Double the Value of Your Medical Practice

By John Henry Dreyfuss, staff.

Save to PDF Medicine, Business, LawRetirementPerformance-Based Medicine By
  • The partners in a reasonably profitable medical practice can more than double the value of the practice by properly structuring the corporation and the books, and by trimming costs.
  • There are numerous benefits to running a fiscally simple practice: easier to manage, easier to sell, potentially be more lucrative.
  • The basic strategies to follow in order to increase the value of your practice are to a) make more money; b) spend less money; c) run the business more efficiently; d) have strategies in place to increase revenue and profitability.


A well-run, orderly medical practice will always be more valuable than one that is even mildly disheveled.

Any viable medical practice must have accounts and patients to bill. It must have cases scheduled into the future so that income in ensured. These are the basics. However, there are a number of steps that you can take to significantly increase its value.

Keep Detailed Records

Practice management and accounting software can generate dozens of different types of reports. Here are 5 reports that a physician in a leadership position should see each month, for the previous month’s data.

  • Profit & Loss (P&L) Statement. This report indicates the overall financial health of the practice. A well-constructed P&L shows revenue and expenses in dollars and percentages, against previous periods and current budget.
  • Aged Accounts Receivable (A/R) Report. Review the A/R date by insurance plan, with insurance and patient balances shown separately for each plan.
  • Patient Receivables. Generate the report so that balances display in descending balance order, not alphabetically by patient last name. Focus your attention on Page 1.
  • Adjustments. Adjustments are the detailed categories to which staff post the amount between an actual payment and your standard fee. They include contractual adjustments and multiple procedure discounts of course, but also adjustments for denials (such as patient ineligible or a coding error), and A/R clean up actions (such as bad debt and small balance adjustments).
  • Credit Balances. This report indicates overpayments from patients and insurance companies. If balances are researched and refunds made continuously, the report total should be very close to $0.00.

Train Your Staff

Investing in staff through hiring and training can increase the value of a practice. The more smoothly and efficiently the practice runs, the more money it can make in a given economic environment.

As a partner in your firm, don't allow continuing learning to be optional. Budget for training and education of the management and staff. Create a culture in which those who attend off-site conferences, participate in webinars, and read industry journals teach their peers by summarizing and presenting what they learned and how it applies to the job and the practice.

Put Your Accounts Receivable in Order

If your business were running optimally, you would bill for every billable minute and every one of those bills would be paid within 30-60 days. You know that business often does not work this way. This is a problem begging for a solution – and it’s been mostly solved.

First, you must code for every single procedure that you conduct in your office. A coding specialist is worth his or her weight in gold. You want to make sure that your patients and payers are regularly billed in a clear, concise, and timely manner.

Ask your coding specialist to do some research and find ways that successful practices have used to get reimbursed.

Signs that Your Accounts Receivable are in Disarray

  • An increasing portion of your A/R begin to exceed 50 days.
  • Of your accounts receivable (A/R), 30% of the insurance A/R is more than 90 days old;
  • No one can explain the detail about the top 10 large outstanding balances.
  • There are clear denial patterns – patient not eligible, incorrect code, applied to deductible, wrong modifier, incorrect patient ID – but there has been no analysis to address the root cause.
  • Write-offs for bad debt and small balances have not been made for more than a year.
  • No one is accountable for calling patients about past due balances.
  • The manager has not presented the physicians an action plan for clean-up.

Important Risk Areas are Off the Radar

Here are 4 common practice risks that are frequently overlooked, along with actions your manager can take to address them.

  • E/M code usage. Managers should bi-annually generate an evaluation and management (E/M) code frequency report for each physician, and compare the data to national and state norms in the specialty. If a physician in the group is an outlier compared to peers, an internal audit of the physician’s documentation is recommended.
  • Cash handling protocols. The front desk is a common place for employee embezzlement. Certain standard accounting procedures guard against theft at the front desk, and effective managers know how to set them up. Effective managers also recognize the reasons why staff that collect money should not deposit it, and conduct periodic reviews to make sure procedures are followed.
  • Credit balances. Credit balances are a financial liability. If they are accurate, you’re required to pay them back to patients or insurers. Good managers make the review and approval of credit balances a priority, and ask physicians to sign refund checks on a monthly basis.
  • Online reputation management. Good managers direct staff to monitor what’s being said about the practice online, and have a plan in place for addressing negative reviews.

Make It Easy for People to Pay You

You went into medicine to be a doctor but one of the things you do is get paid. You administer anesthesia, you care for patients, you collaborate with colleagues, and you get paid. So, make it as easy as possible for people to pay you. For instance, accept as many types of payment as possible; credit cards, debit cards, cash, and checks.

Help patients create credit accounts. An uninsured or underinsured patient may simply not be willing or able to pay the anesthesiology portion of his bill. Offer him the chance to pay it over time. You can extend a line of credit and receive interest income. Every little bit helps.

“Our financial advisors were very effective in helping us identify areas where we could increase revenue, decrease costs, and just make the business more efficient, which made it much more attractive to our eventual buyers,” said Paul D. Montanarella, MD, of Arrowhead Anesthesia in Phoenix, Arizona.

Reduce Payroll

Of course it is always worth reviewing your staffing levels. Is there a position that can be cut? Can two positions be integrated? Can you turn a full time position into a part-time one? Could you reduce payroll costs by contracting with an outside service?

Cutting staff is not always the best way to reduce costs, either from a morale perspective or from a business perspective. Still, it is a thing any business owner must consider.

Keep Your Accounts Payable Current

Clean up accounts payable that are 120 days old or older serves an important purpose in preparing the practice for sale. First, someone associated with the practice needs to learn whether the money will be coming into the practice or not. If not, it should be deducted from the books as a loss.

Out dated, uncollectable accounts receivable can falsely inflate the value of the practice. Literally, they are monies owed the practice. Again, someone needs to get to the bottom of whether the bill will be paid and when.

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