Use templates to monitor financial performance

To make effective management decisions, practice leaders must have access to up-to-date, comparative information about their finances. A variety of report templates can help you aggregate key data to accurately monitor financial performance.

Monthly financial report

One important template is a one-page monthly financial report featuring a variety of “must watch” indicators. The report should include:
  • Total charges by day and by physician,

  • Total payments and refunds,

  • Total A/R and their age,

  • Gross collection ratio,

  • Net receipts (actual/budget),

  • Operating expenses (actual/budget),

  • Net income,

  • Total encounters,

  • New patient visits, and

  • Full-time equivalent staff. 

    Followed regularly, these numbers are good measures of your practice’s month-to-month financial health.

Annual report

This template draws much of its data from the aforementioned monthly reports. But annual reports must incorporate even more operational detail and descriptions of long-term trends to reveal a practice’s mission, objectives, strengths and challenges. The template should include:

  • Ancillary receipts,

  • Physician compensation,

  • Operating expenses (total and by site),

  • Overhead percentage,

  • Capitation payments, and

  • Gross collection ratio.

    The template can also include space for photographs and employee profiles to give readers a better idea of the human elements of your practice.

RVU report

A relative value unit (RVU) report template measures productivity based on RVUs. With high-quality RVU data, the report can be used to negotiate managed care contracts, revise physician income distribution formulas, set fees and track relative resource use.

The template is a list of billing codes relevant to the practice, with an RVU for each one. The frequency for each code is multiplied by the RVU to arrive at total RVU. If the marginal cost per code is available, it can be multiplied by the code volume to get the total cost for each code.

Payer evaluation report

Occasionally, a practice wants to evaluate its payers. In these cases, a template displaying comparative data can be useful when renegotiating an existing contract, deciding whether to drop a payer or choosing a new one. There are two formats for a payer evaluation report:

  1. The practice’s profitability for each payer. This uses the same structure as the RVU report to derive a practice’s total operating costs and receipts for the codes billed to each payer. Use these figures for negotiating your fee schedule or evaluating overall practice profitability.

  2. The payer mix collections report. This indicates how promptly payers pay claims, monitors the effectiveness of the practice billing staff and tracks the relative size of each payer as a percent of practice business.

    In either case, the template should draw from five sets of quarterly numbers for the practice’s payer mix: Medicare, Medicaid, commercial, managed care (capitated and noncapitated), and self-pay. Each set needs to include charges, payments/receipts, collection ratio and A/R.

Fee schedule report

This template begins as a simple list of the practice’s most commonly billed codes. Then, for each code, you insert:

  • The practice’s fee,

  • Its cost for providing that coded service, and

  • The fees reimbursed by each of the payers with which the practice contracts.

    The resulting report can help billing staff verify that payments received are accurate. In addition, the fees in a proposed new contract can be compared to those in current contracts. The template also supports arguments for renegotiating existing fees.

Proposed service report

Often, practices need to decide whether to add a new service (or piece of equipment) or drop an existing one. Because these decisions are made with an eye on generating new net revenues, your practice should determine whether it’s more profitable to bring the service in-house or continue to outsource it.

A proposed service template offers four steps toward creating a cost/benefit analysis and report: 

  1. Identify the codes that will be billed for the service.

  2. Estimate the likely service volumes and reimbursement amounts (revenues).

  3. Determine the time needed to perform the service and the office resources it will require (expenses), taking into account factors such as convenience, patient satisfaction and quality of care.

  4. Subtract expenses from revenues to get profits.

    Most of these steps will be assumptions, so be sure to run different scenarios at different service volumes, expense levels and reimbursement rates.

Getting started

These templates can help maintain an ongoing, high-level awareness of your practice. They also provide a basis for benchmarking your operations — either by comparing current performance to historical performance or by judging your practice against national standards available from organizations such as the MGMA. For help creating or refining the most relevant templates for your practice, work with your financial advisor.

Why templates?

Templates can help condense, organize and present critical data in a format that facilitates practice operations and management decisions. Most templates can be generated by standard practice management systems. If some data isn’t available on your system, the template can be modified to add or delete entries.
Although templates do efficiently synthesize a variety of financial metrics to create helpful reports, they’re not the only means of measuring financial performance. Be sure to continue looking at other, traditional sources of financial information such as comparative financial statements, cash flow statements, general ledger detail and payroll details.
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