Financial fitness strategies to help medical providers build thriving healthcare practices

As a doctor or healthcare facility manager, your top priority is and always will be your patients. But as you know all too well, delivering exceptional patient care isn’t enough to keep your practice running—the financial side of your business demands attention too.

At James Moore, our experienced healthcare CPAs specialize in accounting for healthcare and medical providers. We understand the unique financial challenges that come with running a medical practice, and we know how to stay on top of industry regulations and spot issues early to save you time, money, and stress in the long run.

This healthcare accounting guide draws on our more than 50 years of experience helping medical providers in hospitals, doctor’s offices, urgent cares, home health agencies, and more streamline their operations, maximize their profitability, and build solid foundations for long-term success and growth.

Whether you’re running a large healthcare organization or an independent physician-owned practice, this guide is designed to help you take control of your finances so you can continue doing what matters most: caring for your patients.

Unique Challenges in Accounting for Healthcare Providers

Healthcare practices face a distinct set of financial challenges that set them apart from other businesses. Understanding them is the first step toward developing effective strategies to mitigate or avoid them entirely.

Text image that states "Challenge 1". "Challenge" is in purple coloring while the "1" is in green to sky blue gradient top to bottom.

Challenge 1: Time Constraints

Physicians who own their practices often face significant time constraints, as they must balance their primary role of patient care with the demands of running a business.

For example, a busy family practice physician who sees over 20 patients a day may have little to no time for financial oversight. This can result in neglected accounting tasks and missed opportunities for financial optimization. Given these constraints, practice owners need to develop efficient ways to manage their finances without compromising patient care.

Practical tips for managing time constraints

Delegate financial tasks: Hire a trusted practice manager or financial administrator to handle day-to-day financial operations.
Schedule brief, regular financial reviews: Set aside 15-30 minutes weekly for a concise overview of key financial metrics with your financial administrator.
Use technology to streamline processes: Implement integrated practice management and EHR systems that provide real-time financial data alongside clinical information.
Outsource complex financial tasks: Consider partnering with a healthcare-focused accounting firm like James Moore to handle tasks like bookkeeping, payroll, and tax preparation.
Prioritize critical financial decisions: Focus your limited time on making important strategic decisions, and allow your staff to handle routine financial tasks.

Partnering with an experienced healthcare accounting firm like James Moore can alleviate many of the burdens of running a successful practice. Outside experts can provide an objective assessment of your business processes and help you optimize your financial management.

At James Moore, we can even handle day-to-day accounting tasks on your behalf through outsourced accounting and controllership services. This allows you to focus on patient care while ensuring your practice's financial health is professionally managed.

Text image that states "Challenge 2". "Challenge" is in purple coloring while the "2" is in green to sky blue gradient top to bottom.

Challenge 2: The Complexity of Healthcare Regulations

The healthcare industry is governed by numerous regulations, including HIPAA and Medicare guidelines that can complicate financial reporting and compliance. For a small specialty clinic, this could mean struggling to keep up with changing Medicare reimbursement rules and risking claim denials.

Practical tips for navigating healthcare regulations

Stay informed: Regularly attend workshops or webinars on healthcare regulations and their financial implications. Provide similar training opportunities for your practice staff.
Implement compliance systems: Invest in software that helps track and manage regulatory compliance requirements.
Designate a compliance officer: Assign a team member to oversee compliance efforts and ensure all staff are trained on relevant regulations.

If time constraints make it difficult to stay up to date on regulatory compliance, enlisting outside experts may be helpful. James Moore’s team of experienced healthcare accountants has the resources and bandwidth to stay current on the latest requirements to keep your practice compliant.

Text image that states "Challenge 3". "Challenge" is in purple coloring while the "3" is in green to sky blue gradient top to bottom.

Challenge 3: Medical Billing Intricacies

The medical billing process is often complex and rife with challenges like claim denials and delayed payments. In fact, it’s not uncommon for a multi-physician practice to have 10-15% of their claims initially denied due to coding errors, and that impacts cash flow.

If this is the case for your practice, these are some immediate steps we recommend to reduce your claim denials:

Analyze denied claims to identify common errors.
Implement a claim scrubbing system to catch errors before submission.
Provide training for billing staff on coding and documentation practices.

To further address these challenges, practice owners should also focus on optimizing their billing processes through a revenue cycle enhancement process.

Practical tips for optimizing the medical billing process

Investing in advanced billing software: Use software that flags potential errors before claims are submitted.
Monitoring key performance indicators (KPIs): Track metrics such as claim denial rates and days in accounts receivable to identify frequent issues.
Providing staff training on coding and billing: Frequent refreshers on the latest updates in medical coding and billing can keep staff sharp and mitigate potential issues.

By implementing these strategies, medical practices can enhance their revenue cycle management, streamline billing processes, and improve overall financial performance.

Text image that states "Challenge 4". "Challenge" is in purple coloring while the "4" is in green to sky blue gradient top to bottom.

Challenge 4: Balancing Patient Care with Financial Management

Striking a balance between delivering quality patient care and managing financial responsibilities can be challenging. Solo practitioners might find themselves working late into the night to catch up on financial paperwork, leading to burnout.

Practical tips for balancing patient care and finances

Delegate financial tasks: Consider hiring a part-time financial manager or outsourcing to a healthcare accounting firm to handle day-to-day financial operations.
Implement efficient systems: Use practice management software that automates routine financial tasks to save time and streamline your processes.
Schedule regular financial planning: Set aside time for strategic financial reviews to align financial goals with patient care priorities.

If you struggle to balance financial management with patient care, outsourcing your accounting functions might provide that balance. With our expert medical practice accountants handling day-to-day financial management, you’ll be able to focus on your patient care priorities while still providing leadership in strategic financial decisions.

Text image that states "Challenge 5". "Challenge" is in purple coloring while the "5" is in green to sky blue gradient top to bottom.

Challenge 5: Keeping Up with Technological Advancements

The rapid evolution of technology in healthcare requires practices to adapt continuously. For instance, a mid-sized practice may struggle to decide whether to invest in a new EHR system as they weigh the potential efficiency gains against implementation costs.

Practical tips for keeping up with technology advancements

Audit your tech stack: Regularly assess your current systems and set aside time to learn about emerging technologies that align with practice goals.
Pilot new technologies: Test new systems on a small scale before full implementation to evaluate their impact. This can increase your confidence in a new tool before making a commitment to it.
Allocate budget for training: Ensure staff members receive adequate training on new technologies to maximize their benefits.

When in doubt, enlist an experienced consultant to evaluate your practice’s technological opportunities. At James Moore, we can assess your overall financial management systems and recommend process and technology improvements to streamline your practice.

A doctor reviewing notes on a medical charter

9 Best Practices for Healthcare and Medical Accounting

Implementing a healthy and robust healthcare accounting function may seem intimidating, especially if you’re a physician with little to no financial management experience. But doing so could be the difference maker when it comes to the overall success and health of your practice.

At James Moore, we suggest that healthcare businesses implement these best practices:

1. Establish robust internal controls:

Implement checks and balances to prevent errors and fraud. This includes segregating duties among staff and conducting regular audits.

2. Use specialized accounting software:

Invest in healthcare-specific software that integrates billing and compliance tracking. Look for features like automated billing and real-time reporting to enhance efficiency.

3. Regularly review financial statements:

Conduct monthly reviews of profit and loss statements, balance sheets, and cash flow statements to identify trends and make informed decisions.

4. Implement a comprehensive budgeting process:

Develop a detailed budget that accounts for expected revenue and expenses. Regularly update forecasts to adapt to changes in patient volume or operational costs.

5. Optimize your revenue cycle:

Streamline processes from patient registration to collections. Focus on verifying insurance eligibility and managing claims efficiently to reduce delays in payment.

6. Enhance patient communication:

Clearly communicate financial policies and provide cost estimates for services upfront to improve patient satisfaction and facilitate timely payments.

7. Monitor KPIs:

Track metrics such as days in accounts receivable and claim denial rates to identify areas for improvement.

8. Provide ongoing staff training:

Regularly educate your team on coding changes, billing practices, and compliance requirements to reduce errors and enhance overall efficiency.

9. Plan for future growth:

Consider long-term financial planning, including potential expansions or investments to ensure sustainability.

By adopting these best practices, you can not only strengthen your practice's financial management but also enhance your operational efficiency and ultimately improve patient care.

A physician working on a Laptop on a desk with reports on their healthcare practice value.

How to Maximize the Value of Your Practice

Get actionable strategies to enhance healthcare practice value, from optimizing revenue cycles to improving patient satisfaction.

Key Financial Management Strategies for Healthcare Practices

It’s undeniable that effective financial management is a key aspect of the success and sustainability of your healthcare practice. In this section, we explore strategies to manage and optimize your practice’s financial health.

Revenue Cycle Management

Revenue cycle management (RCM) is the process of creating and improving your financial processes to boost your ability to generate revenue. It encompasses all financial processes related to patient care, from appointment scheduling to final payment collection.

While the specifics vary by situation, here’s a breakdown of what it typically looks like for healthcare practices.

Streamline Patient Registration and Scheduling

Efficient patient registration and scheduling processes set the foundation for a smooth revenue cycle. By optimizing them, you can streamline administration, improve patient satisfaction, and set the stage for timely reimbursements.

Here are some strategies to consider:

Implement an online scheduling system: Allow patients to book appointments through your website or a patient portal. This not only reduces phone traffic but also gives patients the convenience of scheduling the time that suits them best, potentially reducing no-shows.
Use pre-registration forms: Send electronic forms to patients before their appointment. This allows them to fill out their information at home, which reduces wait times and ensures more accurate data collection. Make sure you use secure, HIPAA-compliant platforms for this process.
Verify insurance information in advance: Use automated systems to verify insurance eligibility before the patient’s appointment. This helps prevent claim denials due to coverage issues and allows you to inform patients of their financial responsibility up front.
Implement appointment reminders: Use automated text, email, or phone reminders to reduce no-shows and last-minute cancellations. Consider a tiered approach, sending reminders at different intervals (e.g., one week, two days, and day of appointment).
Train front desk staff: Invest in comprehensive training for your front desk staff. They should be proficient in customer service, data entry, insurance verification, and basic financial counseling. Regular refresher courses can help maintain high standards.

Done effectively, revenue cycle enhancement can help you reduce or eliminate lost revenue opportunities. And by boosting your practice’s revenue, you improve your ability to assist more patients, improving the overall effectiveness of your practice.

Optimize Charge Capture

Accurate and timely charge capture involves ensuring that all services provided are properly documented and billed, preventing revenue leakage.

Here are some things you may be able to do to improve your charge capture:

Use EHR with integrated charge capture: Implement an electronic health record (EHR) system that seamlessly integrates with your billing system. This allows providers to document services and automatically generate corresponding charges, reducing the risk of missed billing opportunities.
Implement point-of-service collections: Train staff to collect copays and outstanding balances at the time of service. Provide them with scripts and training on how to have these sometimes difficult conversations with patients.
Conduct regular audits: Periodically review a sample of patient encounters to ensure all services are being properly documented and billed. This can help identify patterns of coding errors that may need to be addressed.
Provide ongoing education: Keep providers and staff updated on coding changes and documentation requirements. Consider monthly coding tip sheets or brief training sessions to keep everyone informed.
Use charge capture software: Consider specialized software that can flag potential missed charges based on typical treatment patterns. These systems can serve as a safety net to catch services that might otherwise go unbilled.

It may seem obvious, but making sure all of your practice’s billable activities are accurately documented and submitted can make an enormous difference in improving the EBITDA profitability of your practice. By prioritizing charge capture, you reduce the risk that revenue opportunities are falling through the cracks.

Improve Claims Management

Efficient claims management is crucial for maintaining a healthy cash flow. The claims process is often where practices encounter significant challenges, leading to delayed payments and increased administrative costs.

These are some steps you may be able to take to help improve this process:

Implement a claims scrubbing system: Use software that checks claims for errors before submission. This can significantly reduce the number of denied claims due to simple errors like missing information or incorrect codes.
Monitor claim status regularly: Set up a system to track the status of submitted claims and follow up promptly on any that are delayed or denied. Consider using automated tracking systems that can alert staff to claims that need attention.
Analyze denial patterns: Regularly review denied claims to identify common issues. Use this information to improve your processes and prevent future denials. Create a dashboard to track denial reasons and trends over time.
Establish a timely filing process: Submit claims as quickly as possible after service delivery. Implement a process to ensure all claims are submitted within payer-specific timely filing deadlines. Consider setting internal deadlines that are shorter than payer requirements to allow for any unforeseen delays.
Train staff on payer-specific requirements: Ensure your billing staff is familiar with each insurance payer's unique requirements. Create payer-specific cheat sheets or guides they can easily reference when preparing claims.

By implementing these strategies, you can avoid common billing errors, streamline operations, and ensure timely reimbursements. Additionally, fostering a culture of continuous improvement and open communication within the billing team can lead to innovative solutions and a more proactive approach to managing claims.

Enhance Patient Collections

With the rise in high-deductible health plans, collecting revenue from patients as well as insurers has become increasingly important. A well-defined patient collections process not only improves cash flow but also enhances patient satisfaction by providing clarity and transparency.

To improve your patient collections process, consider adopting the following strategies:

Communicate financial policies clearly: Provide patients with a clear, written explanation of your financial policies at the time of registration. Consider creating a patient-friendly brochure that outlines your policies in simple terms.
Offer price transparency: Give patients cost estimates for services before they are rendered. Use estimation tools that take into account the patient's specific insurance plan to provide accurate estimates.
Implement multiple payment options: Offer various payment methods, including cash, credit cards, online payments, and mobile payment options. Consider partnering with third-party financing companies to offer additional options for larger balances.
Set up payment plans: For larger balances, consider offering payment plans. Develop clear guidelines for eligibility and terms, and use automated systems to manage these plans efficiently.
Use automated payment reminders: Set up a system to send automated reminders for upcoming or overdue payments. Use a combination of methods (e.g., email, text, phone calls) to increase the likelihood of reaching patients.
Train staff on financial conversations: Ensure your staff is comfortable discussing financial matters with patients in a professional and empathetic manner. Provide scripts and practice role-playing exercises to help staff navigate these sensitive conversations.

In short, with a transparent and patient-friendly collections process, you can improve your medical practice’s cash flow while also fostering trust and satisfaction among patients.

Cost Control and Financial Planning

While maximizing revenue is crucial, controlling costs and planning for the future are equally important if you want your practice to remain profitable long-term. Effective financial planning allows you to make informed decisions about investments, expansions, and day-to-day operations while also planning for potential challenges down the road.

Conduct Regular Financial Analysis

Regularly reviewing your practice's financial statements helps you understand your financial position and make data-driven decisions. Here are some steps that can help:

Analyze profit and loss statements: Regularly reviewing this document can help you identify trends in revenue and expenses. Look for areas where costs are increasing unexpectedly or where revenue is declining.
Review balance sheets: Monitor your assets and liabilities to maintain a healthy financial position. Pay particular attention to accounts receivable aging and any growing liabilities.
Monitor cash flow statements: Ensure you have sufficient cash flow to meet your practice's needs. Use cash flow projections to anticipate and prepare for periods of lower cash flow.

Financial analysis may not be the most enticing thing to a physician who opened their practice to serve patients. But it is nevertheless an important aspect of running your business. Regular financial analysis empowers you to make strategic, data-backed decisions that position you for long-term success.

Implement Budgeting and Forecasting

Developing a comprehensive budget for your practice enables you to set realistic revenue and expense targets and plan more accurately for the future.

These strategies can help:

Create a structured budget: Develop an annual budget that accounts for seasonal fluctuations in patient volume and plans for major expenses or investments. Break this down into monthly targets for easier tracking.
Regularly forecast financial performance: Use historical data and industry trends to anticipate future financial performance. Update your forecasts quarterly to reflect changing conditions.

If you’re not sure where to start, outsourced healthcare accounting firms like James Moore can assist in setting up robust budgeting and forecasting systems for your practice and provide training to do so more effectively. This can help you plan for your practice’s future with confidence.

Optimize Supply Chain Management

Healthcare supplies can be a significant expense for practices, but taking the following steps can help address this issue:

Regularly review and negotiate contracts: Continuously assess your supplier contracts and inventory costs to ensure you are getting the best prices and terms. Don’t hesitate to negotiate for better deals.
Consider joining group purchasing organizations (GPOs): Leverage collective buying power by joining GPOs, which can provide access to better pricing on medical supplies and equipment.
Implement inventory management systems: Utilize software to track inventory levels, automate reordering, and identify slow-moving items. This helps avoid overstocking and reduces waste.
Analyze supply utilization: Regularly review usage trends to identify opportunities for cost savings. Understanding which supplies are used most frequently can help streamline purchasing decisions.
Foster supplier relationships: Build strong relationships with suppliers to improve communication and negotiate better terms. A collaborative approach can lead to more favorable pricing and service agreements.

By adopting these strategies, healthcare practices can optimize their supply chain management, ensuring they maintain quality care while controlling costs.

Invest in Technology Wisely

While technology can improve efficiency, it's important to carefully evaluate potential investments. Considering cybersecurity and internal controls is also crucial, especially with privacy regulations like HIPAA. Some things to consider:

Assess return on investment (ROI): Before investing in new technology, calculate the potential ROI. Consider both tangible benefits (e.g., time savings, increased revenue) and intangible benefits (e.g., improved patient satisfaction).
Ensure integration: New systems should integrate well with your existing infrastructure. Prioritize solutions that can communicate with your EHR and practice management software.
Implement cybersecurity measures: Invest in robust cybersecurity solutions to protect patient data and comply with HIPAA regulations. This includes firewalls, encryption, and regular security audits.
Establish internal controls: Implement access controls to limit who can view and edit sensitive financial information. Use audit trails to monitor changes and identify potential security breaches.
Provide staff training: Regularly train staff on healthcare cybersecurity best practices and the importance of maintaining patient confidentiality. Conduct periodic drills to ensure staff are prepared for potential security incidents.

James Moore’s Technology Services professionals can assist in evaluating technology investments, supporting integration, and implementing necessary cybersecurity measures and internal controls to protect your practice.

Monitor Key Performance Indicators (KPIs)

Establishing and tracking key performance indicators (KPIs) is essential for understanding your practice's financial health and operational efficiency. KPIs provide valuable insights that can guide decision-making and help identify areas for improvement.

There are some key financial KPIs that healthcare practices should monitor:

Days in accounts receivable (DAR): This metric measures how long it takes to collect payments. Aim for 30-40 days or less to maintain healthy cash flow.
Net collection rate: The percentage of potential reimbursement actually collected. A target of 95% or higher indicates effective collections.
Claim denial rate: The percentage of claims denied by payers. Strive for a denial rate of less than 5% to minimize revenue loss.

You don’t need to limit your metrics to your finances. You may also track KPIs related to your operational and clinical performance.

To make the most of your KPIs, start by setting benchmarks to compare your metrics against industry standards and your historical data. Regularly review the data to spot trends and identify areas for improvement. Create action plans to address any underperforming metrics, and keep your staff informed about KPI performance to encourage accountability and continuous improvement.

James Moore’s experienced healthcare CPAs can support this effort by establishing effective KPI tracking systems, helping you set benchmarks to compare your performance against industry standards.

Compensation and Reimbursement Models

High-quality compensation and reimbursement models should be a cornerstone of your practice’s growth. Why? Together, they enable you to attract and retain top talent for your practice without compromising your financial security. This in turn improves your patient care and makes your practice more attractive to potential buyers when you’re ready to move on.

Compensation Structures

Implementing fair, transparent compensation structures helps you maintain harmony within your practice, ensure financial stability, and retain your talent.

Here are a few best practices to keep in mind:

Develop clear agreements: Outline compensation structures, including base salary, productivity bonuses, and profit-sharing arrangements. Ensure these agreements are in writing and reviewed by legal counsel.
Conduct annual reviews: Ensure compensation structures remain fair and aligned with practice goals. Use this time to discuss performance and set new targets.
Use objective metrics: Incorporate measurable performance indicators, such as RVUs (relative value units) or quality metrics, into compensation calculations. Be transparent about how these metrics are calculated and used.
Seek professional guidance: Consult with healthcare-specific financial advisors or attorneys to develop and review compensation models. They can provide insights into industry standards and legal considerations.
Maintain transparency: Ensure all practitioners understand how compensation is calculated and have access to relevant financial information. Regular financial meetings can help maintain trust and alignment.

At James Moore, our HR consulting team can assist in developing and reviewing compensation structures, ensuring they are fair, transparent, and aligned with practice goals.

Reimbursement Models

Effectively navigating reimbursement models ensures your practice’s financial stability and helps you deliver high-quality patient care. With the landscape of healthcare payments continually evolving—particularly in light of high-deductible insurance plans—practices must be proactive in adapting to these changes. Here’s what we suggest:

Stay informed: Regularly educate yourself and your staff on current and upcoming changes in reimbursement models and healthcare policies. Attend industry conferences and webinars to stay up to date.
Invest in technology: Utilize advanced practice management and EHR systems that can handle multiple reimbursement models and provide detailed financial analytics. Look for systems that can easily adapt to new payment models.
Optimize coding practices: Provide ongoing training for staff on proper coding techniques and consider periodic audits to ensure accuracy. Use coding software that integrates with your EHR for more efficient and accurate coding.
Diversify payer mix: Analyze your payer mix regularly and consider strategies to optimize it based on reimbursement rates and patient demographics. Be cautious about over-reliance on any single payer.
Implement patient financial counseling: Educate patients about their financial responsibilities and offer transparent pricing and payment options. If you operate a larger practice, consider hiring a dedicated financial counselor.
Consider alternative payment models: Explore opportunities to participate in accountable care organizations (ACOs) or other value-based care initiatives. Carefully evaluate the potential risks and benefits before committing to new models.

James Moore can guide your practice in adapting to complex reimbursement models and optimizing coding practices. We’ll also help identify and implement more effective payment models to ensure financial stability.

Why Choose James Moore for Your Healthcare Accounting Needs?

Healthcare practices operate in a complex financial environment, requiring a deep understanding of industry-specific regulations, billing intricacies, and reimbursement models. At James Moore, our healthcare CPAs have more than 5 decades of experience ensuring the financial health and compliance of medical practices throughout the U.S. Here are just some of the ways we can help:

Navigating regulatory compliance

Healthcare providers must adhere to numerous regulations, including HIPAA and Medicare guidelines. Our specialized healthcare accountants are well-versed in these regulations and can help ensure your compliance, reducing the risk of costly penalties.

Optimizing revenue cycle management

The revenue cycle in healthcare involves various stages from patient registration to final payment. Our expertise in this area helps medical practices like yours streamline processes, minimize claim denials, and improve your cash flow.

Understanding unique financial metrics

Healthcare practices have specific financial metrics that differ from other industries. Our specialized medical accountants provide insights into KPIs that are crucial for your financial health. We can also provide benchmarking information for additional context for your performance.

Tailored financial strategies

Each healthcare practice has unique financial needs based on its specialty, size, and patient demographics. We develop tailored financial strategies that align with your practice's goals and challenges.

By partnering with our healthcare accounting professionals who understand the healthcare landscape and can advise on matters such as choosing the right entity structure and optimizing revenue, you can enhance your financial management and focus more on delivering quality patient care.

Where Can I Find an Experienced Healthcare CPA To Optimize My Medical Practice Accounting Strategies?

Effective financial management is essential for the success and sustainability of your practice. By prioritizing your financial management and implementing best practices, you can enhance its financial health, ensure compliance, and position yourself to provide better patient care.

James Moore is committed to supporting healthcare practices by providing tailored accounting solutions and strategic guidance. Contact us today to learn how our knowledgeable healthcare CPAs can help strengthen your financial situation and grow your practice.

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A Guide to Healthcare Accounting

Financial fitness strategies to help medical providers build thriving healthcare practices

Unique Challenges in Accounting for Healthcare Providers

Challenge 1: Time Constraints

Challenge 2: The Complexity of Healthcare Regulations

Challenge 3: Medical Billing Intricacies

Challenge 4: Balancing Patient Care with Financial Management

Challenge 5: Keeping Up with Technological Advancements

9 Best Practices for Healthcare and Medical Accounting

1. Establish robust internal controls:

2. Use specialized accounting software:

3. Regularly review financial statements:

4. Implement a comprehensive budgeting process:

5. Optimize your revenue cycle:

6. Enhance patient communication:

7. Monitor KPIs:

8. Provide ongoing staff training:

9. Plan for future growth:

How to Maximize the Value of Your Practice

Key Financial Management Strategies for Healthcare Practices

Revenue Cycle Management

Cost Control and Financial Planning

Compensation and Reimbursement Models

Why Choose James Moore for Your Healthcare Accounting Needs?

Where Can I Find an Experienced Healthcare CPA To Optimize My Medical Practice Accounting Strategies?