Legal Affairs: 2016 OIG work plan: what does it mean for hospitals?, see page 2
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The Leading Source for Healthcare Business News
January 2016 • Volume 12, Issue 9 • $3.50
Preparing a budget for the new year
BY REED TINSLEY, CPA,
CVA, CFP, CHBC
INSIDE
▼
Memorial Hermann Katy
reaches new heights
with expansion
see page 4
INDEX
▼
Legal Affairs......................2
Integrative Medicine.........3
Hospital Headlines..........4
THA................................6
Moving On Up.................8
Plan where your money
and your practice are
going
Budgeting is your financial
map. A good budget encompasses all the
financial details of running your practice.
“Good budgeting” goes further and projects
how those details will help achieve your
and your practice’s larger, long-term goals.
Strategic questions like, “What do we want
to be doing in five years?” produce natural
operational questions like, “What will we
do next year to put or keep us on that path?”
This strategic planning step in
volves
questions about internal (physician goals)
and external (competition and other market
forces) factors like:
• Do you want to make the practice
larger?
• How can you keep the cost of
malpractice insurance from strangling
your practice?
• Should you add physicians? Or increase
your geographic mar
ket with an
additional office?
• Should the practice introduce new
services you’ve referred out in the past?
Where to start
Budgets usually work best when they reflect
what the management team genuinely
expects to happen in the coming year
-- especially if the team is new to formal
budgeting.
see page 3
That said, you will probably want your
manager to run some optimistic, pessimistic
and middle-of-the-road sce
narios, so you
know what to expect if the unexpected
happens.
. . . . . . . . . . . .
Start your budgeting process by looking at
what you will take in as revenue. That is
Integrative medicine
updates
probably the most important -- and most
conjectural aspect of the entire effort.
Experienced budgeters can effectively use
revenue projections to set growth goals for
the coming year(s). Planning for continued
growth keeps the pressure to produce on
physicians and employees — particularly
when they are included in a performancebonus pool.
If you are just starting out with budgets,
begin with only the upcoming year. Make
your first effort as straightforward as possible.
While so-called stretch goals might moti
vate competitive doctors, you can kill any
enthusiasm for the entire budgeting process
if you set targets too high and spend the
whole year “behind budget.”
Keep it real
If you do build stretch goals into your
budget, base them on something realistic.
When you budget new revenue, make sure
there is an achievable source, such as adding
new services, opening a satellite office, or
hiring a new provider. Do not budget a 20%
revenue increase in 2003 if you are basi
cally planning to do the same things you
are doing in 2002. That is just wishing for
growth.
The same idea applies to expenses. There
is no sense in budgeting a 5% reduction in
expenses without some plan for achieving
that objective.
As you become more comfortable with the
process, budget further into the future. The
long-term numbers will no be precise, but
they will help you keep sight of your goals.
Suppose your group wants to expand from
a single site to three offices within three
years. How are you going to pay for it?
Long-term budget planning shows the path
to that expansion objective.
Use it!
Do not just create and forget about your
budget until you begin the process again
next year. Track it monthly and measure
your progress. Examine discrepancies to find
their cause. By doing so, you will steadily
develop a more complete understanding of
your finances. t
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