Review practice operations before adding physicians

Practice Pointers. By Karen S. Schechter, AMNews contributor. July 16, 2007.

PRACTICE POINTERS

Answers to questions about the business side of your practice

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Question: My partner and I have been in private practice together for six years. We have a steady flow of patients, and our net income seems to increase slightly each year. We are thinking of adding another physician and want to make sure our ducks are in order before we start the recruiting process. What types of indicators should we be looking at?

Answer: Making sure your practice is operating at peak performance should be a priority, regardless of whether you are recruiting a new physician. However, as is true with many situations, it often takes an anticipated change to motivate us to take a critical look at ourselves and make improvements where necessary. Here are some areas to review.

Make sure the practice operations are running as efficiently and cost-effectively as possible. Review key management and financial reports. Specific statistics to look at include:

• Monthly charges and revenues.
• Total accounts receivable.
• Gross and net collection rates.
• Average number of days in accounts receivable.
• Percentage of accounts receivable greater than 90 days.
• Operating expenses as a percent of net revenue.
• Current ratio.
• Debt-to-equity ratio.

Most of this information can be obtained from your practice management and accounting systems. Analysis of this data, over a period of two or more years, might lead you to some conclusions about the health of your practice and what areas are insufficient and need to be addressed.