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