Financial Management

Most people think of a doctor’s office as a place focused solely on the well-being of patients. However, the reality is that a medical office is a business. As with any business, it cannot function for very long if it is losing money. Accordingly, most medical offices hire one or more people to work exclusively on managing the practice. These employees take the burden of ensuring the office remains financially sound off the clinicians so they can focus on patient care.

A large part of the financial management of a medical practice involves accounting. As with any office, there are a large number of monthly, quarterly and annual bills to pay. For example, the office space must be paid for in the form of a mortgage payment on owned properties or rent on a leased space. The local power companies must be paid for the electricity, natural gas, or other sources of power used to run everything from lights and computers to high-end medical equipment. Medical offices generally require special cleaning firms and disposal services that are licensed to handle offices with biological materials. These specialty firms can be expensive and must be included in the accounting. Additionally, the accounting functions must encompass the payroll and employee benefits. Employee benefits generally include health insurance, vacation and sick days, disability insurance, and retirement plans (such as 401k accounts). Together, payroll and benefits typically make up the largest percentage of medical practice costs.

An important item falling under the accounting umbrella that is unique to medical office management is malpractice insurance. Medical malpractice insurance is insurance to financially protect medical professionals in case they are sued for malpractice (causing injury or death resulting from negligent professional actions). Malpractice insurance may be purchased by each individual medical professional or by the office group as a whole to cover all employed staff. Most states require medical professionals to carry malpractice insurance in order to be licensed and allowed to work in the state. This is an exorbitant cost that must be accounted for carefully in the budget. Of course, any practice will also need general liability insurance, and possibly additional forms of insurance. (Of course, every office will have to pay into the workers compensation insurance fund run by the state, too.)

Strategic planning is another large part of medical office management. Strategic financial planning is the process of mapping out a plan to achieve particular financial goals that accounts for risks and necessary expenditures. For example, a medical office may have a goal of expanding to new locations or offering new services over the next five years. To accomplish this, a certain amount of money is needed upfront, such as to purchase an additional office or to acquire new technology. All of these expenditures must be carefully budgeted and planned for well ahead of time.

Another large item that must be carefully monitored is the plethora of ever-changing policies surrounding health insurance and Medicare. Changes in these programs may affect the amount medical offices can reasonably charge for services and dictate the total number of visits each patient is allowed. Cuts in the amount covered may also decrease total patient visits, as many patients will not seek medical care for issues that appear minor when their co-payment increases. Accordingly, the medical office manager must forecast changes in insurance and Medicare coverage and budget appropriately.

Attention to the financial aspects of medical practice management is crucial for the success and continued operation of any medical office. All bills must be paid on time, taxes must be filed correctly, and employees need to be paid promptly for the office to function. And that’s just to operate day to day. Long-term financial plans also need to be created and implemented to ensure long-term viability. It is a heavy responsibility, but also an exciting and challenging one for someone interested in working behind the scenes to help patients.

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