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Engagements for medical professionals.

Even generalists will find they can expand the services they offer to health care. clients.

Many CPA firms practicing in today's competitive economic environment are struggling to find ways to increase practice revenue. Some concentrate on gaining more clients, others try to expand services to existing clients, while most try to do both. For CPA firms with physician clients or for firms wanting to attract them, there are enormous opportunities to expand revenue by adding consulting services to existing accounting and tax service capabilities.

One reason for this opportunity is that most CPA firms don't render the consulting services physicians want and need. CPAs do a good job rendering accounting, tax and sometimes financial planning to medical clients. However, to the existing or potential client, it can be difficult to distinguish one firm from another. The ways to differentiate a firm are to develop and provide consulting services and to deemphasize the basic, traditional accounting services that other CPAs render.


While traditional accounting services are a business necessity, most clients also need help developing and managing their businesses. The keys to any successful enterprise are revenue optimization, cost containment and the maximization of bottom line net income.

Medical practices are no different from any other businesses in that the success formula is the same. Most doctors desperately need help to create and maintain financially healthy practices. The reasons are numerous but two are paramount. The first is that most doctors never learn the business aspects of medicine while in residency or fellowship training. Since only clinical skills are emphasized, many doctors experience business problems soon after beginning their medical careers and don't know how to identify or solve them. This applies even to physicians who have been in practice for a number of years. In addition, there is a shortage of qualified medical practice personnel who have the unique abilities needed to manage complicated medical practice functions, such as billing and collecting. This shortage creates problems for a large number of medical practices.

CPAs can help provide solutions by developing and providing medical practice management consulting services for doctor clients. They can accomplish this by becoming specialists and devoting the bulk of their practices to these services or by targeting a few types of consulting engagements to offer existing physician clients. The first step on either path is to gather the necessary expertise.


There are three basic ways for CPAs to increase their understanding of the workings of a medical practice:

* Medical practice management conferences. A list of seminars can be obtained from any state or county medical association and the American Medical Association.

* Health care publications. Practitioners can ask doctor clients and their office managers which practice management periodicals they read and which are the best publications on the Medicare and Medicaid systems.

* Firsthand observation. An important way to learn about a health care practice is to spend time watching how the office works; this is good business even for CPAs offering only traditional services. Watching day-to-day operations helps a CPA understand how the practice generates revenue, how bills are processed and how potential practice management problems are and should be solved.


It's not always necessary to offer specialized engagements within a practice devoted exclusively to medical practice consulting. The services described below are well suited to generalist CPAs with large physician clienteles who want to add one or two specialized engagements targeted to them.

* Physician contract review. The content of employment contracts used in incorporated medical practices usually is 90% financial detail.

* Corporate buy-sell agreements. Many medical practices don't have these agreements, so CPAs familiar with medical practice economics can offer to help clients to create them.

* Physician income distribution arrangements. In multipartner practices, these determine how the revenue pie is divided. Changing reimbursement patterns can affect current formulas.

* Medical practice valuation. CPAs must know appraisal techniques and how medical practices differ from other businesses. There is great demand for these services for CPAs well acquainted with the health care industry.

* Improving collection techniques within a practice. Medical practices frequently aren't very good at collection. The policies to be applied aren't much different from those in other businesses.

It is relatively easy for CPAs with some familiarity with medical practices to develop expertise in all of the above areas because they know the details of such engagements through their own practices or their clients'. Practitioners should remember, however, that medical practices have their own unique characteristics and are radically different in operation from other businesses. It's important to develop health care industry expertise and' not apply general business principles to them.


CPAs who devote their entire practices to medical consulting focus on day-to-day practice management issues that aren't suitable for the generalist CPA. Overall billing and collection procedures are the most important part of any medical practice. When a doctor bills for services, both the doctor and the billing staff must know current procedural terminology and diagnosis coding, which explain to the insurance company what services were performed. In addition, the office must know how to prepare an insurance claim form, including the rules of a variety of insurance programs, such as Medicare, Medicaid, workers' compensation and managed care plans. Any problem in this process means lost revenue and payment delays from the insurance companies, which almost always reduce overall practice cash flow.

The exhibit on page 38 lists just a few of the consulting services and related engagements a CPA firm could render to aid doctor clients with billing and collection efforts. Doctor clients sorely need all these services. For example, many doctors have no clear idea how they arrived at their current practice fee schedules and may never have increased fees to cover higher practice costs caused by general inflation. This creates a demand for engagements in which CPAs review and evaluate a practice's current fee schedule, including fees for surgery, medicine, evaluation and management, radiology and lab.

Another step is to study the complex issues of Medicare, Medicaid, workers' compensation, coding and managed care. A medical practice's financial success depends on its ability to manage health care payment problems. CPAs can increase their expertise in seminars and publications offered by their states' Medicare, Medicaid and workers' compensation insurance carriers.

Many managed care plans set standard fees and pay doctors' bills up to those standards. For doctors who see a great many patients enrolled in these plans, CPAs can review plan payments to see if the practice is being reimbursed for 100% of standard fees. If it is, the practice is probably charging too little.

Another engagement that's valuable to medical professionals is a review of insurance claim turnaround to determine how quickly a practice can file a claim once a patient service is rendered. To illustrate, say it takes 10 days to prepare and mail the form and another 60 days to receive the insurance company payment, putting the age of the patient copayment at 70 days. This means the patient receives his or her first statement from the doctor when the account is between 70 and 90 days old. It's easy to see why doctors can have problems with their receivables.


Besides consulting services targeted for a doctor's billing and collection operations, there are other nonaccounting services specialists can offer doctor clients, such as

* Consolidation of solo practices. Assistance in merging several small practices into one larger one will be in great demand during the 1990s because the era of the sole medical practitioner is on the wane. CPAs must help answer questions about how income will be distributed, how partner retirements and additions will be handled, the financial aspects of a variety of legal documents and personnel issues. Accountants will be needed to advise on implementing new financial policies and procedures and on negotiating problems of commonality, such as whose computer system is retained and whose is scrapped.

* Sale of a practice. CPAs can offer advice on specialized tax issues and help in negotiations.

* Financial and tax issues in hospital recruitment contracts. Hospitals offer medical residents financial incentives, including salary and practice volume guarantees, to affiliate with them. CPAs can help these new doctors understand and negotiate their contracts.

* New practice launches. Doctors starting new practices will need help setting the proper financial controls and choosing personnel who can implement them.

* Office computerization. Physicians need advice on buying the right systems, setting policies and procedures and ensuring they function.

* Implementation of embezzlement controls. Midsized medical practices can benefit from engagements for annual embezzlement reviews.


The development of any new practice area requires a CPA firm's complete backing and the personal commitment of those who wish to specialize. There will be required expenditures for books, publications and seminars and there may be opportunity costs for non-chargeable time devoted to learning how a medical practice really works. Not all partners are willing to back such an endeavor, particularly those who focus only on short-term benefits. Time requirements vary among professionals, but CPAs must be prepared to devote a minimum of 5 to 10 hours every week for about eight months to the study of medical practice issues to become comfortable enough to deliver non-traditional services to physicians. This may be too great a commitment for many CPAs, especially those in smaller firms who also must remain current on emerging tax and accounting issues and attend to the details of firm administration.


Those who choose to invest in a new practice will find many opportunities in physician consulting services. Medical professionals practice in a very complex and ever-changing industry, with major changes on the way because of the efforts to address skyrocketing health care costs. This, coupled with the fact that most doctors do not possess extensive business experience, means there are and will continue to be many consulting opportunities. By developing expertise in the areas of practice management consulting, a CPA can increase firm revenue, become a valued adviser to doctor clients and easily separate the firm from its competition.

REED TINSLEY, CPA, CFP, is director of the medical practice group of Haynes O'Neal, Houston. He is a member of the American Institute of CPAs and a past member of the personal financial planning committee of the Houston chapter of the Texas Society of CPAs.


* THERE ARE enormous opportunities to expand revenue by adding medical practice consulting services to a CPA's existing accounting and tax service capabilities.

* WHILE TRADITIONAL accounting services are a business necessity, most doctors desperately need help to create and maintain a financially healthy practice. Many never learn the business aspects of medicine while in residency or fellowship training. In addition, there is a shortage of medical practice personnel qualified to manage complicated medical practice functions.

* CPAs CAN become specialists in medical practice consulting and devote the bulk of their practices to these services or target a few types of consulting engagements to offer existing physician clients. The first step on either path is to spend a great deal of time gathering the necessary expertise.

* SERVICES THAT generalist CPAs can offer include reviewing the employment contracts used in incorporated medical practices and assisting in creating corporate buy-sell agreements and physician income-distribution arrangements in multipartner practices.

* CPAs who decide to devote their practices to medical consulting will focus on day-to-day practice management issues, such as billing and collection, and, increasingly, consult in solo medical practice consolidations.

Other services for physicians

Here are some of the specialized engagements medical professionals may need from their CPAs:

Current procedural terminology (CPT) coding analysis and staff education. CPT coding tells third-party payers what the physician has done.

Diagnosis (ICD-9) coding analysis, If the diagnosis doesn't match the services, payment may be delayed or denied.

Medicare and Medicaid compliance review. CPAs can review doctors' compliance with regulations to prevent an audit.

Medical billing for doctors. Taking over a medical office's billing has become a very profitable area for many CPA firms.

Medical billing software installation assistance. C PAs c a n assist doctors with purchasing computer systems and medical billing software.

Explanation of benefit analysis. CPAs review the insurers' explanations of benefits to spot specific reimbursement problems.

Fee schedule review. The practitioner determines whether the physician's fee is usual, customary and reasonable for a specific practice area.

Monitoring of patient and insurance receivables. CPAs can examine receivables on an ongoing basis to determine how well and how quickly the office is collecting for its services.

Implementation of delinquent insurance follow-up system. Many offices file claims with insurance companies and wait for payment. CPAs can devise follow-up systems to help speed the process.

Medicare fraud and abuse issues. Practitioners can advise on how to avoid these problems and running afoul of regulations.
COPYRIGHT 1993 American Institute of CPA's
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Tinsley, Reed
Publication:Journal of Accountancy
Article Type:Cover Story
Date:Apr 1, 1993
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