1. Copyright © 2008 Delmar Learning. All rights reserved. Chapter 18 Financial Management of the Medical Practice

2. Copyright © 2008 Delmar Learning. All rights reserved. 2 Objectives Review the learning and performance objectives for this chapter By the end of this chapter, demonstrate the procedures in the textbook and the job skills in the workbook

3. Copyright © 2008 Delmar Learning. All rights reserved. 3 Service –It takes a well-rounded medical practice to be successful, one that patients will talk about with high regard. Heart of the Health Care Professional

4. Copyright © 2008 Delmar Learning. All rights reserved. 4 Computerized Financial Management Medical Office Budget –Income and expenses –Analyze previous year’s –Project for upcoming year

5. Copyright © 2008 Delmar Learning. All rights reserved. 5 Computerized Financial Management Financial Status Reports –Accounts Receivable List of account balances –Aging Summary Analysis Age of accounts receivable

6. Copyright © 2008 Delmar Learning. All rights reserved. 6 Computerized Financial Management Financial Status Reports –Insurance Aging Report Time insurance companies take to pay claims –Financial Summary Monthly report

7. Copyright © 2008 Delmar Learning. All rights reserved. 7 Computerized Financial Management Financial Status Reports –Periodic Transaction Summary Presents financial position of practice –Profit and Loss Statement Summarizes income and expenses

8. Copyright © 2008 Delmar Learning. All rights reserved. 8 Analyzing Practice Productivity Collection Ratio –Status of collections –Possible potential losses –Payments/fees charged = collection ratio

9. Copyright © 2008 Delmar Learning. All rights reserved. 9 Analyzing Practice Productivity Overhead Expenses –Cost to run the practice –Determine percent of income used –Monitor regularly

10. Copyright © 2008 Delmar Learning. All rights reserved. 10 Analyzing Practice Productivity Cost of procedures and services –Total expenses for procedure –Divide by number of procedures –= Cost of procedure

11. Copyright © 2008 Delmar Learning. All rights reserved. 11 Analyzing Practice Productivity Managed Care Analysis –Capitated payments received –Number of member visits –Decision to continue to participate

12. Copyright © 2008 Delmar Learning. All rights reserved. 12 Accounts Payable Check Controls –Control of office checking account –Verify purchase orders –Monitor utility bills Create headings and post entries in an accounts payable system, write checks –Procedure 18-1

13. Copyright © 2008 Delmar Learning. All rights reserved. 13 Payroll Wages and Hours of Work –Overtime Rules Over 40 hours worked in a week –Posting Requirements Federal labor law information signs Local labor law signs

14. Copyright © 2008 Delmar Learning. All rights reserved. 14 Payroll Payroll Procedures –Department of Labor Regulations –Records of hours worked and wages –Separate record for each employee –Itemized statement to employee

15. Copyright © 2008 Delmar Learning. All rights reserved. 15 Payroll Employer Identification Number –9-digit number for tax accounting –Provided by the Internal Revenue Service Social Security Number –Required by age two –Employment Eligibility Verification Form I-9

16. Copyright © 2008 Delmar Learning. All rights reserved. 16 Payroll Employee Withholding Allowance Certificate –Form W-4 –States number of exemptions claimed –Fewer exemptions = higher tax –One exemption for self –One exemption for each dependent

17. Copyright © 2008 Delmar Learning. All rights reserved. 17 Payroll Payroll Deductions –Federal Insurance Contributions Act Three programs financed Disability, Medicare, retirement –Income Tax Deductions Federal withholding tax State withholding tax

18. Copyright © 2008 Delmar Learning. All rights reserved. 18 Payroll Payroll Deductions –Disability Insurance Deductions Required in five states –Optional Payroll Deductions or Benefits Credit Union deposits Partial payment for insurance benefits

19. Copyright © 2008 Delmar Learning. All rights reserved. 19 Payroll Federal Unemployment Tax –Paid by employer –Costs of state unemployment programs –Annual Tax Return Employers must report these payments

20. Copyright © 2008 Delmar Learning. All rights reserved. 20 Payroll State Unemployment Tax –Paid by employer –Rate set by state –Funds for unemployment compensation

21. Copyright © 2008 Delmar Learning. All rights reserved. 21 Payroll Tax Reports –Employer’s Tax Guide Guidelines and requirements –Federal Tax Deposits and Receipts Employers act as collection agents –Employer’s Quarterly Federal Tax Return Payment of taxes withheld from paychecks

22. Copyright © 2008 Delmar Learning. All rights reserved. 22 Payroll Tax Reports –Wage and Tax Statement W-2 given to employee at end of year –Transmittal of Wage and Tax Statement Comparison summary Taxes reported on W-2 forms Taxes paid quarterly

23. Copyright © 2008 Delmar Learning. All rights reserved. 23 Payroll Tax Reports –Employee’s Earning Record Separate financial record for each employee Gross income, deductions, net income –Payroll Register Summary of time cards

24. Copyright © 2008 Delmar Learning. All rights reserved. 24 Payroll

25. Copyright © 2008 Delmar Learning. All rights reserved. 25 Payroll Tax Reports –Payroll via electronic banking Direct deposit to bank account –Create category headings, determine deductions, calculate payroll, and make entries to a payroll register Procedure 18-2

26. Copyright © 2008 Delmar Learning. All rights reserved. 26 Payroll Tax Reports –Write-it-once check writing and payroll journal systems –Layered forms –Pegboard system

27. Copyright © 2008 Delmar Learning. All rights reserved. 27 Stop and Think Prepare an analysis to determine the effectiveness of capitated plans –Review the scenario –What information do you need? –What type of formula will you use? –What other information may have an impact?

28. Copyright © 2008 Delmar Learning. All rights reserved. 28 Stop and Think Determine payroll frequency for deductions –Review the scenario –What are the payroll dates for next month? –Where will you find the deductions? –Write down your answers by each staff member