Module 3 - Financial Management of the Medical Practice Flashcards
What is a Budget?
It measures projected financial goals with the actual financial performance by taking the past few years of expenses/revenue into consideration.
What is Budget Development?
The Control Process that projects revenue (short and long term)
What are the Aspects to Consider when establishing Budget Goals?
- Number of Providers
- Services Provided
- Facility
- Support Personnel
- Patient Load
- Plans (fee schedules, what’s profitable, etc.)
- Marketing Plan
What are the considerations when planning a Financial Objective?
- Capital (cash, credit, accounts receivable)
- Capabilities of Facilities (expand, add new service, hire?)
- Inflation (expect and plan for it)
- Competition
- Trends in Reimbursement
- Unexpected Events
Average Cost per Patient
Total Expenses/Total Patient Visits = Average Cost Per Patient
Total Expense per Patient
Total Expenses/Total Number of Patient Visits = Total Expense per Patient
Average Net Charges per Patient
Total Net Collections per Month / Total Number of Patient Visits per Month = Average Net Charges per Patient
Capitated Income
Contracted managed care payment made based on covered lives - per member, per month
aka
Fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of health care services.
Direct Expenses
Expenses that are directly related to a cost center
I.E. What x-ray equipment is to a Radiology Department - they’re directly related
Indirect Expenses
Expense that is not directly related to medical services
I.E. utilities, cleaning services - they aren’t related to the medical services
Expense to Earning Ratio
Total Expenses / Total Collections
Fixed Expense
Constant expenses that do not vary with volume of services
I.E. rent, salaries, loans.
Variable Expense
Expenses directly related to the number of patients seen and services provided
I.E. How many members we have
Income Statement (Profit and Loss Statement, P&L)
Record of Income Generated minus(-) Expenses of Practice
Net Profit
Net Income - Expenses = Net Profit
Overhead (Expense-to-Earnings Ratio)
Ongoing Expenses necessary for the business to function (don’t relate directly to sales)
I.E. Rent, Utilities, medial supplies, insurance
NOT: salaries
Expense-to-Earnings Ratio (Overhead)
I.E.
50% Expense = 50% of earnings are used for practice expenses (1:2 Ratio) is considered good.
Forecasting Patient Volume
Track percentages of increase/decrease in patient volume for past few years
Gross Collection Ratio
Gross Collection Ratio = Total Collections/Total Gross Charges
Net Collection Ratio pg. 46
Total Collections / Net Charges (Gross Charges - Adjustments)
What are the Two Types of Employee Theft?
- Forgery: Signing or Altering documents/checks which change financials of the practice
- Embezzlement: obtaining property or cash without approval
What is the Federal Fair Credit Billing Act?
It protects the consumer from unfair and inaccurate credit billing
(Patients can dispute unauthorized charges from us)
