I recently had the opportunity to speak with a practice administrator about creating a series of management reports for the owner-physicians. Her concern was to not overwhelm the doctors with too much information, yet provide appropriate data on key indicators to keep them apprised of practice performance. She explained their accountant provides detailed reports on a quarterly basis and the volume of information can be overwhelming. At times, she feels the doctors "get lost" in the detail. In addition, some of the data is "stale" by the time it's received. More current information, presented in a clear, concise manner, would allow the practice stakeholders to review and respond to business issues and address trends that might be developing in a timely manner. This is a common challenge for many practice administrators and physician owners.
When developing financial management reports, we recommend you consider the following essential criteria:
- Timeliness of report generation: It is the responsibility of practice administration to ensure good quality information is received in a timely manner. Financial statements and management ratios should be completed and received within 20 working days of the end of the month.
- Concise summary of data: Management reports should be formatted to fit on one piece of paper; more does not mean better. Consider developing two or three "dashboard" reports that focus on what matters most to drive practice performance, i.e., key financial results, productivity measures, and collection activity.
- Ease of access: Whether your practice is a multi-physician, multi-location practice or a solo physician with one office, information necessary to effectively manage the practice should be easily accessible.
- Ability to make comparisons: Although certain data are best considered in absolute terms, most relevant financial data and patient statistics should be compared with previous operating results or anticipated budgets and industry norms. These comparisons provide an excellent benchmark tool.
- Ability to analyze trends: When comparing information, it is critically important to assess trends within the practice. Current operating results should be analyzed in comparison to three, six, or 12-month moving averages, as well as prior year results. This will help identify subtle changes and trends within the practice.
- Educate your team: Meet with the management team and explain the significance of having access to data. Engage them in the process so they understand what is needed, why it is important, and how it will be used to ensure continued practice success.
Maintaining control over the financial affairs of an ophthalmology practice requires good information. Your challenge is to effectively integrate this information with a motivated and educated team which will allow you to stay in control and successfully meet the challenges that lie ahead.
About the author: Lisa Peltier is vice president of operations for BSM Consulting, an internationally recognized health care consulting firm headquartered
in Incline Village, Nevada and Scottsdale, Arizona. For more information about the author, BSM Consulting, or content/resources discussed in this article, please visit the
BSM Café
at www.BSMCafe.com.
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Key Considerations for Evaluating Your Ratios
By Lisa Peltier
BSM Consulting
Managing and sharing financial data must include a skillful evaluation process that does not compare apples to oranges or view data out of context. It is not uncommon for management teams to misinterpret results, causing unnecessary concern and confusion. As a follow-up to the primer, this article offers guidelines for the interpretive phase of working with financial management reports.
Analysis Tips
When computing and analyzing your financial management ratios, it is important to note the following:
- Do not overreact to monthly fluctuations in operating ratios. Year-to-date and moving averages provide a more stable illustration of results which can be used in comparison with current-month averages.
- Track ratios over time and present numeric and graphic analysis of your results. Utilizing graphs helps tell the story and allows the reader to easily assess performance and identify trends.
- Do not look at ratios out of context to overall practice operating results. Before determining results are bad because a ratio falls outside of industry norms, evaluate other related metrics. For example, many practices have payroll ratios outside healthy ranges, but the operating expense ratios are well within healthy ranges.
- The most important consideration is to apply what has been learned. Invest the required time to analyze practice results, identify opportunities for enhanced performance, and develop a plan to allocate the necessary resources to implement change.
Keeping these four key considerations in mind will help you avoid the common pitfalls of evaluating financial data. Your goal is to obtain and evaluate information that really matters and then incorporate it into a meaningful business plan that meets your specific challenges and needs.
For more information about the author, BSM Consulting, or content/resources discussed in this article, please visit the BSM Café at www.BSMCafe.com.
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