Running your practice like a business Running your business Deon Bührs

How to run a practice Billing for my treatments Getting paid for my treatments Your practice and the medical aid Financial management Human Resource management

Billing for my treatments Decide on a billing policy / approach Ensure your policy is in line with HPCSA and CPA Get informed consent from your patient Be disciplined in its application Be prepared to review it Treat the patient and then bill (NOT visa versa!) Be aware that your practice is being profiled Request peer review for piece of mind

Getting paid for my treatments Cash is king! Send out your accounts quickly and accurately Have a credit control policy in place, and follow this strictly Who is ultimately responsible for the account Payment terms – e.g. 30 days (Medical Schemes Act) When does the patient become liable for the account? Debt collection Agent Lawyer Black listing?

Your practice and the medical aid Friend or Foe? Let’s consider what the other side of the table looks like

Physio Healthcare Patient Funder Interactions Physio Healthcare Patient Funder

HPCSA Managed care: Most medical schemes offer managed care options Restrict the choice of patients and providers to an extent Less expensive than traditional fee-for-service Make healthcare more affordable Capitation systems may become a reality

HPCSA Considerations: Professional independence should remain intact No single party should allow for ethical rule violation The HPCSA does not condone the intervention from advisors and clinical management of patient – if this happens, they share the responsibility for the wellbeing of the patient Scheme protocols should be harmonised with the ethical rules of the HPCSA

HPCSA Contracts: Providers must ensure that legal, ethical and clinical norms are adhered to in managed healthcare contracts Should aim towards evidence based medicine and ethical behaviour To the benefit of the patient Not permissible to enter into a contract which affects the clinical independence and judgement of practitioners

Medical Schemes Act & HPCSA Funders must: Ensure payment is made within 30 days of receiving the account Pre-authorisation must be conducted according to scientifically developed protocols / clinical guidelines Peer-to-peer communication prior to any denial of benefits An appeals process should be in place, should you disagree with the Medical Scheme or MCO

Medical Schemes Act & HPCSA Profiling of providers is acceptable Profiling must be transparent and scientific Providers should be allowed to query their personal profiles Should be allowed to understand the criteria used All providers should have the opportunity to participate in preferred provider networks HPCSA encourages GP’s as gatekeepers

Medical Schemes Act & HPCSA What if the medical schemes does not cover what I envisage as best treatment for the patient? If your recommendations regarding the patients treatment differs from that of the medical scheme or MCO, then your recommendations must be submitted to the patient in writing Let the patient decide as to the treatment path that they will follow If the patient suffers harm, the fund or MCO will accrue liability

Medical Schemes Act & HPCSA What if the medical schemes does not cover what I envisage as best treatment for the patient? Providers must inform patients of medically appropriate treatment options, regardless of the cost of the treatment, or extent of their scheme coverage Be sure to advise the patient according to your clinical judgement, and not according to their medical plan

Scenarios Let’s look at some scenario’s regarding payment of your accounts: Patient needs equipment, but it is reportedly not covered by the medical scheme Patient needs to stay in hospital, but the medical aid insists on discharging the patient Medical aid insists on paying your fees to the patient Your patient says “if the medical does not pay for it, I am not going to pay”

Financial management The business approach Basic accounting principles Budgeting

Financial management Understand accounting terms and principles Bench mark to determine acceptable levels Set targets and standards, and manage these Ensure economic viability of the practice Tune in to early warning signs Establish sound financial policies and principles Control = the process of comparing results with set standards

TAX – How does this work? Death and Taxes – you can be sure of them! Personal tax 18% - 40% Company tax is at 28% Turnover tax for smaller businesses – first R150 000 per annum is not taxed Turnover more than R1 000 000 = VAT at 14% “Give to Caesar what belongs to Caesar…” Tax avoidance, not tax evasion!

VAT – How does this work? Threshold of R1 million per year turnover Can voluntarily register for VAT Output VAT – Input VAT = VAT Liability Paid on a 2 monthly cycle How can we reduce our VAT liability legally?

Basic accounting principles People exchange goods & services Bartering has been replaced with money We need to be able to record this exchange of money Therefore, we ACCOUNT for this exchange

Definition Accounting is the systematic recording of ALL financial transactions in a generally acceptable way A financial transaction is simply the exchange of goods / services for money Can be cash or on credit Practice : Client relationship

Practical 1 You open your own practice: What salary would you want to pay yourself? Your overheads are as follows Rent R10 000 / month Admin R15 000 / month (incl. salary) Other R5 000 Your average patient session is R350 How many patients do you need to see before you start making a profit?

Practical 1 What do we call this calculation? Break even point Point where no profit / loss is made

Practical 2 How do we determine the amount of money required to start up a practice? Business set-up costs Cash flow forecast / projection

How do we measure the financial health of our business?

T-accounts What is a T-account? Dt Ct

T-accounts DEAD Increase on Debit side: Expenses ; Assets ; Debtors CLIC Increase on Credit: Liabilities ; Income ; Creditors End of the month, these are totalled and posted for closing off

Financial statements Income statement What you GET and what you GIVE Summarises the income, gross profit, expenditure and net profit (or loss!)

Financial statements Balance sheet What you OWN and what you OWE Summarises the assets, liabilities and owners equity

Financial statements Cash flow Shows the true cash situation of the business We all use this measure 

Interpretation of financial statements To evaluate the performance of the business, these statements are not sufficient These need to be analysed and interpreted This then empowers the business owner to make decisions regarding the practice

Interpretation of financial statements Income statement Sales / turnover / services rendered Cost of sales  Gross profit Other income: Interest earned, investments etc. Admin costs, overheads, salaries etc. Profit before tax ; tax ; net profit

Interpretation of financial statements Balance sheet Universal accounting equation: Assets = Liabilities + Equity Assets Current assets: Cash, debtors, inventory Fixed assets: Computers, furniture, land etc Liabilities Who you owe money to (creditors) Owners contributions, Capital

Interpretation of financial statements Ratio’s Actual vs budget Net profit ratio = profit before tax / turnover x 100

Interpretation of financial statements Management reports Debt collection period (Debtors days) = debtors / sales x 365 Salary ratio Admin ratio Performance indicators Profit or loss per project / department / practice

What are the predominant causes of business failure? Lack of managerial experience Poor Business Planning Poor Financial Planning 

Where businesses fail… "If you fail to plan, you plan to fail." Leadership is about planning for success before it happens 78% of businesses fail due to lack of a well-developed business plan 82% of businesses fail due to poor cash flow management skills followed closely by starting out with too little money

Where businesses fail… Many small businesses fail because managers do not integrate accounting and accounting practices to a reasonable level in their business

Budgeting This is the financial “road-map” of your business Needs to be strictly adhered to Gets more accurate over time Need historical or industry data PLAN FOR PROFIT

A budget is a short term financial plan, and should incorporate: Budget continue… A budget is a short term financial plan, and should incorporate: expectations of market and product changes loss or gain of key personnel mayor alterations to the structure of the business capital investment decisions affecting the period a forecast of inflation

Overheads and Expense Management IDEAL RATIO for a solus practice: Staff Salaries (including your own) 50% Expenses 30% Principals’ Return on Equity (minimum) 20%

The big question Is your practice a business / charity? Will you be working for yourself, or be a business owner? Do you work for your practice, or does it work for you? Is your practice a true asset? How do you prepare for the long-term?

Human resource management Payroll Staffing levels Leave management Disciplinary policies and procedures UIF, PAYE, SDL returns and payments IRP5’s for staff COIDA contributions Team building

What does the Labour law say? Labour Act Basic Conditions of Employment Act (BCEA) Thresholds - 2014 Below 65 years and under R70 700 p.a. – no PAYE Over R205 433,30 p.a. – Exempt from sections of BCEA More than 24 hours in a month – BCEA chapters More than 40 hours in a month – Employment relationship 5 or more employees – sections of the BCEA More than R500 000 per annum in salaries – SDL

What does the Labour law say? Employment contract – if absent, BCEA applies Policies and procedures Disciplinary Disciplinary code Grievance Leave Patient confidentiality To dismiss an employee Poor performance Misconduct

Contact us Deon Buhrs Brooklyn, Pretoria Tel: 012 751 2867 Cell: 082 904 8855 Fax: 086 689 1232 email: deon@proffessa.co.za web: www.proffessa.co.za Skype: deon.buhrs