Money Matters
The following article appeared in the of Barry University's MedExpress Magazine Spring Edition 2008.
Podiatry Billing Services emphasizes the importance of managing your practice as a business. You’ve spent many years preparing to practice. The rewards, both psychologically and financially, should be great. Yet, many well established physicians are unable to appreciate basic concepts, important in managing the financial well being of their practice.
Before discussing practice management, let's review several basic concepts.
 
AR Days refers to the number of days it takes for your money to turn over. It’s calculated by dividing your total accounts receivable balance by the average amount of money your practice bills out each day. In most efficient practices this number should be less than 30 days.
 
Overhead Expense is the cost of operating your office. It’s calculated by dividing the gross income of the practice by your expenses (minus your salary). This will vary based on the size and efficiency of the practice. For a small practice it might be in the area of 50% to 60%. For larger practices it’s not unusual to see an overhead expense of over 70%. Obviously, the lower your overhead expense, the less you have to work for your money.
 
Productivity is the amount of money your practice must generate each hour to cover your basic expenses. This is calculated by dividing your total expenses (including your salary) by 2080, the average number of hours worked in a year. Most physicians are surprised by the answer. With this number you can begin to understand what insurance contracts you can accept and which procedures are more productive.
 
We look forward to hearing from you. Email your questions or comments to: pbsmail@podiatrybilling.com or call toll free (800) 394-1169.