An Open Letter to Central Florida Physicians from CPA Solutions
My Mother was a Pediatrician and I grew up with an enormous admiration for doctors. Yet my academic strengths and personality did not have the calling for your profession so I became an accountant. However, there is significant synergy in what we do - You Save Lives and I Save Medical Practices from Financial Distress! You read charts and I read numbers.
You entered the practice of medicine with a spirit driven mission; diagnosing and treating people. Unfortunately, this mission gets overshadowed by mundane operational and financial tasks. Many physicians we speak with recognize they do not have the time to understand all the information presented on financial reports; the information literally showing the financial health of their practice.
As trusted business advisers, our goal is to decrease the burden of financial concerns and educate clients on the financial health of the practice. CPA Solutions currently serves 50+ medical practices. Over the years we have learned, that preventing embezzlement and establishing proper internal controls is consistently overlooked. Two issues routinely negatively impacting medical practices. One of the foremost reasons doctors suffer embezzlement is due to their caring and trusting personalities, as well as the time pressure placed upon them. The CPA Solutions philosophy is trust but verify.
CPA Solutions is small enough to give your practice personal attention, yet big and established enough to provide the services and recourses needed. If this letter speaks to you and your experiences, we will gladly meet with you...Our goal being to learn more about you and your practice, in order to be of assistance.
Dalia Cantor, CPA
Tips for Physicians
#1 How to prevent embezzlement in your practice?
Physicians and dentists are more exposed to embezzlement than any other profession for multiple reasons such as their extremely busy schedule, lack of business training in medical school and their very caring and trusting personalities.
Most common ways of embezzlement:
- Adding family members or bogus people to payroll
- Paying unknown or fake vendors
- Keeping cash co-pays
- "Borrowing" from petty cash draw
- Issuing bogus credit card refunds where the refunds are going to the employees credit card
- Pocketing patient's payments and making billing adjustment on the patient's account
- Charging personal items on the Company credit card
In my personal experience billing and collections is the most sensitive area where most theft happens and needs to be watched closely.
Red flags to look for:
- An employee never takes vacation or time off
- An employee is not willing to cross-train
- An employee constantly works overtime and takes work home
- An employee is overly controlling of all finance functions
- A change in employees' lifestyle
- Increase in patient refunds
- Increase in billing adjustments
- Drop in collection percentage
- Increase in expenses
Steps to prevent embezzlement:
- Applying payments in the EMR and making deposits should be done by two separate employees
- Bank reconciliations should be done by an outside person (usually your CPA firm)
- Credit card terminals should have a password for issuing credit card refunds
- Mail should not be received exclusively by one person
- Review monthly bank statements and cancelled checks
- Review monthly credit card statements
- Review financial trends monthly and verify that variances are explainable
- Approve each payroll run
Listen to your instincts! If you become suspicious don't turn the other way but start digging.
One can never imagine that such a thing can happen to their practice...but embezzlements do happen and more often that we think. If you have no segregation of duties in your practice which is common due to small size, rely on your CPA to at least prepare monthly bank and credit card reconciliations and perform monthly financial analytics.
It all starts with the tone at the top so establish strong financial practices in your office and adhere to them. Existing employees will appreciate a solid foundation and a clear understanding of how things need to be done. New hires will recognize how much you respect finances and know what is expected of them. They will understand this is a practice that "minds the money."
#2 How to control your overhead?
Due to declining reimbursement rates, costly new regulations and increasing costs, independent practices are faced with diminishing profits at rather drastic rates. These are challenging times for practice administrators and frustrating times for the doctors who are forced to take pay cuts. So how do you adapt to this ever changing climate and return to profitability?
You can't control certain things but you can most likely control your overhead. Start with low hanging fruits:
Easiest ways to cut costs:
- Review your clinical supplies and injectables ordering process to make sure orders get pre-approved and you have no waste
- See what you are paying in merchant fees - your merchant fees should not be more than 2.5%-3% of your credit card sales
- Obtain new quotes for your general, auto and malpractice insurance for potential savings
- Review your office and cellular phone bills - maybe it's time to switch to voice over IP (VOIP) or revise your mobile plan design
- Review your spending on office supplies - since most practices switched to EMR your paper product usage should decrease substantially
- Revisit your advertising spending - yellow pages is getting to be an outdated way to get new patients yet is still rather expensive
If these initiatives are not enough to get your overhead in line, take a deeper dive into the following areas:
Practice management assessment steps:
- Review your Accounts Receivable collection process to make sure your write offs are within the norm, rejected claims are being resubmitted timely, patient statements are being sent out periodically and past due amounts are being followed up promptly by the billing department
- Review possibilities of automating processes versus manual labor such as payroll, bill payments etc. which may reduce your staff needs
- Review your staff and their salaries to make sure you are not overstaffed and your overtime is controlled
- Evaluate your infrastructure - if you have multiple offices there might be possibilities of centralizing certain function and realize savings in IT, telephone, answering services and other administrative costs
Changes don't happen overnight but with a concerted effort from you and your team the results can be very welcoming.