Though the modern hippocratic oath reminds physicians to honor the place for art as well as science in the practice of medicine, the code doesn’t stipulate the need for business acumen. However, as physicians feel the increasing strain of running their practices, many are exploring the option of hospital acquisition. Not unlike selling a house, there are avenues physicians can take to groom their businesses and enhance their practices’ “curb appeal.”
According to a 2003 Medical Group Management Association (MGMA) survey, 24% of physician practices in the United States were owned by a hospital or health system. A mirror MGMA survey taken in 2011 found that 68% of physician practices across the country were part of larger medical systems. Physicians can gain relief from offloading the pressure of business responsibilities onto an entity that is well-versed in the business of medicine, while hospitals — already looking for measures to prepare for health care reform — acquire potential physician leadership and, more importantly, a gateway to their services.
The sales, if approached correctly, can be financially and professionally advantageous for physicians.
“In terms of practicing medicine, the physician won’t experience any changes, but from the standpoint of running the practice, managing people, negotiating the fee schedules, and being responsible for accounts receivable and expenses, they will turn that over,” says Richard Stooksbury, CPA/PFS, CFP, senior manager at Decosimo. “Physicians get to do what they are licensed and trained to do, and hospitals or medical systems come in and handle the administrative and management side.”
The Top Five
As Stooksbury explains, the basics of improving a practice’s sales value break down into five categories: revenue cycle, accounts receivable, accounts payable, overall expenses and increased productivity. The lifeblood of a physician’s income — the revenue cycle — should be solidified beginning with accurate and extensive documentation of patient care to ensure appropriate coding. From there, physicians should streamline each step from billing, to fee schedule negotiations, to passing a claim along to the practice’s collection system on a timely basis. According to Stooksbury, hospitals are most interested in practices with efficient revenue cycles, and improvement in the bottom line means a higher price to the physician.
While competent management of accounts receivable becomes the process that converts a service into cash, directing accounts payable is a less obvious endeavor. These expenses are not necessarily recorded on the balance sheet and, in the case of high drug costs, can be extended over a long-term payment schedule. In the case of high-cost drugs, payments may be extended over several months past the use and collection of charges. Stooksbury recommends continuing analysis of those costs, as well as expenses such as benefit packages, lease agreements and staffing arrange- ments that could all be adjusted. Finally, an undertaking as simple as physicians increasing their own productivity in comparison to other physicians in their field directly improves the practice’s bottom line.
“There are a lot of business aspects physicians should make look as good as they can before approaching a hospital,” Stooksbury says. “When the hospital begins doing its due diligence and looking at the numbers, that work should trans- late into a higher price for the physician.”
Whether you want to sell your practice or make your practice more financially sound, contact Decosimo’s experienced healthcare professionals at www.decosimo.com/physicians to explore these concepts.
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