Financial management

Financial controls are essential to your medical practice. They safeguard it from accidental or fraudulent mismanagement, ensure that you are using and managing money effectively and help your team understand their roles and responsibilities regarding finances.

A financial policies and procedures manual establishes controls for your practice that ensure the accuracy, timeliness and completeness of financial records and information, making it an invaluable guide for staff and management.

Ensure that your manual reflects all relevant government legislation and standards from departments such as Canada Revenue Agency, Health Canada and Industry Canada, and ensure you receive notices of changes as they occur so you can update your policies and procedures accordingly to meet mandatory requirements.

Think of your policies and procedures manual as a roadmap, in two parts:

• Policies identify the rules, explain why they exist, describe who they apply to and when, show how they are enforced, and outline the outcomes
• Procedures identify specific actions and when to take them, outline alternatives and emergency steps, include warnings and cautions and illustrate clear and relevant examples

Effective financial policies and procedures will create a plan of action to carry out tasks, clarify expectations, reduce confusion and errors (which can be costly) and establish boundaries for employees. If your practice already has an established manual, it might be time to review and revise it if you see consistent mistakes by different staff, reluctance to complete tasks or regular questioning of why a particular policy or procedure is necessary.

What should a financial policies and procedures manual include?

Your manual should reflect all relevant government legislation and standards. Subscribe to the websites of departments like Canada Revenue Agency, Health Canada and Industry Canada to ensure you receive notices of changes (e.g., new regulations) as they occur; update your policies and procedures accordingly so your practice meets its mandatory requirements.

Think of your policies and procedures manual as a roadmap, in two parts:

• The policies identify the rules, explain why they exist, describe who they apply to and when, show how they are enforced, and outline the outcomes
• Procedures, meanwhile identify specific actions and when to take them, outline alternatives and emergency steps, include warnings and cautions, and illustrate clear and relevant examples (e.g., completed sample forms)

Effective financial policies and procedures will create a plan of action to carry out tasks, clarify expectations, reduce confusion and errors (which can be costly), and establish boundaries for employees.

If your practice already has an established manual, it might be time to review and revise it if you see consistent mistakes by different staff, reluctance to complete tasks, or regular questioning of why a particular policy or procedure is necessary.

Revenue management for medical practices begins with a patient’s first contact with the practice and extends across scheduling, the front desk, clinical areas, billing and collections.

Increasingly, factors like capitation-based payment are driving the need to manage overhead costs and organize practices more efficiently. In addition, solo practices are gradually transforming into shared expense agreements, formal partnerships and group/team models — all of which require sound financial management, monitoring and expertise on the part of all stakeholders.

How should revenue performance be tracked?

Practices that take the time to measure, analyze and assess financial results relating to revenue will position themselves to be profitable.

Creating benchmarks to measure your practice’s daily, monthly and annual financial and productivity performance is important. This can help you to identify profitability against a historical baseline.

What kind of tools do you need to benchmark? It could be as simple as a one-page “scorecard” that provides a monthly snapshot of various aspects of the revenue cycle (e.g., billings, collections, adjustments, total visits, net revenue).

Regular, comprehensive reporting from your practice management system is an essential best practice. Sharing the scorecard with all staff is also an effective way to include everyone in improving revenue management performance.

A number of medical services are not insured by the Ministry of Health and the demand for uninsured services is increasing. If physicians are not compensated for the time required to provide these services, their offices can gradually become overwhelmed with the extra administrative costs.

One way to ensure  physicians are paid for all services rendered is to develop and implement an uninsured services program. This can generate increased practice revenue and help to offset overhead expenses, while promoting administrative efficiency. Revenue may be derived in two ways:

• Charge a flat fee to patients for providing a pre-determined set of uninsured services during a pre-determined period
• Bill for individual uninsured services provided to patients and third parties who are not enrolled in the block-billing plan

Learn more in the implementing an uninsured services program guide.

In December 2020, the OMA informed members about a consent judgment, a judgment rendered by the court with the prior consent and agreement of the parties involved, from the Tax Court of Canada regarding the claiming of scientific research and experimental development (SR&ED) tax credits by the academic radiology group at St. Michael’s Hospital. Based on the facts of the situation, the St. Michael’s group was granted 90 per cent of the SR&ED credits it claimed for the period in question.

The OMA and the Academic Health Sciences Centre (AHSC) governance chairs agreed to work with tax counsel at Thorsteinssons LLP to create materials for physicians who claim SR&ED to respond to a CRA audit that take into account the consent judgment. The CRA is required to take a “principled” approach in its conduct of audits, which means that if the CRA allows SR&ED credits in one scenario, it is supposed to follow the same principle in other similar situations.

The OMA and the AHSC governance chairs are pleased to provide members with:

• A memo from Thorsteinssons LLP with its opinion on the consent judgment and what it means for similar cases that may arise in the future. 
• A template letter that physicians can use if they are subject to a CRA audit regarding SR&ED tax-credit claims.

We hope that these materials will help physicians and their tax experts to respond to any questions raised by the CRA about claims for SR&ED tax credits. If you have questions or require assistance, please email info@oma.org.

For most physicians, office overhead expenses typically account for 35 to 40 per cent of gross income. So, reducing that figure can have a major effect on your bottom line. You might already have many ideas to save office expenses, and your staff can be invaluable in this process as well, given their perspective on how the practice is managed. (You can even reward employees whose proposals are adopted.)

Before implementing any strategies to reduce overhead costs, consult your lawyer and/or accountant. Also, keep in mind that you never want to reduce or curb services in a way that compromises delivery of care. Ultimately, you want to operate in the most efficient way possible for the benefit of both your practice and your patients.

Five ways to reduce your costs

Negotiate a better lease

Start negotiations with your landlord at least eight to 12 months before your lease expires. Research available office space/leasing costs in your area, and what different buildings offer in utilities and amenities. This will reveal fair market value, and give you alternatives should the negotiations with your current landlord fail.

Standard leases usually favour the landlord and can involve unnecessary expenditures. Consider using a real estate agent and/or a professional lease negotiator to get the best deal, and look at clauses that you can eliminate or amend to your benefit. For example, your landlord might be willing to reduce your rent if you enter into a longer term.

Track office and medical supplies

Analyze what volume of supplies you have on hand, whether you need them all and if you can hold off purchasing certain supplies until necessary.

Assign one staff member — well-trained and accountable for the responsibility — to buy supplies and shop for the best prices. You can often negotiate lower prices with suppliers by showing that a better deal is available.

Take advantage of discounts, but do not over-order as that will tie up cash needed for other expenses.

Use staff wisely

Staff is typically the largest expense for any physician. Research whether the compensation you offer is commensurate with market conditions and the work being done.

To maximize your performance and effectiveness, review whether you are using staff to your full advantage. Ensure they are fully trained on processes and technologies, and cross-train staff so they can fill in for one another during vacations or absences.

Streamline processes to avoid redundancies when more than one individual is doing the same tasks.

Administrative tasks are part of your job; however, you should be spending the vast majority of your time with patients. If this is not the case, consider an efficiency review to identify improvements.

Fully utilize capacity/office space

Vacant space costs money. Seek out physicians who might want to relocate to your office, either full time or part time. Having someone else to share a portion of rent, personnel, supplies, etc., will greatly reduce your costs.

Consider the potential benefits of extending hours of operation (after discussions with staff) or adding ancillary services. Both could incur more costs (e.g., for equipment or training), but also increase revenue in relation to the added overhead.

Review expenses regularly

You cannot implement the ideal cost-reduction measures until you know your expenses. Do you know what you are spending on telephone systems? Billing? Supplies? Review your expenses in full, and then explore less costly alternatives.

Technology is always improving in the practice of medicine — not just in the tools to help treat patients, but also in equipment that allows your office to run more efficiently than ever. Some of this technology is common to any business, such as accounting systems. Some is specific to effective patient care and management, such as Electronic Medical Record systems, and some greatly enhance existing office practices, such as medical billing. 

Several other types of technology can make a major impact on your efficiency and productivity, and therefore on your costs. That ranges from online medical appointment scheduling, to outsourcing phone services (freeing your receptionist to spend time on other important responsibilities, such as patient support). Some technology can help you to improve patient satisfaction too, which also influences your practice success.

Accounting systems benefits and considerations

Accounting is one of your primary back office functions. The right accounting system can provide multiple benefits:

• Helping you to adopt best practices for your payables and receivables
• Ensuring accurate reporting of business transactions
• Providing easy access to financial statements
• Minimizing tax issues
• Serving as a critical management tool
• Streamlining administration
• Improving your workflow

Tips for choosing an accounting system

Take ownership of the decision

Your accounting software will impact how your practice operates, so do not delegate. While your staff should play a key role in the selection, the process requires the expertise and leadership that only you can provide.

Determine your key needs

Build a comprehensive list of must-have features, then prioritize them based on what will provide the most value to your practice. Map out your ideal workflow and staff responsibilities in advance. The software should fit your needs, not the other way around. Be open to suggestions from software vendors, too.

Get the right accounting system for your specialty

Most accounting products suit a wide range of medical practices, while others are designed for specialties. Ask each vendor how they will meet your practice's unique requirements.

Integrate practice management

Consider how you want your accounting system to support practice management. Do you want all functions in one complete suite of software, or should your accounting system interface with existing systems?

Focus on ease of use

Medical practice is complex enough without software adding to the challenge. Find a system that is intuitive, easy to understand and simple to use (this is especially important if you need to get new staff up to speed quickly).

Test the system with a demo

Try a common process like paying an invoice. Did you “get it” right away? Features that can add to ease of use include drop-down menus and online help functions.

Assess training, support and upgrades

Leading vendors provide support 24/7, and you will almost certainly want weekend and overnight support to match your hours. Also, consider how training and support are delivered, and what’s included (e.g., on-site help, technical assistance, access to new features, bug fixes and system upgrades).

Assess any potential vendor’s record in delivering consistent, high-quality new releases, as you will likely be paying for them annually.

Consider vendor viability

You are not just buying an accounting system - you are also entering into a long-term vendor relationship. Have they shown the ability to invest in new features? Have they met regulatory requirements and supported new standards?

Assess the vendor’s reputation, financial well-being and vision for the future.

Never buy on price alone

The savvy buyer considers the value of the system as measured by return on investment, rather than thinking in terms of absolute dollars. More expensive systems typically meet or surpass the latest standards, offer more sophisticated features and are more easily integrated with existing practice management systems.

Ensure flexibility

Reimbursement procedures and regulatory requirements change regularly. Therefore, a system must be built on flexible technology that enables the vendor to release frequent and quality upgrades.

Benefits of EMRs

Electronic Medical Record systems are rapidly becoming a standard of practice, enabling better patient care and more efficient practice management. It enables physicians to access relevant patient information whenever and wherever they need it, and to share information with all physicians in a group and the extended care team.

The benefits include:

• Medication management
• Lab results management
• Treatment management
• Workflow management
• Records management

For more about EMRs, email OntarioMD.

Point-of-sale medical billing software

Electronic billing means faster collections, fewer denials and lower costs. If your practice sells products or non-insurance billable services directly to patients, POS systems can:

• Accept debit or credit card payments
• Simplify transactions and banking tasks
• Keep track of inventory
• Issue reorder reminders
• Generate patient communications
• Produce reports that assess each product’s sales history and profitability

Before deciding if your practice will invest in electronic medical billing, consider the costs, features and how to get started.

Current costs

The cost of electronic billing might seem high, but compare it to your current direct and indirect expenses, from administrative time to the cost of storing documents.

There is usually an initial one-time setup fee, a monthly charge to maintain the account and a per-transaction fee that is either a flat fee or a percentage of the transaction.

New features

If you are already doing billing online, which new features do you want in your electronic medical billing software program? Do you want to include revenue management within your billing program?

Startup

Most software programs are designed to work with existing practice computer operating systems. However, if your office system is outdated you must also factor this in when calculating costs.

Not all physicians are in a position to charge a block fee due to the nature of their practice and/or specialty. Physicians are not required to offer a block fee option but can instead charge patients on a fee-for-service basis for uninsured services. Physicians who choose to offer a block fee must also offer uninsured services separately at individual costs to patients. Patients cannot be required to pay a block fee.

Patient decisions regarding payment for uninsured services must not affect patients’ ability to access health-care services.

Physicians must not:

• Require patients pay a block fee before accessing an uninsured service
• Offer to treat patients preferentially because they agree to pay a block fee
• Terminate a patient or refuse to accept a new patient because that individual chooses not to pay a block fee

There are five steps that will help physicians to implement a successful block fee billing plan:

1. Inform patients of the plan
2. Provide an enrolment form
3. Update the patient record
4. Develop a standard process for charging for uninsured services
5. Remind patients and renew the plan

For more information on implementing an uninsured services program, download the physician guide.

The following are suggested steps that will help physicians develop a personal uninsured services program policy and uninsured services fee schedule:

• Identify any uninsured services provided by the practice
• Decide which services to charge for
• Determine the prices (refer to the OMA Physician’s Guide to Uninsured Services for guidance)
• Develop and implement policies related to uninsured services (e.g., when to apply charges, when to waive fees, etc.)
• Develop and implement communication strategies surrounding the uninsured services program (both internally with practice staff and externally with patients)
• Determine how to go about fee collection (e.g., point of service, billing by mail, etc.)
• Develop strategies to deal with payment collection issues

There are some instances where patients claim economic hardship and an inability to comply with the fees they are charged for the uninsured services rendered. When calculating fees, physicians should consider the financial burden that such charges might place on the patient and should decide whether it is appropriate to reduce, waive or allow flexibility based on these considerations as applied to the circumstances of each case.

The Canadian Medical Association’s Code of Ethics states that “an ethical physician will consider, in determining professional fees, both the nature of the service provided and the ability of the patient to pay, and will be prepared to discuss the fee with the patient.” Additionally, the Medicine Act prohibits physicians from “charging a fee that is excessive in relation to the services performed.”

Many patients are surprised to discover that not all of their medical needs are covered under OHIP and that they must pay their provider directly for certain uninsured services. This misunderstanding can lead to situations that are frustrating and uncomfortable for the patient and physician, as well as medical office staff, particularly if the patient learns about the cost after the service has been rendered.

To prevent this, a practice should consider adopting one or more of the following communication strategies for making patients aware of its policy regarding uninsured medical services and related fees.

Place signage in the office

Place a sign or poster in the office waiting area and/or exam rooms to inform patients that certain services are uninsured, and list the most commonly requested uninsured services (e.g., request for medical records).

Have patients sign a letter of acknowledgment

Have patients sign a letter or form that acknowledges and confirms their awareness of the fact that some medical services are uninsured.

Dedicate a section to uninsured services in the office newsletter and/or office website (if applicable)

Consider dedicating a section in the office newsletter and/or office website to the issues and costs associated with uninsured services provided by your practice. Include information on which methods of payment will be accepted by the practice, and encourage patients to ask questions or obtain more information from staff. A patient information pamphlet can also be created and distributed, communicating the uninsured services offered and their respective fees.

Have staff talk to patients

Educate the office team about uninsured services so that they can educate patients. Providing staff with a laid-out uninsured services fee listing, and ensuring they are well-versed in payment procedures, is an effective and direct method of communicating with patients.

This process will involve counselling staff on which questions to ask patients at the time of rostering and/or when an appointment is being booked, so that staff are better equipped to advise patients about any associated uninsured fees. Staff should also inform patients about acceptable payment methods so that patients are prepared to pay at the time of the appointment.