ACCOUNTING AND FINANCIAL MODELING
New Mexico MGMA
July 8, 2015

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• Vice President – Butler and Company CPAs, PC
• Serving clients since 2003, providing advice to individuals and closely-
held businesses, with a focus on professional services, medical and
veterinary practices, individual taxation and business start-ups.
• Honored in 2011 as one of New Mexico’s “40 Under Forty” by NM
Business Weekly
• 2010 AICPA Leadership Academy Graduate
• Board member for Alta Mira of New Mexico
• Member at Large of the AICPA Governing Council
• Family consists of Tina (CNM in Training), Levi (Lil’ Dude
Extraordinaire) and Baby #2 (coming in December)
• Was a Seattle Seahawks fan WAY before they won the Super Bowl
Jason Deshayes, CPA, CGMA
SPEAKER BIO

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• Various forms of modeling your internal
financials
• Modifiers for any model
• Financial metrics
• Accounting platforms to consider
• Q&A
TODAY’S AGENDA

FINDING THE RIGHT MODEL

Everyone is treated equally
All revenues are shared equally based on ownership
Costs are shared in the same percentage that revenue is
No correlation to production, but simplistic to understand
Values production/collection over anything else
Providers are often considered profit center
Overhead is a cost center allocated to providers
Without modifiers, non-production business activities not rewarded
Places value to procedures based on CPT codes
Collections are split according to everyone’s percentage of RVUs
Monthly versus year-to-date
SO MANY OPTIONS
“HALFIES”
KEEP WHAT
YOU KILL
RVUs

Practice model that
allocates financial
resources equally without
consideration of individual
efforts or use of resources
The easy way out
Does not tie financial compensation to any efforts
Bad producers are equally rewarded as good ones
What do you do with non-owner providers?
Without some measurement tool, you don’t have a way to
properly compensate your non-owner providers other than
“here’s some cash”
Only appropriate in my eyes for sole providers who only
have to split the pot with themselves
“HALFIES”

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This is the model that many practices work with, mostly because
it allows providers to be “semi-independent” while getting the
benefit of cost sharing with other providers. Generationally, this
is a model that many professional service companies (lawyers,
accountants, engineers, consultants, etc…) owned by baby
boomers seem to work well in.
Given the direct impact of specific types of patients with a more
favorable pay mix, there are many ways to game the system by
encouraging staff to schedule higher dollar procedures with
better paying insurance or self pay. There is very little
incentive to consider what is best for the practice.
More traditional model What are some of the pitfalls?
KEEP WHAT YOU KILL

Revenue by provider is based on collections (not billings)
Call money can be directly allocated to provider
Other forms of income beyond billed charges (medical directorship, etc..)
Physician compensation and benefits (health insurance, retirement, etc..)
Nurses and support staff directly assigned to the provider
Other costs tied to the provider – malpractice insurance, donations, marketing, etc…
Cost center that includes all of the non-provider specific costs to run the practice
Various ways to allocate to the profit centers
Consider fixed and variable components to overhead
FINANCIAL BREAKDOWN
DIRECT
REVENUES
DIRECT
EXPENSES
OVERHEAD

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Attach units of value to CPT codes
Apply those units to overall collections
Somewhat ties production to collections
Removes the “gamesmanship” by tying
overall collections to RVU efforts
Requires upfront time by the physicians to
attach value on each CPT code
RVUs

BEYOND THE NUMBERS

Building and training
next generation
physicians; coaching on
meeting metrics
Mentoring
Modifiers
MODIFIERS
Targets that align
production to bonuses
and other forms of
compensation
Production Goals
Handles in-practice
testing, quality control
and regulatory reporting
Clinical Director
Leads the overall
business operation of
the practice
Practice President

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Are the physicians
incentivized to think
about what makes
sense for the practice
beyond their personal
benefit?
Are practice cash flow
needs being met by the
model? Retention,
funding profit
sharing/retirement, etc..
Is the practice
adequately prepared for
future retirements and
incoming doctors?
Do the providers
understand the model?
How often are they
exposed to it beyond
bonus time?
OTHER CONSIDERATIONS
QUESTION
ONE
QUESTION
TWO
QUESTION
THREE
QUESTION
FOUR

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Needs to be practical and easy to explain (to everyone!)
Tie it directly to the financials – numbers (generally) are impartial
All new providers need a “Financial Model 101” class
If the practice undergoes a change, take a fresh look at whether
the model is appropriate anymore
Address concerns with providers sooner than later
PICKING THE RIGHT MODEL
MAINTAINING THE MODEL
OUR RECOMMENDATIONS

Patient visits
Monthly charges and collections
(including coding)
Number of provider work days
Freshness of your accounts receivable
Patient and payer mix
PRACTICE METRICS

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• No single measure taken
out of context is able to
explain a situation
• Look at trends, not
isolated instances
Be careful not to give too much
weight
Take things in context Have a second set of eyes on this
• Look at comparative
numbers on the financials
• Helps identify trends and
potential “hot spots”
• You have a lot on your
plate as a practice
manager
• Have an outside advisor
assist with reviewing
these and determining
where concerns lie
MORE ON METRICS

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ACCOUNTING PLATFORMS

Data is stored either locally or on a service
Typically, you purchase the license
Backup protocol extremely important
Data is stored in the cloud; access is completely remote
Software is leased; not owned (unless using hosted solution)
Inherently better collaboration with outside parties
HIPAA issues – most systems are not inherently compliant
Number of users needed
Ask your CPA for their thoughts!
ACCOUNTING PLATFORMS
DESKTOP/
SERVER
CLOUD
BASED
OTHER
THOUGHTS

Questions?
WE SERVE PEOPLE BY
SOLVING THEIR PROBLEMS

www.butlercpa.com
Jason@butlercpa.com
(505) 821-0893
4811A Hardware Dr. NE
Albuquerque, NM 87109
THANK YOU
FOR LISTENING