43 Strategies for Managing a Health Care Practice
The Business Plan
The Operations Plan
• Identify key practice management areas and practice resources.
• Develop policies and procedures to ensure administrative and clinical quality assurance.
• Monitor, report, and benchmark clinical and administrative results.
Legal and Governance Operations
Legal counsel and a certified public accountant (CPA) are necessary professionals to consult about legal, fiduciary, and financial issues that can affect a practice. Developing a strong business relationship with an attorney and accountant with experience in health care operations is valuable, not only during the start-up phase of a health care practice, but also for ongoing consultation. Box 43-1 includes a checklist of major items included in this category that need to be taken into consideration, especially for a new practice.
BOX 43-1 Legal and Governance Checklist
Insurance Requirements
Professional liability insurance provides coverage for both individual providers and the practice in the event of a claim of medical malpractice. Professional liability insurance is written on either a claims-made or an occurrence basis. Because claims-made policies normally require the purchase of a “tail” or extended coverage in the event that the policy is terminated, it is important to understand the differences and which type of coverage is offered under the policy. When purchasing professional liability insurance, it is wise to insure the practice and the individual providers. Insuring the practice provides an added layer of protection in the event of a medical malpractice claim and includes coverage for clinical and administrative support staff. Limits of $1 million to $2 million for each occurrence with an aggregate limit of $3 million to $4 million are considered minimal standards of protection. Insurance payers will normally have coverage requirements in their provider contracts. Medical staff privileges also require a certain amount of coverage. The practice will need to review the pros and cons of individual policies for providers versus obtaining coverage on a group basis. This decision may vary based on practice preference, organizational structure, or legal or insurance company recommendations.
Government Regulations
Retention of Records
There are specific guidelines for the retention of all records and business documents in the health care practice. Requirements vary depending on the type of records (medical records, financial records, claims and billing records, staff and employment records). Table 43-1 contains general recommendations for records retention. As the practice gets larger, the retention of records can become an expensive storage problem. Technologies such as optical scanners and “electronic file cabinets” can help practices meet these requirements efficiently.
TABLE 43-1 Guidelines for Record Retention
| Document/Records | Months to Keep |
|---|---|
| Agenda or schedules | 24 |
| Bank statements | 60 |
| Budgets | 60 |
| Canceled checks | 60 |
| Committee meeting minutes | 60 |
| Contracts | 60 (after expiration) |
| Employment applications | 36 |
| Financial reports | 60 |
| Financial statements | Life of organization |
| Insurance documents | 36 |
| Insurance policies | 72 (after expiration) |
| Invoices | 72 |
| Policies | Life of organization |
| Accounts receivable | 84 |
| Account reconciliations | 24 |
| Reports | 60 |
| Tax returns | 72 |
| Medical records | Pediatric records should be kept a minimum of 7 years past age of majority |
Developed from Recommendations of the American Society of Association Executives and the U.S. Code of Federal Regulations.
Financial Operations
Managing the revenues and expenses of a practice requires the establishment of good financial and accounting systems. This includes developing and implementing financial policies and processes to ensure necessary cash flow for the financial health of the practice and regular monitoring, review, and reporting of its revenues and expenses (Box 43-2). The following steps are recommended when establishing the financial operations of the practice.
• Establish a professional relationship with a bank or other financial institution for the purposes of opening a checking account, a payroll checking account, a savings account, and a line of credit.
• Work closely with an accountant to develop the bookkeeping and accounting systems to meet the needs of the practice. Depending on the size and sophistication of the practice this may mean that the accountant actively reviews financial operations on a monthly basis and prepares the financial reports or is used more as a business consultant. In either case, the accountant will probably be responsible for preparing annual tax returns.
• Choose computerized accounting software. A packaged accounting software, such as Quick Books or Quicken, usually meets the needs of a small to medium-sized practice, whereas larger organizations with multiple locations and many cost centers may require a more powerful and sophisticated system. The accountant should be able to suggest a system that will best meet the needs of the practice. The system should not only be able to manage accounts payables and write checks but also be able to develop budgets, automate payroll, and provide a standard set of financial reports. The practice’s accountant can also help decide whether to operate the accounting system on a cash basis, an accrual basis, or a modified cash basis. Most medical practices use a cash or modified cash basis of accounting.
• Establish a chart of accounts. The chart of accounts plays a key role in budgeting and financial reporting. Although any chart of accounts that can break out and report on revenue sources and track expenses by similar types will suffice, the practice may wish to adopt a chart of accounts similar to the one recommended by the Medical Group Management Association (MGMA). Setting up the chart of accounts so that financial reports are comparable with those of other similar medical groups can be helpful not only for the management of revenue and expenses in the practice, but also comparison or benchmarking purposes.
• Establish internal controls. Safeguarding the assets of the practice is an important part of responsible financial operations. Policies and procedures for handling and depositing cash and checks, reconciling bank statements, check signing, and petty cash management need attention in this area.
• Prepare an operations budget. The development of an operations budget is important as a tool for (1) synchronizing the clinical and administrative operations of the practice with the anticipated revenues and expenses, (2) monitoring the revenues and expenses throughout the year, and (3) reporting the status of actual financial operations compared with the budgeted plan.
