Archives     Advertise     Editorial Calendar     Subscribe     Contact Us    


NMGMA: 10 Minute Takeaway


 

The Basic Principles in Medical Office Accounting

The second Tuesday of each month, practice managers and healthcare industry service providers gather for the monthly Nashville Medical Group Management Association (NMGMA) meeting. As speaker for the May meeting, my presentation focused on the basic principles and elements of medical office accounting.


You Can't Manage What You Can't Measure

The presentation centered on the importance of creating financial statements that are meaningful for the practice. Because financial statements tell a practice's story, they serve a critical role in physician practice management. If designed appropriately, accounting programs can produce reports and subsidiary information that should eliminate the need to prepare separate schedules for management purposes like physician compensation. Strong accounting procedures can reduce the time a practice manager must spend generating additional reports and increase accuracy of the information presented.


Presenting the Reports: Cash or Accrual?

Most physician practices prepare the financial statements on the cash basis of accounting where income is not recognized until it is received, and expenses are not deducted until they are paid.

However, practices can also prepare financial statements on the accrual basis, recognizing income when it is earned (i.e., when the patient service is performed) and deducting expenses when they are incurred. The most significant estimate to determine when preparing financials on the accrual basis of accounting is the adjustment to accounts receivable for contractual adjustments (i.e., adjusting for third-party payer contractual adjustments) and bad debts. The revenue on accrual-based financials should reflect what the practice expects to collect for the services rendered after estimating the adjustments.


Deciphering the Reports

The balance sheet is a component of the financial statements that represents a snapshot of the practice's assets, liabilities, and equity on a certain date (e.g., month end). It's cleverly called a balance sheet, because assets = liabilities + equity. Considered another way, equity represents the difference between the practice assets and practice liabilities (analogous to equity in a home).

The income statement represents income less expenses over a period of time. (For example, an April 30 income statement for a calendar-year practice would reflect income and expenses for four months.) The income statement is a critical tool in practice management and can provide valuable information when compared to prior year results, budgeted amounts, and industry benchmarks. Areas of deviation can be identified and investigated through this analysis.

The statement of cash flows assists the practice manager in answering the age-old question, "Why is income more than cash?" The statement identifies cash flow from operations (i.e., patient service collections less practice expenses) and other factors that increase or decrease cash but may not impact income (e.g., repayment of a practice debt principal).


If You Don't Know Where You're Going, How Do You Know if You've Arrived?

The budgeting process is an essential component for financial management in the medical practice as it helps the practice to translate its goals and objectives into dollars. When compared to actual results, the budget can provide critical information alerting the practice to areas that need attention if financial goals are to be achieved. If the practice is adding providers, locations, or modalities, the budget is an essential tool because it helps estimates the financial impact of anticipated expansion.


Reconcile, Reconcile, Reconcile

Establishing checks and balances in the accounting process for the medical practice is one of the most important steps in protecting the practice from financial fraud. From an income perspective, deposits should reconcile with payments posted to the practice management system and should agree with income reported on the financial statements (cash basis). Setting up a system to approve vendor additions to the accounts payable system can alert the practice to fraudulent vendors. And proper documentation and approval should always be provided for all patient refunds.

Like an apple a day, proper processes can help keep the potential fraudster at bay!

NMGMA June Meeting

The next meeting - scheduled for 11:30 am-1 pm on Tuesday, June 12 at the Medical Learning Center at Saint Thomas West Hospital - features Steve Dickens who will share "Effective Communication: Physicians, Staff & Patients." For event parking and directions or to register, please go online to nmgma.com.

Practice managers interested in attending a luncheon to learn more about the organization and educational topics, should email NMGMA President Joy Testa at joytesta@bellsouth.net to register for their first meeting as a guest.


Lucy Carter is a member (owner) of KraftCPAs PLLC member and practice leader of the firm's healthcare industry team.








WEB:

NMGMA

KraftCPAs

 
Share:

Related Articles:


Recent Articles

Researchers Push Forward Frontiers of Vaccine Science

Using sophisticated gene sequencing and computing techniques, researchers at Vanderbilt University Medical Center (VUMC) and the San Diego Supercomputer Center have achieved a first-of-its-kind glimpse into how the body's immune system gears up to fight off infection.

Read More

Maintaining a Medical Presence in Rural Tennessee

On March 1, another rural Tennessee hospital closed its doors for good, leaving yet another town without easy access to emergency care and inpatient services.

Read More

When Every Minute Matters

Nashville hospitals are setting higher standards for trauma outcomes.

Read More

Physician Spotlight: State of Health

TDH Commissioner Lisa Piercey, MD, is making prevention, rural healthcare a priority.

Read More

Sen. Alexander Recognized by AMA for Outstanding Service

Last month, the AMA recognized U.S. Senator Lamar Alexander for his work to improve healthcare across the country.

Read More

Small Towns, Big Fight for Continued Access to Care

Cuts and reimbursement changes have led to increased hospital closures in rural America, but the National Rural Health Association is working diligently to educate lawmakers on the vital role these facilities play in keeping a community healthy and vibrant.

Read More

Being Responsive to First Responders

First responders witness human tragedy on a routine basis. A train-the-trainer program led by Acadia CMO Dr. Michael Genovese looks to alert colleagues and supervisors to red flags of PTSI and create supports to foster resiliency.

Read More

Violence in U.S. Emergency Departments on the Rise

By their very nature, emergency departments are high-stakes settings filled with vulnerable patients and frightened families. Increasingly, they are also high-risk settings for healthcare providers.

Read More

NMGMA: 10 Minute Takeaway

Hackers continue to target healthcare providers because of the rich patient data that is part of a practice's files. Staying one step ahead is tough, but there are proactive steps to take.

Read More

Education through Innovation

From virtual classrooms to high-tech sim labs, VUSN offers state-of-the-art training for tomorrow's nurse practitioners.

Read More

Email Print
 
 

 

 


Tags:
Accounting Principles, KraftCPAs, Lucy Carter  , Medical Practice Accounting, Nashville Medical Group Management Association, NMGMA, Practice Management
Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: