How to recover from a financial crisis
February 1, 1998 3 minutes read
How to recover from a financial crisis
Three steps out of chaos
The reasons can be manifold: A practice is growing too fast; another has lost market share to the competition; a third has lost a large chunk of change to an embezzling employee. Many practices, for whatever reason, find themselves in financial crisis.
The good news is that in 20 years of working as an accountant for medical practices, Bob Katz, MS, CPA, a partner at the New Orleans accounting firm of Katz & Asher, says he has never seen a practice have to go into bankruptcy to get out of trouble. "I don’t think that’s a viable answer," he says.
So what works? There are three steps to getting out of a financial mess, according to Katz.
1. Get outside help.
For many practices, the problems begin because the physicians have delegated business oversight to whoever volunteers, "whether they are competent or not," says Katz. "If you have someone in charge who doesn’t function as a chief executive, then you will have meltdowns. There is a business of medicine that must be seen to."
If the problem is to be solved, then getting experts involved is vital. "It might be an accountant or an attorney, depending on the nature of the problem."
For those practices without a retained professional, Katz advises you to call your colleagues at other practices and ask who they use. "The same names will come up again and again," he says. "Just make sure you use someone with experience in the medical practice area."
Whoever you get should engage in a little forensic accounting to determine the nature of the problems. "Even if a doctor or administrator is able to do this, they are usually too close to the problem to do a thorough job."
Most of the problems boil down to one of three things, says Katz: poorly trained staff which was improperly supervised, poor accounts receivable management, and expenses that have risen unchecked.
2. Listen to blunt answers.
Once you have the experts in place, be prepared to listen to what they have to say, Katz advises. "There is no point in going through the exercise if you won’t listen to the blunt answers."
Sometimes, those answers are tough to hear fire incompetent staff, even if they have been with you for decades, or cut your expenses (for more on cutting overheads, see story p. 15) and hire the kind of people who can help your practice stay on track.
The latter is particularly important in billing and collections. "You need to get good staff who understand coding, diagnosis codes, and fee schedules. These people have to get bills out in a timely fashion and follow up on past due accounts."
3. Take the recommended actions.
Listening is one thing, says Katz. Doing is often harder still. When an advisor says you have to fire some of your employees, it can be easy to nod your head and not take action. Try to remember why you brought in the expert you were in a financial crisis that threatened the practice itself. Usually, Katz says, that kind of recollection helps to focus your efforts on what needs to be done.
Katz says that there is rarely a case so bad that bills and wages aren’t paid. "Usually, it’s the doctors that suffer; their salaries are what comes after expenses." In some ways, that helps administrators make the physicians take whatever action is really needed. "When a doctor sees less and less money, he is usually willing to make changes."
[Editor’s Note: Katz has written a book which may be helpful. The Physicians Survival Guide to the Business of Medicine, published by Aspen Publishers, 1995. A new edition is pending. More information is available by calling Aspen at (800) 638-8437.]
• Bob Katz, MS, CPA, Partner, Katz & Asher, New Orleans. Telephone: (504) 525-8524.
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