Financial Performance Analysis and Reports
In the last issue we laid the groundwork for a monthly reporting package. We showed how to prepare reports of clinical activity and patient type. In this issue we’ll use the data from those reports in describing the reporting of collection performance, accounts receivable (AR), and practice expense.
Collection Performance
There are several ways to display collection performance in a report. Because very few computer systems can display a revenue flow report of this type, in most cases you’ll have to build this table on a spreadsheet, using data from the billing computer system. Here is an example (the acronym GCR refers to Gross Collection Ratio):
This table shows how revenue flows into the practice. All of the collections are tied to the charges that generated them.
Monthly Charges
Another format for the same information is as follows:
TABLE
Again, the key is to tie payments to the charges that generated the payments. As always, the total collection percentage should be compared to the calculated target (see the November 19, 1999 issue of Watching Your Bottom Line).
Accounts Receivable
The collection performance report describes what has happened in the billing operation; the accounts receivable report describes what hasn’t happened. This report should be presented by payor class.
This table first appeared in the October 19, 1999 issue of Watching Your Bottom Line, and the interpretation of the data can be found there. Practice Expense Practice expense can be expressed, by category, as a percentage of income. The data should be generated either quarterly or as a twelve-month moving
Total Practice Income $2,516,812
The key to interpreting this analysis is to monitor for changes over time.
Summary
As an administrator, you’ll be providing a valuable service to the practice if you generate collection performance and AR reports monthly and expense reports quarterly, and review them with the managing physician. These reports will provide an accurate picture of the practice’s performance, including a quantified look at the practice’s clinical services and an evaluation of whether the income generated from those services is adequate. Only through regular surveillance of the data can problems with the practice’s business processes or the insurers be identified and corrected before these problems inflict serious financial damage on the practice.
Ron Rosenberg, PA, MPH, Author, Practice Management Resource Group
Irene Chriss, Editor Director, AAO Practice Management Dept.
