1. Finance 101: Medical Practice Finance Basics
Presented by: Robbie M. Connell, CPA

2. Agenda Standard Practice Management Reports Industry Benchmark Data
Basic Financial Overview

3. Practice Management Reports
Accounts Receivable (A/R) Aging
Summary
By Payer
By Provider
Denials Report
Activity by Provider & Location
Top CPT Codes

4. Sample A/R Aging Report
Amt
31-60
61-90
91-120
Totals For AETNA
$55.00
$0.00
Totals For Aetna Life Co Mngd Choice Acces
Totals For AETNA MEDICARE
$115.00
Totals For AETNA OPEN ACCESS
$135.00
$95.00
Totals For AETNA POS
$1,116.42
$60.00
$651.42
Totals For AETNA PPO
Totals For Aetna Student Health
$1,279.72
Totals For Assurant Health/ASA
$600.77
Totals For BCBS TEXAS PPO
$14,933.69
$455.00
$900.00
$2,395.37
$132.56
Totals For Caprock - PHCS
$110.00
Totals For CHRISTIAN BROTHERS SERVICE
$210.00
Totals For CIGNA
$1,243.62
$50.00
$25.00
Totals For Cigna HealthSpring Prospect
$150.00
Totals For Cofinity
$430.00
Totals For COMMUNITY FIRST
$986.83
$66.83
Totals For COMMUNITY FIRST CHIP
$420.00
Totals For COMMUNITY FIRST MEDICAID CHIP
$1,350.00
$225.00
$230.00
Totals For FEDERATED INSURANCE
$1,097.00

5. Sample Claims Rejections (i.e. Denials)
SHEET METAL WRKS NATL
Patient : Entity not eligible for benefits for submitted dates of service Acknowledgement/Rejected for Invalid Information-The claim/encounter has invalid information as specified in the Status details and has been rejected. 1
$235.00
SUPERIOR HEALTHPLAN
CHECK MEMBER ID OR ELIGIBILITY. CONTACT PAYER FOR FURTHER INFORMATION.
$402.00
Payer : Cannot provide further status electronically Acknowledgement/Returned as unprocessable claim-The claim/encounter has been rejected and has not been entered into the adjudication system.
UNITED HEALTHCARE
Admission Date is required on inpatient medical visits DTP*435
$2,850.00
CIGNA 2
$600.00
MEDICARE
Re- Submit the claim by appending the suffix to Other Payer Id's, when Other Payer Id's are same. 5
$1,087.00
Adjudication Date required either at the claim level or on all service lines for COB and Tertiary claims / 2430 DTP*573
$300.00
The COB information does not balance at the claim level.
The COB information does not balance at the service level.
The COB information does not balance.
AARP- UNITED HEALTHCARE
Subscriber and subscriber id not found Acknowledgement/Returned as unprocessable claim-The claim/encounter has been rejected and has not been entered into the adjudication system.
$1,439.92
AETNA
Investigating existence of other insurance coverage Pending/Patient Requested Information-The claim or encounter is waiting for information that has already been requested from the patient.
$547.46

6. Sample CPT Code Chart

7. Sample CPT Code Chart

8. Benchmarks Days in Accounts Receivable
Entry Lag – Avg number of days from encounter to charge entry – 0-48 hours
Charge Entry to date of bill release to Clearinghouse/Payer – hours
Denial Rate – Less than 4%
Industry Overhead Comparison

9. Distribution of A/R Days In A/R Cardiology* Family Med. OBGYN
Orthopedic*
0-30 Days
60.41%
72.88%
61.77%
50.28%
31-60 Days
12.16%
10.85%
12.13%
14.03%
61-90 Days
6.94%
5.72%
6.39%
8.46%
Days
4.58%
3.34%
3.71%
5.65%
121+ Days
15.10%
4.73%
11.31%
17.19%
* Texas Specific Data
Median %s used
Source: MGMA Report, Cost Survey: Report Based on 2013 Data

10. Overhead as a % of Total Medical Revenue
Category
Cardiology*
Family Med.
OBGYN
Orthopedic*
Total Support Staff
23.62%
32.05%
24.14%
19.75%
Drug Supply
N/A
3.63%
1.52%
1.67%
Building & Occupancy
4.67%
9.29%
6.28%
5.40%
Prof Liability Ins
1.20%
3.24%
1.11%
Info Technology
1.62%
3.26%
2.07%
1.42%
Medical Supplies
.88%
1.46%
4.65%
2.24%
Total Operating Cost
44.58%
59.80%
54.91%
44.02%
* Texas Specific Data
Median %s Used
Source: MGMA Report, Cost Survey: Report Based on 2013 Data

11. Staffing per FTE Physician
Category
Cardiology
Family Med.
OBGYN
Orthopedic
Clinical Support Staff
1.40
2.59
1.78
1.43
Front Ofc Support
1.58
1.73
1.33
1.67
Med Assistant, Nurse Aides
.87
1.35
.94
1.00
Total Support Staff
4.86
5.76
4.85
5.77
Median FTEs Used
Source: MGMA Report, Cost Survey: Report Based on 2013 Data

12. Other Useful Benchmarks
Percentage of insurance verified – 98%
Number of patients cleared (demographic & insurance data necessary for claims processing prior to visit – 90%
Error rates due to front-end billing – Less than 2%
Time of Service Collections
Copayments – 100%
All other – 75%
Follow-up notes documented on the account – < days
Identification and return of unidentified or overpayment refunds – < 60 days
Date of charge entry to date of claim release – 0-72 hours
Claims Submission – Daily
Source: “The Physician Billing Process: 12 Potholes to Avoid in the Road to Getting Paid” by Deborah Walker Keegan, PhD, FACMPE; Elizabeth W. Woodcock, MBA, FACMPE, CPC; and Sara M. Larch, MSHA, FACMPE

13. Purpose of Accounting
Accounting helps you understand where you have been, so you can decide where you are going
Information systems, which measure, process and communicate information, is useful for decision makers

14. Definitions Asset – Something you own Cash Accounts Receivable
Charges vs. Net Adjusted Collectible Charges
Property, plant & equipment
Liability – Something you owe
Accounts Payable
Long-term equipment loans
Equity – The difference between the two above.
Assets – Liabilities = Equity

16. Financial Statements – The Big 3
Balance Sheet
Income Statement
Cash Flow Statement

17. Visual summary – Financial Statements
Reporting of
Business Activity
Balance Sheet
Financial condition at a point in time
Balance Sheet
Financial condition at a point in time
Income Statement
Summary of activity for a period of time
Statement of Cash Flows
Summary of activity for a period of time
Beginning of Year
January 1, 2015
End of Year
December 31, 2015

18. Basis of Accounting Cash Basis Accrual Basis
Income is recognized when cash is collected
Expense is recognized when cash is paid
Accrual Basis
Income is recognized as it is earned
Expense is recognized as it is incurred

19. Balance Sheet
The balance sheet will tell you what the company owns (its assets) and what it owes (its liabilities) and what is left over for the owners (equity)
Key Points
Snapshot at a fixed point in time
Not necessarily current market values
Current financial health of the company
Focus on the quality of the assets – e.g. is the company sitting on a pile of cash - or is everything sitting in past due receivables?

20. Sample Balance Sheet

21. Income Statement
Shows a company’s performance over a period of time – i.e. how did a company earn its money last year?
Key Points
Also referred to as a “Profit and Loss” or “Statement of Operations”
Useful for determining performance before or after an event – e.g. after the addition of a new physician or the opening of a new location

22. Sample Income Statement

23. Cash Flow Statement
Shows a company’s sources and uses of cash during a period of time
Key Points
Quickly tells you how a company is using its cash or funding its day-to-day operations
Rarely does “net cash flow” equal “net income”

24. Sample Cash Flow Statement

26. Questions? Robbie M. Connell, CPA Manager / BKD, LLP 210-341-9400