Financial Statements and Key Metrics No Margin, No Mission

Transcription

1 Financial Statements and Key Metrics No Margin, No Mission Physician Leadership Institute March 7, 2015 Brian M. McCook, CPA

2 Learning Objectives Overview of Financial Statements Profit and Loss Balance Sheet Discussion of Key Metrics and Trending Using Date for Strategic Decision Making Case Study

3 Financial Statements Profit and Loss Net income from operations Constantly moving Balance Sheet Financial health of organization Static image

4 Financial Statements Statement of Cash Flow Cash receipts and payments for a given period Shows Operating, Investing and Financing activities Statement of Changes in Net Assets Identifies the reasons for the change in the entity s value

5 Cash vs. Accrual Follows movement of cash Ins and outs Tax basis Intuitively understandable Income is recognized when earned Expenses can be smoothed out over time Usually more work Impact of any issues

6 Profit and Loss Also called Income Statement Revenue Expenses = Net Income Easily comparative over multiple periods

7 Profit and Loss - Format Revenue items are shown at the top Expenses are listed below Other income and expenses (non-operational items) shown below MGMA format physician expenses shown separately

8 Basic Income Statement

9 Balance Sheet Assets = Liability + Equity Accrual basis Includes payables and receivables Cash basis Does not include payables and receivables

10

11 Statement of Cash Flows Shows all cash movements during a period Separate out types of expenses Capital expenditures Operational expenditures Other Not the most fun

12 Comparisons Could be anything Current month, prior month, prior period, etc. Year-to-date Last year Locations Doctors Departments Budgets

13 Analysis of Financial Statements What do you care about? What do your physicians care about? Provide an Executive Summary to accompany financials Utilize benchmarks when possible

14 What now? Strategic decision making What do we do with benefits? Can we renegotiate some of our leases? Should we lease or buy the new diagnostic machine? Building the business case is easier with data

15 Practice performance

16 Financial Benchmarks Your practice s history Easiest to obtain Nation-wide associations MGMA, PSR, etc. Other practice s in the area Hardest to obtain

17 Conducting Analysis Relationships are the name of the game Revenue to expenses Expenses to other expenses Fixed vs. variable Variable expenses change with usage Salaries, benefits, medical supplies, billing/collections, etc. Fixed expenses do not change Rent, equipment leases, property taxes, legal/accounting, etc.

18 Employee Costs All practices should know how much their employees cost them, including benefits What is the benefit percentage? What is your employee expense ratio? Total employee expenses (salaries + benefits) divided by total revenue

19 Tracking Results KPI Key Performance Indicator Data point that demonstrates results achieved Benchmark Type of KPI Data point to measure results against Internal or external

20 Why Use KPIs? Measure what s important Identify trends Compare progress to expectations Incentivize specific behaviors

21 Types of Benchmarks Internal dashboard/benchmarks Historical tracking Compare physician-to-physician Compare specialty-to-specialty External benchmarks Compare yourself to the industry MGMA, PSR, local competitors

22 Basic Balance Sheet Ratios - KPIs Current/Quick Ratio Current assets / current liabilities Ability to meet amounts owed now Days Cash on Hand (Cash x 365) / (Operating Expenses Total Depreciation) Number of days operating expenses can be paid without new cash Debt to equity Total liabilities / total equity Shows how leveraged your practice is

23 Basic Profit and Loss Ratios These can be seen as your company s vitals Overhead percentage Physician compensation percentage Benefits as a percent of salaries Salary expense per FTE physician Each expense as a percent of revenue

24 Sample Dashboard Indicator Feb-13 Mar-13 Apr-13 May-13 Jun-13 Current Ratio (Target = > 1.0) Days Cash on Hand (Target = ) Debt to Equity (Target = )

25 Case Study What does this income statement tell you? What do you want to find out more about?

26

27 Monthly Report Package Things to consider Audience Content Method of presenting

28 Things to Remember Financial statements are nothing without analysis Customize dashboards for your audience Track what matters to your practice Knowing your ratios allows strategic thinking to occur

29 Questions

30 No Margin, No Mission Anders Health Care Services optimizes staff, resources and revenue for hospitals and physicians by offering solutions and direction to complex practice management issues. We provide an integrated approach from the financial, operational, compliance and strategic perspectives

31 Contact Information Brian M. McCook, CPA