, it may also save some overhead costs.
[1] Zimlich, Rachael, RN. “What Employers Are Looking For In Healthcare Finance Candidates.” Healthcare Financial Management Association, HERe Newsletter, September 2016.
[2] McClure, Denise, CPA, CFE, and James Margolis, MPA, FACMPE, MGMA. “Theft in Group Practices Costs Billions of Dollars Annually.” MGMA Connexion, September 2010.
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