The Importance of Financial Health Checks for Healthcare Practices
In the complex and ever-changing healthcare industry, maintaining financial health is critical for a practice’s success and sustainability. Regular financial health checks or audits can help healthcare businesses identify areas for improvement, uncover hidden issues, and implement changes to get their finances on track. This article will explore why financial audits are vital for healthcare practices and provide tips for conducting them effectively.
The Benefits of Regular Financial Audits
Identify Cost Savings Opportunities
One of the biggest advantages of a financial health check is finding opportunities to reduce expenses. By closely analyzing spending and overhead costs, practices can pinpoint unnecessary or excessive expenditures to eliminate. This allows them to operate more efficiently. An audit may reveal contracts that can be renegotiated, suppliers that provide goods and services at lower costs, or waste that can be minimized. Discovering even small savings adds up over time.
Improve Profitability
In addition to cutting costs, financial audits also spotlight ways for practices to enhance profits. An in-depth review of revenue cycle management can identify gaps in insurance claims processes and coding that lead to lost or delayed payments. Auditors may also notice service lines operating at a loss that can be adjusted or discontinued. Implementing profit-boosting strategies results in improved financial performance.
Uncover Hidden Issues
Audits frequently uncover problematic areas lurking beneath the surface of day-to-day operations. Examples include staff members misusing practice funds, billing inconsistencies, non-compliance with regulations, and accounting errors. Identifying these threats early provides the opportunity to correct them before they escalate into crises. Otherwise, they may gradually erode the financial health of a practice without anyone noticing.
Assess Overall Financial Condition
Perhaps most importantly, regular financial reviews allow managers to step back and objectively assess the practice’s current fiscal state. Auditors analyze balance sheets, revenue streams, operating costs, capital expenditure, debt levels, and other key indicators of financial well-being. This makes it possible to pinpoint exactly where the practice excels or falls short. Managers can then develop targeted solutions to shore up vulnerable spots.
How to Conduct a Financial Audit
Partner with Knowledgeable Auditors
Healthcare operations are intricate, so it’s advisable to work with auditors who possess specialized expertise in this area. Look for professionals or firms like FRG with extensive experience analyzing practices similar in size and specialty to yours. Verify credentials like medical billing certifications and accounting designations.
Gather Relevant Documentation
Audits examine documents that provide insights into the practice’s finances. This includes financial statements, tax returns, insurance records, payroll information, contracts, operating budgets, appointment schedules, EHR data, and accounts payable/receivable. Ensure all documentation is comprehensive, well-organized, and accessible to the auditors. Missing or disorganized records make their job exponentially harder.
Interview Key Staff Members
Conversations with personnel who oversee day-to-day financial tasks are key during audits. This may involve practice administrators, office managers, billing staff, and clinical department heads. Discuss processes, identify inefficiencies, uncover issues employees notice, and get their thoughts on improvements. Staff often have valuable insights.
Compare to Industry Benchmarks
To determine how well a practice is performing, auditors compare financial KPIs against industry benchmarks. For example, they may assess operating costs and profit margins for a particular specialty against national averages. Variances from norms provide clues about strengths to leverage and problem areas to improve.
Implement Recommendations
The audit produces a detailed report summarizing findings and providing recommendations. After reviewing, managers should develop an action plan for executing suggested changes and follow up to confirm successful implementation. This is crucial for translating audit insights into meaningful financial gains.
Like any business, healthcare practices require proactive financial oversight and management to ensure their stability. Regular financial health checks by knowledgeable auditors provide unbiased insights that leadership can use to enhance profitability, uncover hidden issues, improve efficiency, and keep finances on the right track. By leveraging audits as a management tool, healthcare businesses position themselves for success.
