Unit 2 Costs of Providing Care

Question 1

Compare and contrast assets, liabilities, and net worth

Answer 1

*Assets: positives; anything that provide money; property like goods, equipment, buildings, land, investments and retained earnings
*Liabilities: negatives; anything that takes away money; debts
*Net Worth: assets - liabilities; want assets to be more than liabilities

Question 2

Why is it important to determine the “cost of doing business”?

Answer 2

need to know the cost so that you come out positive. need to charge more than the costs of doing business

Question 3

Compare and contrast Direct and Indirect Costs; include how direct cost and indirect cost/session are calculated:

Answer 3

a. Direct Costs: expenses for delivering services, salaries, equipment (loans or leases), clinical supplies; can change based on the # of pt
b. Indirect Costs: overhead costs: necessary regardless of the # of pts, rent or mortgage payments, utilities, janitorial services, equipment maintenance, office supplies, telephone, internet services, medical records;

Question 4

Compare and contrast the different Cost Classifications:
a. Fixed:
b. Variable:
c. Semi-Variable:

Answer 4

a. Fixed: the same cost regardless of the number of pts who are treated
b. Variable: the cost increases as the number of pts increases
c. Semi-Variable: fixed cost that may vary

Question 5

List examples of Different Operating Costs:
*Fixed
*Variable
*Semi-Variable

Answer 5

*Fixed: rent, loan payments, salaries, benefits, equipment, insurance, depreciation, FICA
*Variable: laundry services, staff, supplies, advertising and marketing, professional fees, miscellaneous
*Semi-Variable: hourly wages: overtime, decrease work hours, pt census fluctuations, utilities, postage and delivery, telephone, laundry and cleaning, maintenance and repairs

Question 6

Explain the 2 types of Expenditure:
a. Routine/Operating:
b. Capital:

Answer 6

a. Routine/Operating: expenses needed for day-to-day costs needed to run a business
b. Capital: major purchases that will be used for >1 year; large equipment, software, clinic space

Question 7

Define Revenue and give examples of the types of revenue you can have in a PT clinic/facility/department:

Answer 7

total of all monies received for services provided or goods sold
*insurance: types or reimbursement/reimbursement rates; contract negotiation
*cash/pt payment: copays, deductibles
*in/out of network: cash based clinics set own fees
*additional: selling goods; other providers: message therapy, yoga, wellness programs

Question 8

What is Expectable Revenue?

Answer 8

the amount that should be paid for services
*based on insurance contracts, fee schedules or other known parameters
*not the same as charges, payments, or receivables

Question 9

What is Net Income?

Answer 9

measure of a company’s earnings (after accounting for expenses)

Question 10

What is Profit Margin Ratio?

Answer 10

comparison of profit to sales, tells how well the company is doing
*expressed as a percentage

Question 11

Discuss Productivity Expectations

Answer 11

*revenue only generated when pt are being treated
*standard: 75-80% of professional’s time should be spent in direct pt care that is billable

Question 12

Calculate the productivity for a PT that works an 8 hour day with a 30 minute lunch break and sees 7 patients for 60 minutes each:

Answer 12

8 hours - 30 minutes for lunch = 450 minutes
7 60 minute treatments = 420 minutes
productivity = 420/450 = 93%

Question 13

What should you consider in terms of productivity?

Answer 13

*different settings mean different productivity
*different types of pts means different productivity
*support systems will have tremendous impact on productivity
*therapists attitudes, beliefs, behaviors, and therapists skills
*don’t compare across setting
*no magic gold standards

Question 14

Explain each stage in the “Lifecycle of a Claim” and what impact each stage can have on revenue:
a. Preliminary:
b. Treatment:
c. Documentation:
d. Coding:
e. Billing:
f. Accounts Receivable:
g. Collections/Management:
h. Corporate Compliance:

Answer 14

a. Preliminary: scheduling, insurance verification, insurance authorization
b. Treatment: pt management skills, value of PT, missed visits
c. Documentation: capture all charges, accurate, legible, “skilled”
d. Coding: are charges entered correctly
e. Billing: charges correct in billing software, clean claim sent to payer, documentation completed and sent properly
f. Accounts Receivable: claim returned, denied, or paid
g. Collections/Management: appeals, explanation of benefits, most write offs
h. Corporate Compliance: post payment review, corrective action

Question 15

What strategies can practices implement to control costs?

Answer 15

*monitoring indirect expenses
*eliminating waste and inefficiency
*become a productive therapist
*address lifecycle of a claim issue