Avoid Financial Mistakes to Get the Money You Deserve

Tom McGuinness CPA

Great, good to be here.

Cheng-Huai Ruan, M.D.

Excellent. So, so happy to have you on and I wanna tackle some topics today and I’m very near and dear to these topics because I felt like I made a lot mistakes earlier on, but that’s why I have you on here, watching the people’s back of the people who are watching this. And so I, you know, I’m curious just a little background for a second. How did you end up even, lecturing at McGovern School of Medicine at University of Texas to begin with.

Tom McGuinness CPA

In an old firm of mine, by the name of O’Neal, McGuinness and Tinsley we did about 90% physician side healthcare and Michael Altman, who is the program director for a family medicine, contacted us and said, “Hey, we need some education in house for people going out into practice, they’re getting a lot of stuff from us from the academic side, they need to hear what the real world is like and can you help us?” And that was about 25 years ago and we developed a whole program for them and it was a little too much, a little too much of us. They tried to condense it into it like one long day, two days worth of things and it, they have 40 hours over a three-year period. So I do two or three hours a year plus helped them find allied professionals to talk about other aspects of getting into practice, attorneys, insurance people, other doctors, you know, just to help give them a good idea of what it’s like outside of academia, ’cause it is, practice and theory are very different.

Cheng-Huai Ruan, M.D.

I’m sure you’ve been talking about this for a very long time, obviously, and I’m sure there’s some commonalities in mistakes a lot of young doctors start out with and even not so young doctors do within private practice even after being on there for few years, right? And so we’re working to address some of that stuff, but let’s talk about something that I didn’t get an education on, when I first started and that’s cash and cash flow related issues especially in starting in private practice and then continue on. What are some mistakes that you see in a lot of doctors, come out when it especially comes to cashflow.

Tom McGuinness CPA

Number one is it’s never too early to find a good community banker. And I say a community banker because, they’re closer to the grassroots of the community. They know the value of physicians in the community, the larger banks are looking for something to put their arms around, which is exactly what young physicians don’t have. Typically they have a 12 year old car and it’s not running that well by the time they get into practice. So they don’t really have a whole lot of assets, their asset is the knowledge that they have. And community bankers are more apt to lend to that person because they know where that cash flow is coming from. So having a good community banker type relationship, and it might take a while to find one in, you know, we’re in the community where you’re going to be practicing, but that is key and having a credit line set up early on and actually having a plan before you walked into a banker is a great idea.

I can tell you the worst thing to do is, and the worst time to go get money is when you need it. The best time is to walk in when you don’t need the money and cut your deal, but as a young doctor, typically you need money. You know, these days, their income guarantees in a lot of places, not as many people are hanging out a shingle as it used to be. So there there’s a lot more cover therefore people getting income guarantees from hospital systems or large groups that are bringing them in. But if you’re doing it on your own, having that community banker and that credit line available, because face it, when you’re young, when you’re starting out, you’re adding a patient and a half a day possibly to your practice. 

It takes a while to build up a full fledged practice and you’re not gonna eat real well in the early going and that’s just part of it. But, having that backing of the banker, you think of it as you’re an asset to that banker for 35 years and the bigger banks don’t look at it that way community bankers do, it’s just, I’ve dealt with big banks and they all come in song and dance to you and then the end, they wanna put their arms around something and the only thing they have is a young doctor who’s broke and they don’t like that.

Cheng-Huai Ruan, M.D.

Yeah, so speaking of big banks, that’s sort of the route that I went and you said something earlier, which is you never, the worst case situation that you can be in, is when you need money and you don’t have any, so six weeks into opening my current practice, well that’s when Hurricane Harvey hit and everything kind of went haywire and all of a sudden, you know, it’s a very cash flow situation. So it was certainly a awakening and it happened a couple of times again, during the pandemic, when we had to really pivot and change the things that we were doing. So you never know what’s gonna come out of this, right? And so, but you talked earlier about credit line, is that the same thing as the line of credit?

Tom McGuinness CPA

Yes.

Cheng-Huai Ruan, M.D.

Interchangeable terms. Okay.

Tom McGuinness CPA

You know, what, having one doesn’t mean you ever have to use it if you’re extremely lucky and you never have to tap into it, great. In most banking situations that doesn’t cost you any money to have that credit. The bank is just earmarking a certain amount of money from their reserves to you for typically an annual period. And, if you need it, well, then it’s there. We have a credit line we have, since the day we started this practice, we don’t like to be in it, but you know, sometimes our cash flow is seasonal, it has its ups and downs and at the end of some of those troughs, sometimes, the peak ends is kind of slim and having that facility there to smooth it out is good. 

And just because you were a young doctor, doesn’t mean that it’s only young doctors that do this. I was mentioning to you a while back, I have a practice right now that I’ve been with them for almost 30 years and they don’t have a credit line right now. And they’re coming in, we’ve been talking about it and they haven’t, one doctor’s afraid to sign an income guarantee or he doesn’t want to. And my comment to him was, “You either sign the guarantee or you’re gonna start writing checks, which one do you wanna do, which one’s gonna be a bigger pain point?” So it’s not just the new doctor in business. I mean, established businesses need credit for just like you’re saying, the unexpected.

Cheng-Huai Ruan, M.D.

So when you’re talking about income guarantee, are you talking about a hospital income guarantee of a private doctor to be within the community or was the income guarantee coming from.

Tom McGuinness CPA

Yeah, it is from a hospital system, it can be… I do a lot of those types of deals with bigger groups that are bringing new physicians in the community and the hospital systems will front them some guarantee money for the first year, depending on what specialty it is and how badly it’s needed, sometimes up to two or three. And that’s in big cities, people used to think it was only in rural areas where it was hard to find talent and draw them there. But I have guys here and men and women here in Houston that are on income guarantees right now. And it’s not some super subspecialty, I mean, it’s orthopedics, OB, some family practice so-

Cheng-Huai Ruan, M.D.

Yeah, so I had income guarantee actually with my area hospital. And so for those of you who don’t know, income guarantee is basically, a hospital trying to attract a physician into a specific area zip code, that’s within radius of the hospital in hopes that, the hospital absorb a lot of the hospitalizations and that’s basically how everything works. But most people don’t know that and most doctors don’t know this, that when you give it income guarantee, you don’t have to send to that hospital. I feel like a lot of doctors are kind of tied to it. In fact, they can’t legally make you send that to the hospital, that’s a kickback. And so, when I talked to my friends that’s usually the main hesitation, I don’t wanna be tied to this hospital like, well and that’s not really necessarily the point, right? I just think that there’s a lot of fear and hesitation around these things, it’s people who aren’t necessarily educated. 

But I do think income guarantees are absolutely crucial because it really stabilizes someone’s cashflow and pretty much guarantees the cashflow because not only do they give you income guarantee for you, the physician, they give income guarantee for overhead, as well as the employees as well. And so that’s on a case by case basis but lot of the large hospitals do there’s actually, a lot of state funding that’s dedicated towards it as well. And so I think it’s a really good thing that people need to really take advantage of. We actually talk about… We get into income guarantees on a whole different segment with Dr. Qureshi on this summit about what his experiences are as well. 

But yeah, going back to the cashflow, so I’ll be real frank and honest with you. I didn’t know what a line of credit was and I didn’t know what the difference between that and a credit card was, when I first started. And so definitely suffered a lot of pain points there, but if you guys don’t know, a line of credit is basically like a big credit card, except it’s a bank account and you don’t have to use the money that’s there, but when you do, and if you don’t pay it back, you have to pay interest on it, but if you don’t, they kind of leave it there, it’s a big cushion. And I wish I had that in the very, very, very, very beginning before Hurricane Harvey, but I didn’t really set that up. So I think that’s a really valuable lesson that I learned. I hope everyone gets a line of credit and I do agree the community banks around the community, much easier to work with. You’ve got someone there to talk to, they understand the situation, there’s a lot more that they can actually do for you. And so, you know, let’s focus on the whole cashflow aspect because I think a lot of doctors and correct me if I’m wrong, think that, okay, well, I’m gonna start my practice and I’m gonna do this and here’s my revenue cycle. I’m not gonna get paid on time for X, Y, and Z. And I’m just gonna get enough, a line of credit or enough cash to cover this. And I feel like a lot of people are just underestimating, did you find that to be the case as well?

Tom McGuinness CPA

If they don’t have help, I try and talk to doctors and some, I hate the old moniker that they use all doctors is a bad business and that’s garbage. You didn’t get through medical school by being dumb, you’re smart, if you put good information in front of you, I guarantee 99 and a half percent of the time you’re gonna make a good decision. So, but different people hit the wall at different places. You know, medicine is not finance, although you need to have some of that expertise with you when you go into business and if you don’t have it, then you look for somebody like myself, or, I mean, there’s a good accountant, somebody who can help you build a budget, build some projections who understands how patients come into the office and how that money flows through the office and what obviously what you bill and what you get paid are two different things. And the timing of those is incredibly dependent on the people that are doing the billing for you and how they’re doing the billing. 

So, that’s an important piece too, when you’re going into business hiring the right people in the right spots. It’s just crucial. You know, I had mentioned to you once before that historically and I’ve been doing this since 1981, the lowest paid person in the office was the biller and that person holds the purse strings of 90 to 95% of your income in their hands, by what they’re doing, how they’re billing, how they’re coding, what you’re doing. So, I would want that person to be the very well-paid as well paid as you can for their position and well-trained, know the codes of your specialty, 80% of your revenue comes from 2020 codes or less. If you’re a family practice, 20 codes hits probably 90%. 

So you don’t have to be a specialist in the whole CPT-4 book or ICD-10 book. You just really to know those things that you’re doing every day and know how to do them well and follow a process to collect regularly. And it’s slow at first, like I said, the model, the typical model for a young practice starting is picking up one and a half patients per month. You know, so it takes a year and a half to get a cycle of patients coming into your office. And again, cashflow is where it’s at, you’re not gonna be taking a lot of money out of the practice, as you start, but you need to live. The good thing is as a resident or a fellow, you learn how to live on very little for years. So you slowly ramp up as you generate that cashflow again, not as many people are hanging shingles out and doing it on their own these days and that’s good and bad, but you know-

Cheng-Huai Ruan, M.D.

All the more, I think it’s all the more reason to have an income guarantee from a hospital because you don’t necessarily run into that issue at the very beginning, because there’s structured dealed from the hospital where they give you your income so you don’t have to be very stressed out in a lot of the cash flows issue. And let’s talk about something that I think that is probably the biggest deal in America in private practice, is billing and collections behaviors. So traditionally, what most practices do is that, a services rendered, whether that be a doctor seeing a patient or procedure that’s done.

So some services render on day one and then there’s CPT codes that get billed out, maybe, you know, however many days after, or they’re really good, probably that same day and then it goes into this black box, we call it revenue cycle. When I say black box, I mean black box of most doctors and things magically happen in this revenue cycle and then an X amount of money gets dumped into the bank account. And that X amount of money is not necessarily predictable by the practice owner. So that’s usually what that revenue cycle is. And this is where most of the stress occurs with burnout is, what does that little black box in the revenue cycle? What are some the best practices that doctors should have to have a lot more visuals into their finances and not have to be in a whole lot of stress.

Tom McGuinness CPA

So whether you’re a primary care doctor or a specialist, there are some different rules. The first rule is, get the bill out correctly and this quickly as possible. For primary care practices, that’s from, at the time of service to one or two days at the most before that bill goes out the door and goes to a clearing house and it’s scrubbed to see whether it’s a clean claim or not. And then the insurance company takes it, adjudicates the claim the number of days actually has been going down over the years. That’s the good news, the bad news is, so is reimbursement. So, you get less money, but you’re getting it a little quicker. I mean, Medicare for as big a beast as it is a lot of firms they’re paying in 10 or 11 days on a clean claim. 

So the, and they used to be the second worst payer, with Medicaid being the worst and now they’re all terrible payers. But the idea is to make sure that that claim is clean when it goes out the door, because if it’s not, it’ll get rejected and come back to you and that’s not a good thing. That’s one of the cemetery spots for claims, because it comes back and every claim has a shelf life, typically it’s 60 days. And the rejected claim, if it’s not worked, it is not ever going to turn itself into cash coming back into your practice. So the first thing is if your primary care, get that claim out in a day to two days, if you’re a specialist, a lot of times do you have to wait on demographics from a hospital or, another system in order to get your claim out? 

So that’s three to five days. Any claim that’s rejected should be turned around within 48 hours, because if you don’t do it, believe me, that bucket gets full and people who are not paying attention will find themselves wondering where in the heck all of their money is and it’s sitting in the trashcan because at 60 days, that’s a dead claim, and, you can plead with insurance companies and some of them will work with you, and most of them will tell you, better luck next time. So once you get the claim out the door, then you monitor the timing and the, you know… So the recipe for success is to find good procedures and follow them religiously. And have that routine going daily and monitoring older receivables. You don’t have to wait until a receivable is 60 days old to call somebody about it. You know, at 30 days, if you don’t have the money, your billing people should be making phone calls to their insurance rep, asking what the status is on claims. You know, sometimes they get hung up, bu the squeaky wheel does get greased most of the time when you’re dealing with insurance.

Cheng-Huai Ruan, M.D.

Right, so Tom, I’m just gonna take a pause here because how do you know all this? You’re a CPA and I just wanna, ’cause you’re speaking like a biller right now. And when I work with a lot of CPAs, especially in analytics and stuff like that, very few people, very few doctors actually, know we just talked about. So how do you know to this extent of the information within the revenue cycle?

Tom McGuinness CPA

Well, I’m a reformed auditor from Big Eight firm, you know, working in practices, looking to see, and actually it is, the audit function is a discipline within the accounting profession and you test cycles to see where problems occur. And it’s like looking at a pie and various slices, we’ve gone through, a short piece of the revenue cycle, talking about, when a claim should get out, how it should be followed and then, either it’s collected or it’s not, the one thing we didn’t talk about, on the very front end, is collecting any copays and deductibles at the front desk. I mean, it might only be five to 10% of your total revenue, but it’s five or 10% that you can either have, or not have, and never get, because sending bills out is, it depends where you live, what zip codes you’re practicing in, but a lot of it’s a waste of time and you’re just throwing good money after bad, in some parts of Houston. 

Where I live, we have those copays and deductibles paid before they see the doctor, because the walkout rate without paying is so high, it makes practicing almost unaffordable without putting those steps in. And yes, some people get angry, but if they wanna be seen by the doctor, doctors don’t live on, on love and charity, they have to pay their bills too. So and you, you ask where it happened. I’ve made my mistakes with practices as well, going through finding problems, looking at issues and not being quite right about where they’re at and I mean, look at me, I’ve been in business for 40 years doing this stuff. So it was actually easier a long time ago, because for docs every year there was a new pot of money and you could make lots of mistakes and every year you started fresh. Now that the reimbursement is not so plentiful and one big mistake can really put you in a world of hurt and take you years to get out of. So doing it right the first time it is so much more important today than it ever was.

Cheng-Huai Ruan, M.D.

Yeah and you put on a really good point, which is it collecting a front and copays and stuff like that. And I think a lot of doctors just kind of cringe at that because, by nature we’re physicians and I hate to ask my patient to pay and stuff like that, but it’s needed. And I’ll tell you, based on the Texas Medical Association, I did a survey, of who are basically the most angry patients and it has nothing to do with payment or deductible. It has to do with the fact that they are communicated that there is not a pocket beforehand, but generally, if they are, they’re more than happy to pay for it because there’s a perceived value, versus if they go and get the service and then they get billed on the backend, that’s where the irritation actually occurs. 

So those doctors thinking, no, I don’t wanna collect up front, well, going on the back end and collecting from there, not only is a nerve wracking for the patient actually, it creates much worse, google reviews and patient satisfaction scores and stuff like that. So I think we really need to shift the mindset for a lot of physicians that hey, collecting and paying up front, means that you’re doing the patient a service by delivering the value of knowing that, hey, there’s this, out-of-pocket, there’s a structure here, and you may have this out-of-pocket. And sometimes we don’t know what the out-of-pocket is because they may be on some drug that needs prior verification and stuff like that. But collecting a front is a big game changer because we didn’t really do it at the very, very, very beginning, but we did after the hurricane. So and that made a huge impact for us.

Tom McGuinness CPA

It makes a lot of sense to do that and yes, some of it might be the patient education, but from long before you started in practice, there were co-pays and deductibles, there’ve been deductibles since before I was in practice, and insurance was way back when typically, I mean, there was a lot of places in the primary care market where insurance wasn’t used. People had insurance, health insurance, but it was more used for catastrophic stuff. My parents, when we went to the doctor they paid cash, for the service right then and left the insurance wasn’t looked at as the, be all end all in the healthcare system. I knew with the advent of managed care, did the whole shift on where the cash is coming from take place. 

And so a lot of people who have been born or you know, since 1990, when managed care really hit here in Texas, they don’t know anything different than the insurance company pays everything. And Obamacare didn’t help that much either because as you well know, I talked to patients all the time who are angry and some of my doctors said, we do call this patient and explain to them that Obamacare isn’t free medicine. And, the copays and deductibles, the deductible especially, in most of those plans is higher than an HSA plan deductible and those were typically 5,000 bucks and the premiums for Obamacare, I mean, they do have the credit that’s out there, but it’s not a bargain. And, but there’s this misrepresentation that it’s going to be free and yes, then the practice has to overcome that as well as the declining reimbursement that’s been happening since 1990. 

So yeah, it’s a bit of a conundrum and having signage, good signage, if you’re in a multi-lingual place, having it in several languages to say services are expected to be paid at, yeah… Copays and deductibles are expected at the time of service, you know, we’re happy to work with you on payment plans for the rest of your bill, but you know, you have bills to pay too. And by the way, I was sending out emails to several of my doctor clients, saying, hey, we have a bill that’s over 60 days to let them know and I mean, they’re busy guys and girls, that’s fine, but I provide a service too and I try and keep people out of trouble, but as I said, doctors don’t live on love and charity, they need cash to pay bills, so do accountants, I mean, it makes the world go round. So cashflow is king and if you’re not paying attention, you’re going to be looking for an alternative source of revenue, which is probably, going hand in hand someplace where you won’t make the money that you can, because somebody else is going to be taking that risk for you and there’s a price to be paid.

Cheng-Huai Ruan, M.D.

Right. And so I think a lot of physicians also just take a lot of those situations and kick it to the corner and say, hey, this box is what my practice manager should really be doing, right? But I feel like there should be at least some oversight into what that black boxes as well. And especially you right now with the how complex things are, there’s actually, practice management and revenue management systems that could be tapped into. And I don’t feel like when I talk to a lot of private practice docs, I don’t feel like, their managers are utilizing these capabilities. Can you kind of just explain what some of those things are?

Tom McGuinness CPA

Well, you know, if you can get into the EMR realm, you know, a lot of the new architecture is really pretty smart stuff. I mean, it will pull and highlight areas for you to code, for your coders to pick up on, because you providing a service that’s easy. If you provide a service that may have a modifier attached to it, because you’re doing it on both sides, you’re taking a bilateral chest X-ray. Well, there’s a difference between one side and two, and you get paid a different thing for each one. So, those people knowing how to do that, billing and coding and knowing their EMR and its capabilities, like I said, a lot of them are smarter these days, the EMR systems, and they will help find you money in your coding and charting. 

So, you gotta find, get it wherever you can. And I’m not saying to upcode, I’m not saying to do anything like that, because believe me, accountants, just like doctors can go to jail for upcoding the, you know, fraud and abuse and stark, and a kickback and all of that stuff. we’re just as liable for it as you are, if we’re telling you to code for something that wasn’t performed, we’re just as liable. I teach CPAs about this as well. So, but there’s nothing that’s as just like performing a service and expecting payment for that service. If you provide a service, you wanna get paid the most that you can for the service that you’re rendering. And so it’s real important when, if you’re opening your own shop or have your own practice to look at those EMRs and see what those capabilities are. 

And another thing, even as big as that is the ability to design your templates. Because if you have to go 11 places and make 11 clicks to get one little body system and say, it’s unremarkable, you’re losing patient time during the day to a stupid machine. And if you can’t, manipulate those templates to be efficient for you, you can lose up to 20% of your practice time, with screwy going from screen to screen, to screen checking things off, because some code head doesn’t know how to efficiently design a system. That would be a deal breaker for me. I have some practices that are on their third EMR, just because they went in unknowing the first time around, they got a system that really wasn’t designed for their specialty.

Cheng-Huai Ruan, M.D.

Right.

Tom McGuinness CPA

They limped along with it for years and of course, none of them are cheap and believe me, the sticker price is not the half of it, it’s the underlying set up of the EMR and pulling the… If you’re gonna pull legacy data in to it or designing how you’re going to accept that data and store that data so that it’s useful for you to run your practice down the road because Medicare and everybody else is asking for, key thing, you know, key metrics on chronics and all of that and you get paid or penalized for being able to show or not show that you’re taking care of that patient base. That’s money in or money out of your pocket as well and sometimes you don’t even know what that number is until the end of the year.

Cheng-Huai Ruan, M.D.

Right. And sometimes you don’t know at all, because like you said, if it takes 11 clicks to do one thing, it takes 22 to do two things, right? And you’re missing out and that time could be spent doing something else. And that time actually has, holds a lot of value that’s really hard to calculate. Another one that is similar to the number of clicks for me, is actually the number of steps in between each room as well. So that’s something that should be considered as well, because if basically it’s patient transition time. 

So I learned that the hard way is that, yes, there’s a number of clicks the patient transition time and how long does it take for you to move to one patient to another in documentation. And then that allows us to figure out, whether we should pay for scribing services and stuff like that. So time is valuable and it’s not optional to look at it later and say, hey, this is this note. You know, I saw this patient for seven minutes, it took me 22 minutes to do the note. It’s just not right. But unfortunately, that is what the standard is at this point, especially with all the EMRs going-

Tom McGuinness CPA

Well, there aren’t that many 30 minutes slots in the day for you to make money on… If you’re in a primary care practice, you’ve got to see upwards 30, 35 patients a day for family practice, possibly pushing 40 and really, then you get into the numbers game. Am I really… You got into practice to take care of people and the way that the market has shifted with managed care, you know, the big lie was, oh yeah, we’re gonna pay you less, but we’re going to send you a whole lot more patients. Well, that’s good and bad, if you’re gonna see 40 patients and you can only earmark five or six minutes for each patient during the day, a good deal of healthcare is actually being missed. And so, that boat missed the port it was supposed to dock at. And that’s where lots of docs run into that moral question of, am I really doing what I’m supposed to be doing here?

Cheng-Huai Ruan, M.D.

Absolutely. And I think the good news, is since 2020, there’s other CPT codes now , that reimburse for things that we’re already doing, which is communicating with the patient, sending patient either a text message or secure message, email, five minute phone calls are being reimbursed by Medicare and private insurance is now I think that, what we did in our practice, we actually allocated much longer. We do have 30 minute in hour visits, but we also bill for those digital communications. We also bill for, if you want me to speak with your doctor, well, here’s a time slot and now there’s interprofessional codes. 

I think we’re really entering into an era where we can play around with the CPTs quite a bit by doing the things that we are already doing on the back end, but having really been paid for it. And now there’s remote patient monitoring and chronic care management that the medical staff, get a lot for. So I think we’re changing, I think that set up is definitely changing and it’s certainly doable, but that gets me into the, another question, which is, okay, so we have our EMR, so our EMR, we have our practice management software within our EMR. And then we have a tax software, which is completely different than our practice management software, right? And so most people use QuickBooks or Xero or some other platforms to look at taxes, but then what happens, what I find very difficult is that there’s not necessarily like predictive analytics of cash flow or any of this stuff that I think other, non-healthcare companies have access to that exists. So how do you advise practices to look at, what is my predictive analytics? What is my cash we’re gonna be in, one month, three months, six months a year, what does that look like? How do you, how do you figure that out?

Tom McGuinness CPA

Okay, so first things first, yes, your general ledger accounting system, it’s your balance sheet, your income statement, those are the summary reports that come from a general ledger, that has a list of all of your accounts and you’re in control of that list of accounts. Now, most people, other than accountants don’t really know that or understand it, but the reason other businesses are better and good practices understand it as well is, the general ledger at its bare minimum is there to capture enough information for you to prepare a tax return and a lot of people just stop there. You know, how much revenue did I make? What are my expenses? That’s fine. 

There’s so much more to be harvested in that data and that’s where practice management actually comes in. You have your software that keeps track of your charges, your receipts, it keeps track of and reports on what your production is. What your other providers production is and their collections and their adjustments. And by the way, within that realm, there’s a lot of learning that can be done as well, because not everybody codes the same way and some people do it better than others and capture more. And so you can learn by looking at some of the analytics in your own practice and you can use RVUs, you can use patient visits, you can use whatever metric you want to see, Bill and I do the… We see virtually the same number of patients, but he’s collecting 20% more than I am. How is that? Now, Is he upcoding or are you missing charges? You know, obviously if he’s upcoding that’s actually a different issue because, there are legal problems with that in particular, but saying any of that kind of thing going on, just saying, well, when I’m doing this, there’s also an injection that’s happening and it doesn’t look like your chart has that J-code,

Cheng-Huai Ruan, M.D.

Yeah

Tom McGuinness CPA

And I’m picking that up. And so you’re paying for the material, you’re just not collecting the revenue on it. So looking at those metrics, and it may be something, and it may be nothing, it may be that your patient base is not as acute as his or hers and so it dictates more 99214 and fives than a 99213 or or he’s seeing more new patients and they’re more chronically focused And so there’s more decision-making that goes in there and just by the charting your coding is different. So there’s either an answer for it or there’s not. If there is an answer, we’ll then okay, I get it he’s got a different patient base than me, if we’re doing the same thing, one of us is missing something and is usually someone who’s not collecting that extra 20%. 

But on the accounting system side, you can build, first you wanna make sure that everything that’s getting coded in there, is being coded the same way all the time, consistency, because you can use that from period to period, to benchmark your own practice, see what’s working, what’s not, see how you’re doing this month versus last, this month, this year versus last year. The first benchmarking that we typically have a practice do is with some common size data from other practices, you know, family practice across the country, family practice in the Southwest region, family practice in Houston, what is the average revenue? 

How many RVUs are average for a doc to see? what are we doing? You know, looking at those things, and the RVUs come out of the practice management system, if it has that particular template available. But as you push, some of that data comes across, obviously because the cash that you collect shows up in the general ledger, the bills that you’re paying show up in the general ledger and so by designing your general ledger appropriately, you might have service lines that you want to look at and see how profitable they are by setting up a different department or a different class. QuickBooks is used by so many people, they use what’s called a class. And so you can break that out by doctor, by provider, have your nurse practitioners or PAs, or what have you in there, and you can track them, build overhead out, design it so that you have variable costs versus fixed costs separately, because fixed costs are just that, if you do no business, you have that cost, if you do see a thousand patients, if that’s within the relevant realm, you have that same cost, variable, it changes, you got table paper, you see more patients, you use more table paper, you use more supplies and things like that. 

Getting back to your point of how do you utilize your data to figure out what you’re doing? You can build a projection model to say, well, if I have another 250 patients, if I can bring in a nurse practitioner or a PA that’s gonna cost me $60,000 a year, but that person can see 250 patients in a certain period of time. You can take a look at what that average collection is for the services he or she is going to be providing, you can dial in what the change in your variable expenses is gonna be because more patients more of those costs, and you can see how profitable that person might be for the practice and then use that as a benchmarking tool to see if you can measure it, you can evaluate it. And then you have goals set up and you monitor it, not every decision you make is gonna be a winner. 

But if you’re looking honestly at trying to expand your practice, you got to try some things. I mean, I can tell you, I have not been successful at every thing that I have done, I’ve made my mistakes, you learn more from those mistakes than you learn from hitting the home run. The home run feels good, but you said, how do you know all of this stuff? Well, you do a lot of things over and over again and you learn from the mistakes that you’ve made. I can tell you the hardest specialty out there to make work is infectious disease. And I’ve had two practices over my 40 year career that have actually failed. 

Because they were in environments where the referring doctors did not know how to utilize them appropriately, or they used them as the trash bin, oh, I’ve got, you know, Medicaid guy, I don’t know what to do with them I’m gonna send them over there. The reimbursement is terrible, it’s not worth my time, which is not what a doctor should be doing. But I mean, they’re the catchers of a lot of that stuff and a lot of insurance companies don’t value what they do. So I’ve seen practices fail only a few, but they were, they were ideal practices, because of combination that reimbursement… A lot of people wont practice, when we split out EOBs, explanations of benefits, we found that several carriers were not paying them at all. He was seeing their patients and he never got reimbursed anything from them, and I said, stop seeing their patients, right now. And he was like, well, I can’t do that. They have a responsibility to you to pay you for the service you’re rendering. This is like a holdup, it’s just, there’s no gun in mass.

Cheng-Huai Ruan, M.D.

Yeah. 

Tom McGuinness CPA

So I went on there a little bit, but I mean that, you can find good things through measuring them and a well-designed chart of accounts will give you better information that you can use, and certainly use outside benchmarking type stuff, common size financials, from MGMA or, I use several other sources to get information, but the best information is your own practice. And as you grow again, that’s what I said, be consistent in the way things go in there, because if you’re not consistent, the numbers aren’t any good and you’re gonna spin your wheels.

Cheng-Huai Ruan, M.D.

Yeah, it’s interesting, ’cause I think most practices already have the data, but turning those numbers into words may be the missing link that’s right there, right? And so you talk about benchmarking and I think this is really important to hit on. So benchmarking is also another big black box in question mark, I think for myself and for a lot of people as well, because you know you said some really good points to benchmark on as examples earlier, but how should a practice. right now, they’re not benchmarking anything all they’re doing now is looking at their bank account and that’s pretty much it, What are, maybe the first two or three benchmarks to start looking at to see if they’re losing any revenue?

Tom McGuinness CPA

A real interesting thing to do would be to separate your explanations of benefits by insurance company, by insurance carrier, because you have your fee schedule and they have theirs, unfortunately you’ve got to live by their fee schedule. But looking to see what they’re doing, because a Blue Cross might have 50 or 60 plans that you’re on, each one of those probably has a somewhat different fee schedule, not all 99213s are paid at the same amount.

Cheng-Huai Ruan, M.D.

Right.

Tom McGuinness CPA

You know, an HSA plan might be paying different than a PPO plan that has a thousand dollar deductible because the premium on that one is 700 versus 400 so they’re paying a little bit more. But looking at those things and seeing that you’re being paid consistently by that carrier is one thing, I’ve seen numbers all over the board, I’ve seen where a particular code is being rejected every time it gets billed to a particular insurance company and you call them and say what the heck?

Cheng-Huai Ruan, M.D.

Yeah I’ve done that.

Tom McGuinness CPA

Yeah well, it’s an accounting term. And there’s no real good explanation. Insurance companies for so many years had so much data, but did very little with it, I mean, they did some things, but doing the hard core number crunching, they weren’t doing a lot of it and when you’re negotiating, he who has the better data wins, and utilizes the better data wins. You know, if you can show why you should be paid more, you can probably get paid more. But if you can’t you’re at their mercy, just like everyone else, you have to differentiate yourself from others, show your outcomes are better. Again we were talking about looking at populations, you know, a lot of reimbursement is moving toward the general health of the population you’re looking at and there are bonuses for doing that. 

Capturing that data and utilizing that data will get you paid more money. It takes time and it’s not free to do it because somebody has got to got to do that number crunching, your office administrator could do it, if you have some really talented staff and maybe an accountant that could give them some direction, you can get a lot of that stuff done internally, designing reports in your practice management software or pulling the data from your general ledger, typically the stuff that I was just talking about is gonna come out of your practice management data because of the fact that, that’s where the insurance companies live, in all of that stuff. But that’s a database, the ability to extract data and mine it to highlight your strengths will get you paid more. So that’s one way to do it. But looking at this data, just putting stuff into a computer and saying, the day is over, let’s go home. 

Yeah, you’ve got the data, but again, you could be as bad as the insurance company, having all of the data and not doing anything with it to help yourself. You know you can learn a lot clinically from it by looking at your patient base and then seeing what you’re doing you might have a more acute patient base that you have better outcomes than your peers. That should get you paid more, especially the changing environment of reimbursement. And I’m a fossil, I started doing this stuff back when it was PEG and ledger, no computers. So seeing how many generations of improvement practice management systems have gone through, seeing the birth of EMR and the five or six generations that are out there now, it’s amazing what can be done with that, but you got to commit to knowing how to pull that stuff and you can do it. 

I have a practice, an orthopedic practice and the orthopedic surgeons, they make a lot, you know they’re on the higher end of the pay scale, but this practice was able to show that their outcomes were significantly better than their local peers. And they ended up getting almost a $2 million bonus at the end of the year from Medicare, because they could show that their outcomes were significantly better and cheaper than their peers. Of course, Medicare moved the goalposts the next year for them so they had a higher goal to meet, to be able to get that bonus, but they’re available.

Cheng-Huai Ruan, M.D.

Yeah, so whenever we think about these will be value-based contracts and bonuses, stuff like that, you’re right, there is a fixed costs, I should say there’s a variable cost to getting that data and someone’s got to mine that data, put it into the specific structure field, so it could be report at a given time. I think that’s very off putting to a lot of physicians and sometimes you just wanna call it like, well, you know, I’ll just do what I wanna do. And kind of give up on that. But I think that, and for us as a system to propel forward, even within private practice, I think that data is valuable, I think that we have to speak the same language as insurance companies and the government wanting to look at the same data and we wanna be able to make sure that we’re doing well for our patients, you know, patient reported outcomes and clinical outcomes to really go hand in hand. 

I think all that is there, it’s in our EMR, it’s just not mined properly. And even if it is this a lot of times you don’t know what to do with that information. And I think that the education here is lacking, when it comes to stuff like this with physicians and we really rely on practice management and practice managers to look at this. But really have to understand that they have a lot less incentives for change as well, if things are going smoothly, according to them so we really have to stir the pot a little bit, once in a while, once a quarter, once a year, whichever it is, to look at these things and then look at benchmarks and then create new benchmarks so that we can continue to improve and otherwise we’re just gonna be eaten alive. I think.

Tom McGuinness CPA

Well, I can tell you, even in our firm, we’ve recently found some things, I’m the administrative partner, so this is kind of a black mark against me, we found a couple of places that nobody was looking at, and we were losing some money. I mean, we were paying for some things for clients where we didn’t provide that service to a client anymore some of it was a particular software that we were getting billed a certain monthly rate. Well, it was being charged on a credit card and the, I mean, the buck stops with me. I should have been grabbing that invoice every month, but there was a breakdown in communication internally and my partners didn’t tell me we weren’t providing this service for this person. Well we just did some personnel changing and the new person said, hey, why is this? And so what you mentioned is a really good point of mixing it up every once in a while, having somebody do somebody else’s job for a little bit, the questions that get asked, can be amazing and it’ll save money and you’re not having to spend a whole lot of money to do it. 

There’s only so many ways you can squeeze the income statement, the expense side to reduce expenses. It it’s just not, there is a diminishing returns aspect to it, and you are finding a dollar here and a dollar there, or $5 here and mind you, that’s all good because it all adds up. But there are very few whales swimming in the general ledger that you can just harpoon it and say, man, I’ve found, we’re good from here out. It’s constantly monitoring your phone service, your internet service, who’s giving you your office supplies, going out for bid every so often to make sure that, that you’re keeping everybody honest there.

But you’re already paying for your EMR, there’s a little bit of training that can be had, or there might be a lot of training. That money, you know it’s, I had a doctor one time, and this was years ago, we found a half a million dollars in his practice one year. It was just, he was an animal, he was practicing all the time, but the staff was not doing their job. And we found it, and his comment to me at the end of the first year was that was very good, and how are you gonna find me a half a million dollars next year, and justify your fees? And I said, if I walk out of here that half a million dollar level that you’re at is gonna drop back down to where you were, because people will go back to their old habits. You’re paying me to keep it up here this year and anything that we find that’s incrementally better it’s not gonna be as much, but you should be real happy for it, but you’re gonna keep paying me to keep you at that level, because that half a million dollars more this year is another half a million dollars more next year, all other things being equal, except for reimbursement, which goes down every year a little bit. 

So it might, might be 475 or whatever, but the idea, you find those little gains and you hold them and you’ve elevated your practice to a slightly higher level. Finding a little nugget in your EMR that will help save you time. If it saves you a little bit of time, that may be another patient as you spread it out amongst 20 patients during the day one patient every day increase can be $10,000 at the end of a year or more. So I mean, you said it early on time is money, when you’re a service provider, that’s what, you’re selling a service, your leverage is upfront because you have what somebody wants and therefore back to collecting upfront, because that leverage goes completely away after the patient’s been seen in your case. So you wanna use that leverage, you want to use the knowledge, and you know, I’m pretty good with Excel, I use it every day. Every once in a while, I go to build a spreadsheet and I’ve got something more complex and it takes me a couple of hours. 

And I think, there’s a better way to do this, there’s gotta be, and do you know what, I go in and look and sure enough, there’s a way to do it that would take five minutes. And that’s the way the EMR is. There are plenty of places like that to find. So making sure your staff is as up to date on it and actually have them task the rep to find out what other people are doing that we’re not? You know, just asking those simple questions, even if you’d get one answer that might save you time, it might create additional revenue, all of those things help. I mean, that’s where you build a practice up and then once you find it you keep it there and have the discipline to follow the process and the procedures religiously.

Cheng-Huai Ruan, M.D.

Yeah, definitely. I felt all those pain points before. So totally understand them. We’re definitely in the process of getting benchmarks and all this stuff set up with us as well. And I can’t thank you enough for being on, I mean, this is probably one of the most valuable segments for someone who’s in private practice, who’s kind of doing the same thing every day, trying to figure out where to go from here, how do I leverage, is all about leverage, How do I leverage my practice, leverage my business? I think these are just absolute crucial so thank you for being on. Any last words to our doctors listening, I know we’ve talked about a lot, but any last tips you got?

Tom McGuinness CPA

Gosh, you know? 

Cheng-Huai Ruan, M.D.

Parting gift. 

Tom McGuinness CPA

Parting gift. Take your staff to lunch every once in a while. Set some incentives for them that are realistic and reward them for giving it the old college try. Making sure that you enhance the loyalty of your staff will have them there when they’d rather be somewhere else, they’ll be working harder, they’ll want to learn more because it’s helping you out. The other side is, if you don’t do that, some people will tend to rationalize that doctors make so much money and I don’t make that much, I should be making more and that’s the dark side of medical practice. And believe me-

Cheng-Huai Ruan, M.D.

The culture.

Tom McGuinness CPA

Internal controls are not strong in most medical practices. It is a beautiful hunting ground for the person who wants to steal.

Cheng-Huai Ruan, M.D.

Yeah.

Tom McGuinness CPA

And that is a nice parting note. But I mean, doing good things for them, builds a loyalty, treating them the opposite, will do the opposite. And most people won’t steal for anything, but you have people in the wrong situation or the right situation, they will. So the golden rule treat others, love others as you would like for them to treat you and build that team. Like I said, well, or you said, there’s no I in team. We’ve been very blessed, we have a great team here and we call people out, you know, hey, so-and-so did this, we did that. And it builds a comradery inside. it may sound very raw, raw-ish but when you look at the hierarchy of what people feel is important, money is like fifth or sixth out of the top 10. What’s at the top? That recognition, being told you’re doing a good job that hand on the back, thanking them, that’s gold, right there.

Cheng-Huai Ruan, M.D.

Absolutely. That is that’s really echoing a lot of other speakers, parting gifts as well. So we can see how much company culture and practice culture really translates, not just into revenue money, but longevity, decreased burnout and increasing connections, that human connection, actually increases overall patient outcomes as well, and that’s truly, what’s important. So, yeah, thanks for being on Tom. This is such a great talk and probably one of the longest but I just have you keep going, because it’s just each thing that you say is just absolute pure gold. But for those of you listening, I hope you get inspired by this talk and create some benchmarks and work with your team And also don’t forget to take your team out to lunch. it’s important.

Tom McGuinness CPA

Hey, well, thanks so much I enjoyed it.

Cheng-Huai Ruan, M.D.

Thank you so much, have a good one.

Tom McGuinness CPA

Okay.