By Stephen W. Earnhart, MS


Earnhart & Associates

Austin, TX

When it comes to profit and loss statements, all too often we find that what we think the numbers are in a surgical area or freestanding center are not that way in the books, which an accountant or bookkeeper prepares. It is a big deal, regardless of awareness.

Case in point: We are conducting an evaluation for a client that involves re-syndication of their surgery center. It involves some number-crunching, analysis of “things,” and generally coming to an understanding of how the facility is performing. Per everyone, including the owners and those who wish to buy in, everything is great.

However, upon looking at the books, it’s not so good. There are major errors and omissions from what the facility thought vs. what the numbers show. This had a big impact on new surgeons joining the facility and even existing partners wanting out. The administrator, business office manager, owner, or someone else must check what you report against what is reported in the books every month. In this case, it had been more than a year since that happened, and the accountant had just been recording what was inaccurately reported each month. The inaccuracies grew. Any discrepancy between actual and posted must be discussed and rectified before any month is closed out.

• Insurance contracts. Many facilities have so-so insurance contracts. A few have great contracts. But most have lousy little contracts because they are typically created “in house” by those who don’t know what they are doing.

Regardless of where you fall in this mix, many are getting shortchanged because what you think you are getting when the case is posted is not what you are getting reimbursed. This is usually your fault. Insurance contracts change all the time. It is a group effort to stay on top of those changes and record it in your billing system. Many do not. When you get reimbursed $2,112 for a procedure when you thought you would receive $2,885, most don’t notice the discrepancy.

Every reimbursement for each patient must be checked against what you have contracted. Many don’t have the time, desire, or personnel to do that, so most don’t. Nevertheless, what you are missing could easily support one new hire to only check for variances.

• Supply costs. There is an accepted protocol for the ordering and payment of supplies. One person orders the supplies. Another person confirms the delivery and matches the items on the invoice against what was ordered and the contracted price. A third person approves payment, and the invoice is sent to the fourth person, who cuts the check. Ninety-nine percent of the time, that fourth person rarely examines that invoice before he or she signs the check. Any deviation in this protocol is a set-up to be ripped off, and chances are high that you have been, will be, or currently are.

We all love our vendors, and they are very helpful for most of us, but our local and trusted vendors have several people stacked up behind them on every transaction we make with them. Honest mistakes happen, contracts get messed up, quotas may not be accurate, and backordered items may not have been paid. These issues are not rare; they are everyday occurrences that people are just too busy to investigate further.

Is there a good solution? Probably not, but the one way to deal with all these issues is very simple: profit-sharing. Let everyone pay for these mistakes/oversights, not just the owners. Very quickly, motivated staff will go the extra mile.

If that isn’t an option, then use diligence. Let everyone know what must be done and then make sure it is. That will help for a while because tracking the “numbers,” like credentialing and accreditation, is an ongoing, daily activity that never ends.

Earnhart & Associates is a consulting firm specializing in all aspects of outpatient surgery development and management. Earnhart & Associates can be reached at 5114 Balcones Woods Drive, Suite 307-203, Austin, TX 78759. Phone: (512) 297-7575. Fax: (512) 233-2979. Email: Web: