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ACCOUNTING AND FINANCIAL MODELINGNew Mexico MGMA
July 8, 2015
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• Vice President – Butler and Company CPAs, PC• Serving clients since 2003, providing advice to individuals and closely-
held businesses, with a focus on professional services, medical and veterinary practices, individual taxation and business start-ups.
• Honored in 2011 as one of New Mexico’s “40 Under Forty” by NM Business Weekly
• 2010 AICPA Leadership Academy Graduate• Board member for Alta Mira of New Mexico• Member at Large of the AICPA Governing Council• Family consists of Tina (CNM in Training), Levi (Lil’ Dude
Extraordinaire) and Baby #2 (coming in December)• Was a Seattle Seahawks fan WAY before they won the Super Bowl
Jason Deshayes, CPA, CGMA
SPEAKER BIO
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• Various forms of modeling your internal financials
• Modifiers for any model
• Financial metrics
• Accounting platforms to consider
• Q&A
TODAY’S AGENDA
FINDING THE RIGHT MODEL
Everyone is treated equally
All revenues are shared equally based on ownership
Costs are shared in the same percentage that revenue is
No correlation to production, but simplistic to understand
Values production/collection over anything else
Providers are often considered profit center
Overhead is a cost center allocated to providers
Without modifiers, non-production business activities not rewarded
Places value to procedures based on CPT codes
Collections are split according to everyone’s percentage of RVUs
Monthly versus year-to-date
SO MANY OPTIONS
“HALFIES”
KEEP WHAT YOU KILL
RVUs
Practice model that allocates financial
resources equally without consideration of individual efforts or use of resources
The easy way out
Does not tie financial compensation to any efforts
Bad producers are equally rewarded as good ones
What do you do with non-owner providers?
Without some measurement tool, you don’t have a way to
properly compensate your non-owner providers other
than “here’s some cash”
Only appropriate in my eyes for sole providers who only
have to split the pot with themselves
“HALFIES”
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This is the model that many practices work with, mostly because it allows providers to be “semi-independent” while getting the benefit of cost sharing with other providers. Generationally, this is a model that many professional service companies (lawyers, accountants, engineers, consultants, etc…) owned by baby boomers seem to work well in.
Given the direct impact of specific types of patients with a more favorable pay mix, there are many ways to game the system by encouraging staff to schedule higher dollar procedures with better paying insurance or self pay. There is very little incentive to consider what is best for the practice.
More traditional model What are some of the pitfalls?
KEEP WHAT YOU KILL
Revenue by provider is based on collections (not billings)
Call money can be directly allocated to provider
Other forms of income beyond billed charges (medical directorship, etc..)
Physician compensation and benefits (health insurance, retirement, etc..)
Nurses and support staff directly assigned to the provider
Other costs tied to the provider – malpractice insurance, donations, marketing, etc…
Cost center that includes all of the non-provider specific costs to run the practice
Various ways to allocate to the profit centers
Consider fixed and variable components to overhead
FINANCIAL BREAKDOWN
DIRECT REVENUES
DIRECT EXPENSES
OVERHEAD
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Attach units of value to CPT codesApply those units to overall collectionsSomewhat ties production to collectionsRemoves the “gamesmanship” by tying overall collections to RVU effortsRequires upfront time by the physicians to attach value on each CPT code
RVUs
BEYOND THE NUMBERS
Building and training next generation
physicians; coaching on meeting metrics
Mentoring
Modifiers
MODIFIERS
Targets that align production to bonuses
and other forms of compensation
Production Goals
Handles in-practice testing, quality control
and regulatory reporting
Clinical Director
Leads the overall business operation of
the practice
Practice President
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Are the physicians incentivized to think about what makes
sense for the practice beyond their personal
benefit?
Are practice cash flow needs being met by the
model? Retention, funding profit
sharing/retirement, etc..
Is the practice adequately prepared for future retirements and
incoming doctors?
Do the providers understand the model?
How often are they exposed to it beyond
bonus time?
OTHER CONSIDERATIONS
QUESTIONONE
QUESTIONTWO
QUESTIONTHREE
QUESTIONFOUR
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Needs to be practical and easy to explain (to everyone!)
Tie it directly to the financials – numbers (generally) are impartial
All new providers need a “Financial Model 101” class
If the practice undergoes a change, take a fresh look at whether
the model is appropriate anymore
Address concerns with providers sooner than later
PICKING THE RIGHT MODEL
MAINTAINING THE MODEL
OUR RECOMMENDATIONS
Patient visits
Monthly charges and collections
(including coding)
Number of provider work days
Freshness of your accounts receivable
Patient and payer mix
PRACTICE METRICS
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• No single measure taken out of context is able to explain a situation
• Look at trends, not isolated instances
Be careful not to give too much weight
Take things in context Have a second set of eyes on this
• Look at comparative numbers on the financials
• Helps identify trends and potential “hot spots”
• You have a lot on your plate as a practice manager
• Have an outside advisor assist with reviewing these and determining where concerns lie
MORE ON METRICS
16ACCOUNTING PLATFORMS
Data is stored either locally or on a service
Typically, you purchase the license
Backup protocol extremely important
Data is stored in the cloud; access is completely remote
Software is leased; not owned (unless using hosted solution)
Inherently better collaboration with outside parties
HIPAA issues – most systems are not inherently compliant
Number of users needed
Ask your CPA for their thoughts!
ACCOUNTING PLATFORMS
DESKTOP/SERVER
CLOUD BASED
OTHER THOUGHTS
Questions?
WE SERVE PEOPLE BYSOLVING THEIR PROBLEMS
www.butlercpa.com
Jason@butlercpa.com
(505) 821-0893
4811A Hardware Dr. NEAlbuquerque, NM 87109
THANK YOUFOR LISTENING
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