Essentials of Physician Practice Management E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Jossey-Bass Public Health/Health Services Text
• Sprache: Englisch

Seitenzahl: 902

Veröffentlichungsjahr: 2004

Beschreibung

Essentials of Physician Practice Management offers a practical reference for administrators and medical directors and provides a comprehensive text for those preparing for a career in medical administration, practice management, and health plan administration. Essentials of Physician Practice Management is filled with valuable insights into every aspect of medical practice management including operations, financial management, strategic planning, regulation and risk management, human resources, and community relations.

Leseprobe

CONTENTS

List of Figures and Tables

Acknowledgments

Preface

Part One: Financial Management

Chapter 1: Budgeting for Physician Practices

Variety in Budgeting Methods

Overview of the Budget Process

Chapter 2: Revenue Cycle

Revenue Cycle Processes and Objectives

Reimbursement Methodologies

Common Revenue Cycle Challenges

Measuring Success

Process Performance Indicators

Chapter 3: Understanding the Cost of Providing Services

Definition of Cost

Costs of Practice

Fixed and Variable Costs

Activity Based Costing

Breakeven Analysis

Productivity Management

Chapter 4: Taxation and Physician Practices

Selecting an Entity Structure

Compensation Arrangements

Compensation in Tax-Exempt Organizations

Independent Contractor Versus Employee Status for Workers

Tax Filings and Registration for Start-Up

Tax Compliance

Chapter 5: Capital Investment Decisions

Planning

Evaluation of Opportunities

Financing the Capital Investment

Assessing the Investment

Chapter 6: Monitoring Financial Performance

The Role of the Practice Manager and Some Tools for Monitoring

Financial Performance

Operational Performance

Clinical Performance

Compliance Planning

Part Two: Regulatory Environment and Risk Management

Chapter 7: Negotiating Managed Care Contracts and Contract Management

Preparing to Contract with an MCO

Reviewing the Contract

Reaching the Practice Participation Decision

Conducting the Final Negotiations

Implementing the Contract

Contract Management

Termination Considerations

Chapter 8: Federal and State Regulations

Law and Sources of Law

An Analytical Framework

Laws Applicable to Internal Physician Practice Activities

Laws Applicable to External Physician Practice Activities

Chapter 9: Corporate Compliance in a Medical Practice Setting

Relevant Laws and Regulations

Corporate Compliance Programs

Chapter 10: Risk Management

Medical Malpractice Defined

Malpractice Trends and Their Causes

Malpractice Costs and Patient Safety

Risk Management Defined

Climate for Tort Reform

Risk Identification in Ambulatory Care Organizations

Evaluation of Patient Complaints

Loss Prevention Strategies

Claims Management

Litigation Management

National Practitioner Data Bank

Insurance Coverage

Part Three: Human Resource Management

Chapter 11: Governance and Leadership in a Medical Practice

Practice Management Organizations

Interactions with HMOs

The Traditional Group Practice

Size of the Practice

The Practice Manager

Physician Involvement in Practice Management

The Physician-Administrator Team

MD Compensation

Practice Governance

Physician Contracts

Physician Mentoring

Chapter 12: Human Resource Management

Aligning Practice Strategy with HR Practices

Recruiting Personnel

Retaining Employees

Evaluating Performance

Ensuring Ongoing Training

Applying Federal Antidiscrimination Laws

Managing Compensation and Benefits

Offering Rewards and Recognition

Chapter 13: Physician Compensation

Organizational Nature and Strategy

Building a Formula Process

Chapter 14: The Role of Nonphysician Clinicians in Medical Practice

The Growth in NPCs

Credentialing, Certification, and Training

General Scope of Practice

Billing and Other Economic Issues

Duties of the Supervising Physician

Integration into the Office

Midlevel Providers as Replacements for Residents

PA or NP Residency Programs

Chapter 15: Impact of Nursing Workforce Issues on the Physician and Practice Manager

The Nursing Shortage

Nursing Classifications

The Office Support Team

The Unit-Level Support Team

Part Four: Strategic Considerations: Planning, Marketing, and Management

Chapter 16: Developing a Business Plan

Strategic Business Plan Participants

Strategic Business Plan Process

Chapter 17: Adding a New Service or Program to a Medical Practice

Opportunities

Clinical Need

Professional Satisfaction

Program Economics

Joint Ventures

Credentialing

Marketing the Program

Chapter 18: Marketing a Practice

The Health Care Environment: Recent Trends

The Implications for a Practice

Identifying an Audience: Marketing Audit

What’s Your Story?

Spreading the News: Communication Vehicles

Public (Media) Relations and Community Relations

The Brand Experience: The Patient’s Experience

Patient Education as a Marketing Opportunity

The Marketing Plan and Budget

Measuring the Effectiveness of Advertising

Chapter 19: Integrating a Clinical Research Program into a Medical Practice

Private Practice Versus Academic Practice as a Trial Site

Potential Benefits from Clinical Trial Involvement

Organization of the Trial Process

The Clinical Trial Process

How to Get Started in a Trial

Budgeting and Estimation of Recruitment Potential

Recruitment of Trial Subjects

Study Subject Retention

Ethical Issues

Chapter 20: Relationships Between Medical Practices and Community Hospitals

General Facts

Vertical Integration

Other Forms of Integration

Chapter 21: Academic Medical Centers

Description

Genesis

Challenges

Opportunities

Part Five: Information Management

Chapter 22: Information Systems

Strategic Considerations

Choosing a New System

Implementing the System

Financing the System

System Evaluation

Security, Privacy, and Regulatory Requirements

Chapter 23: Performance Improvement, Teamwork, and Monitoring Outcomes

The Physician as Leader of Performance Improvement

Using Data

The IMPACT CARE Performance Improvement System

Implementing IMPACT CARE

Service

AIDE Approach: Rapid Cycle Process Improvement

Chapter 24: The Twenty-First-Century Medical Environment

Population Demographics

The Knowledge Society

Impact of Health on Cost

Value of Health

Workforce

Health Systems

The Editors

The Contributors

Index

Copyright © 2004 by John Wiley & Sons, Inc. All rights reserved.

Published by Jossey-Bass

A Wiley Imprint

989 Market Street, San Francisco, CA 94103-1741 www.josseybass.com

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax [phone], e-mail: [email protected].

Jossey-Bass books and products are available through most bookstores. To contact Jossey-Bass directly call our Customer Care Department within the U.S. at 800-956-7739, outside the U.S. at 317-572-399386 or fax [phone].

Jossey-Bass also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.

Library of Congress Cataloging-in-Publication Data

Essentials of physician practice management / [edited by] Blair A. Keagy,

Marci S. Thomas.— 1st ed.

p.; cm.

Includes bibliographical references and index.

ISBN 0-7879-7189-8 (alk. paper)

1. Medicine—Practice.

[DNLM: 1. Practice Management, Medical—organization & administration.

2. Financial Management. 3. Marketing of Health Services. 4. Personnel Management. 5. Risk Management. W 80 E78 2004] I. Keagy, Blair A., 1944-

II. Thomas, Marci S., 1953-

R728.E87 2004

610′.68′1—dc22

2004011140

LIST OF FIGURES AND TABLES

FIGURES

1.1

The Budget in Relation to the Planning and Control Cycle

1.2

Relationship Between Level of Effort and Precision

1.3

Budgeting Process

2.1

Patient Service Revenue Cycle

2.2

Patient Access Functions

2.3

Billing and Collections

2.4

Calculating Payment with the RBRVS Methodology

3.1

Direct and Indirect Costs for Pittsburgh Family Practice

3.2

Calculating Percentages to Allocate Support Costs

3.3

Fully Allocated Cost for Newborn Visit

3.4

Proposed HMO Fixed Rate to Cover Direct Costs for Newborn Visit

3.5

Simplified Breakeven Formula

3.6

Mammography Screening Data

3.7

Breakeven Calculations

3.8

Breakeven Graph for Mammography Screenings

3.9

Breakeven Calculation Including Profitability and Overhead

3.10

Expected Average Rate of Reimbursement

3.11

Group Practice Acceptance of Capitated Contracts in 2000

3.12

Capitation Breakeven Formula

3.13

Dr. Foster’s Capitation Breakeven Calculation

3.14

Capitation Breakeven Calculation for New Patients

3.15

Average Variable Cost per Visit

4.1

Advantages and Disadvantages of Taxable and Tax-Exempt Status

5.1

Types of Capital Investments

5.2

Components of the Project Business Case

5.3

Capital Investment Analysis

6.1

Steps in the Benchmarking Process

7.1

Steps in Contracting with MCOs

7.2

Categories of Payers

7.3

Evaluating the Marketplace

7.4

Perform Financial Analysis and Model the Effects of the Contract

8.1

Analytical Framework for Laws That Apply to Medical Practices

10.1

Median Awards for Medical Negligence, 2002

11.1

Increase in Patient Choice Options During the Late 1990s

11.2

Increase in Practice Size and in the Number of Physicians in Large Groups

11.3

Increase in Administrator Compensation, 1996–2000

11.4

Percentage Change in per Capita Health Care Spending, 1995–2002

11.5

Increase in Operating Expenses and Medical Revenue, 1998–2000

12.1

Advantages and Disadvantages of Internal Versus External Candidates

12.2

Strategies to Improve Job Satisfaction Factors

12.3

Behavioral Rating Scale Item for a Practice Receptionist

13.1

Steps in the Compensation Process

13.2

Role of the Compensation Committee

13.3

Example of Compensation Formula Design

13.4

Steps in the Conceptual Design Process

13.5

Overall Compensation Formula Design

13.6

Quality as an Allocation Factor for Overall Practice Profit

15.1

National Supply and Demand Projections for FTE Registered Nurses, 2000–2020

15.2

Ages of Registered Nurses, 1980–1996

16.1

Planning Process Leadership

16.2

Characteristics of Mission and Vision Statements

16.3

Examples of Strategy Initiatives

16.4

Sample Report on Ratings for an Initiative of Improving Affiliate Operations

16.5

Sample Timeline for Plan Implementation

17.1

Median Revenue per FTE MD After Operating Costs

17.2

Ancillary Services Producing the Most Profit per FTE MD

20.1

Decreasing Discharge Rates and Lengths of Hospital Stay

20.2

Hospital Admissions per 1,000 Population in Selected Industrialized Nations, 2000

20.3

Acute Care Beds per 1,000 Population and Average Length of Stay in Selected Industrialized Nations, 2000

20.4

Comparison of Administrative Costs in Health Care in the United States and Canada, 1999

20.5

The Top Three Hospital Revenue Generators per FTE Physician

21.1

Breakdown of Medical School Affiliations with AAMC COTH (Council of Teaching Hospitals) and Health System Hospitals

21.2

Relationship of Medical Schools to Their Parent Universities

21.3

Structure of the Faculty Practice Plan

21.4

Medical Schools by Geographic Region

22.1

Common Practice Applications and Functions

22.2

Common Applications with a Patient Focus

22.3

Traditional Approach to Strategic Planning

22.4

Emerging Approach to Strategic Planning

23.1

Sample Control Chart: Percentage of Children Not Receiving Immunizations During a Seven-Month Period

23.2

Sample Completed Action Plan

23.3

Sample of Data Collected, Analyzed, and Graphed in Preparation for a One-Hour AIDE Team Meeting

23.4

Sample Cause-and-Effect (Fishbone OR Ishikawa) Diagram

23.5

Sample Cause-and-Effect Diagram Identifying Root Causes of Problems

24.1

Health Care Spending as a Percentage of Gross Domestic Product

24.2

Actual and Projected Numbers of Active MDs and DOs per 100,000 Population in the United States

24.3

Numbers of Physicians per 1,000 Population in Selected Developed Countries

TABLES

1.1

RBRVS Illustration

1.2

CPT Codes Categorized by Level of Effort

1.3

Actual and Projected Visits for 2003 and 2004

1.4

Projected Population in Highgrove Service Area for 2004

1.5

Projected Income Levels in Highgrove Service Area for 2004

1.6

Projected Patient Visits by Month for 2004

1.7

Indicators for Additional Analysis

1.8

Percentage of Patients in Each Work Level by Specialty for January

1.9

Total Visits and RVUs by Specialty for January

1.10

CPT Codes Converted to Work Level RVUs and Charges per Payer Type

1.11

Projected Gross and Net Revenue per Payer per Specialty for January

1.12

Revenue Budget for All Specialties for January

1.13

Budgeted Physician Compensation for 2004

1.14

Budgeted Nonphysician Compensation for 2004

1.15

Maximum RVUs per Month for Clinical Employees

1.16

RVUs for January

1.17

Variable Labor Requirements for January

1.18

Budgeted General Operating Costs for 2003 and 2004

1.19

Operating Budget for 2004

1.20

Cash Budget for 2004

3.1

Assumptions Behind Allocation Bases

3.2

Allocated Costs and Total Costs

3.3

Allocation of Costs to Visits and to RVUs

3.4

Payer Types

3.5

Payer Mix and Average Reimbursement Rates for Mammography

3.6

Use Rate Sensitivity

3.7

Payer Mix for Discussion Question 6

4.1

Comparison of Tax Structures

4.2

Establishing Comparability of Physicians’ Compensation

5.1

Weighted Average Cost of Capital

5.2

Payback Period Analysis for Two Alternative Investments

5.3

Computation of Net Present Value for Densitometer

5.4

Computation of Net Present Value for Mammography Unit

5.5

Excerpts from Present Value of $1 Table

5.6

Calculation of Present Value of Ordinary Annuity for Five Years at 10 Percent

5.7

Excerpts from the Present Value of an Ordinary Annuity Table

5.8

Strengths and Weaknesses of Return on Investment Analytical Tools

5.9

Cornerstone ENT Expansion Evaluation

5.10

Lease or Buy Data

5.11

Cash Flow Evaluation for Purchase

5.12

Cash Flow Evaluation for Operating Lease

5.13

Types of Debt Financing

6.1

Report Card for the Richardson Obstetric Group

6.2

Payer Evaluation Sheet

6.3

Stonehill Family Practice Payer Mix Evaluation

6.4

Payer Mix for Discussion Question 2

8.1

Sources of Law by Practice Issue

9.1

Risk Areas Identified by the OIG for Physician Practices

10.1

Malpractice Climate in Various States, 2003

13.1

Performance Areas and Metrics for Compensation Formulas

13.2

Cost Allocation Considerations

13.3

Allocation of Revenue and Costs by Specialty

13.4

Allocation of Revenue and Costs by Individual

16.1

Issues a Strategic Plan May Address, by Type of Practice

16.2

Three Markets with Different Characteristics

16.3

Sample Preliminary Task List and Timeline for One Initiative

19.1

Typical Compensation from a Phase III Trial of an Investigational Compound for Healing Diabetic Foot Ulcers (DFUs) Versus Clinical Revenue Generated from DFU Treatment (Medicare Allowable)

19.2

Personnel and Time Requirements for a Typical Trial

19.3

Media Options for Recruitment and Relative Costs

19.4

Reasons for Patient Dropout

21.1

Affiliated Health Schools

22.1

Electronic Products for the Physician Practice

22.2

Information Technology Implementation Steps

23.1

Goals to Monitor for Success of Practice Changes

23.2

Steps in the AIDE Process

24.1

The Greatest Decline in Mortality in the History of the World Occurred Between 1900 and 2000

ACKNOWLEDGMENTS

The editors want to acknowledge the help and support of their friends and colleagues: William Zelman, who brought us together; Arnold Kaluzny, who helped us find the right publisher; Erika Fulmer, who helped us keep things moving; Kristin Keagy, Kay Grinnell, Donna Cooper, Betsy Mann, and Raleigh Mann, who helped us edit the chapters; and all the chapter authors and contributors, who gave this book its breadth and depth. This book would not have been possible without them.

PREFACE

The purpose of this book is to provide a comprehensive and practical guide to the issues inherent in physician practice management, as well as tools and techniques to deal with those issues. Although primarily designed as a textbook for students interested in the field, this book will also provide physicians and their practice managers with a fundamental understanding of the financial and regulatory issues that influence today’s medical practice and with insight into the cultural, human resource, and governance issues that make physician practices unique among health care organizations. (Businesspeople who work in medical practices are known by a variety of titles, such as administrator, practice manager, or office manager. For consistency we have chosen to use the title practice manager throughout this book.)

Physicians and medical groups face increasing challenges to compete as the cost to provide health care services continues to rise. Because reimbursement from governmental and other third-party payers is flat or decreasing, improvements in technology, increases in costs of pharmaceuticals and for medical malpractice coverage, and the costs of complying with the Health Insurance Portability and Accountability Act (HIPAA) and other legislation have put a strain on practice financial margins. As a result many physicians and their practice managers now realize that they need additional knowledge and administrative skills to understand and deal with the changing regulatory and fiscal environment.

Physicians seldom learn about medical practice management issues and techniques during their years of medical education, and many practice managers have no formal training as health care administrators. Lack of awareness of critically important practice issues such as the organization’s cost structure, the negotiation of managed care contracts, and the importance of federal and state regulations can cause the practice to lose income or, even worse, face civil or criminal action.

In this environment physicians and their practice managers must have a general understanding of the many elements of practice management and a depth of understanding in a few. To ignore these concepts could lead to loss of income as well as sanctions for violations of regulatory requirements. The practical tools and references in this book will help those who lead and manage physician practices to understand the principles behind effective practice management and increase their own proficiency.

As the external environment has changed over the last few years so has the internal environment in which the physician has to practice. Physicians coming from their residency programs face issues resulting from changes in the way practices do business. The loss of control in medical decision making is very much on the minds of many physicians in today’s managed care environment. Newer physicians entering an existing practice also need to understand the culture of that practice and be aware of governance and equity issues. Physicians and their practice managers must work collaboratively to maximize the success of the practice.

The Framework of This Book

In July 2002, the American College of Medical Practice Executives (ACMPE) published The ACMPE Guide to the Body of Knowledge for Medical Practice Management. It summarizes the body of knowledge and skills that the ACMPE considers a practice manager must possess to be effective in today’s health care environment. The “general competencies” that the ACMPE believes necessary are

Professionalism

Leadership

Communication skills

Organizational and analytical skills

Technical knowledge and skills

Technical knowledge and skills should be developed in eight domains:

Financial management

Human resource management

Planning and marketing

Information management

Risk management

Governance and organizational dynamics

Business and clinical operations

Professional responsibility

This book provides the reader with practical, easy-to-implement information related to the majority of these topics. Each chapter contains illustrations of important concepts or management techniques as well as tools and templates that can be used in practice. The book is organized in logical divisions based on the eight domains of the ACMPE body of knowledge, as follows:

Part One, “Financial Management,” provides the reader with the information necessary to understand how to turn strategic plans into financial reality. Beginning with a description of developing budgeting templates to model financial performance in Chapter One, the chapters in this section also discuss increasing net reimbursement through management of the revenue cycle (Chapter Two); understanding the cost of providing medical services and management accounting (Chapter Three); the taxation of physicians and of the profits from their practice (Chapter Four); capital budgeting for the most efficient allocation of practice resources (Chapter Five); and monitoring financial performance through variance analysis, benchmarks, and ratios in order to maintain the practice’s competitive edge (Chapter Six).

Part Two, “Regulatory Environment and Risk Management,” provides the reader with the information necessary to understand the risks that physician practices face in today’s regulatory and litigious environment. The reader will learn how to combine the knowledge obtained in the section on understanding practice costs with knowledge of legal and contract terminology in order to negotiate contracts with third-party payers and minimize risk to the practice (Chapter Seven). Chapters Eight and Nine address federal and state regulations and corporate compliance and will help the reader interpret those complex laws and regulations and know when to seek the advice of legal counsel. Finally, Chapter Ten, on risk management, will help the reader understand the risk of medical malpractice suits and how to reduce that risk.

Part Three, “Human Resource Management,” provides the reader with the information necessary to understand and implement the various governance models appropriate to physician practices. The reader will also learn to interpret and integrate the various laws and regulations that affect the practice’s human resource policies and procedures and to design recruitment and retention strategies (Chapter Twelve); to understand, choose, and apply the best physician compensation model for the practice (Chapter Thirteen); to understand the role of midlevel providers in a practice (Chapter Fourteen); and to understand the impact on the practice of nursing workforce issues and how to address those issues (Chapter Fifteen).

Part Four, “Strategic Considerations: Planning, Marketing, and Management,” provides the reader with the information necessary to create and implement a business plan for the practice, including creating or refining the mission and vision; performing, analyzing, and interpreting market research; building consensus for the plan among key stakeholders; and communicating the plan and obtaining buy-in for the plan from all parties (Chapter Sixteen). Chapters Seventeen, Eighteen, and Nineteen offer information on how to add a new service or program to the practice, develop an effective marketing plan, and integrate a program in clinical research into the practice. Chapters Twenty and Twenty-One present information that will help the reader develop skills in dealing with relationships between medical practices and community hospitals and in working with physicians in academic settings.

Part Five, “Information Management,” provides the reader with the information necessary to assess the short- and long-term needs of the practice and incorporate that information into the strategic plan. The reader will also learn to write requests for proposals (RFPs), understand the various laws and regulations affecting security and transmission of information, and gain awareness of technologies that can add to practice efficiency and quality (Chapter Twenty-Two). Chapter Twenty-Three includes information on performance improvement, teamwork, and monitoring outcomes that is critical to practice management because medical practices are obligated to provide data on clinical results and practice quality to regulatory agencies. The reader will come to understand the necessity of developing databases to gather information that will aid in quality control without providing detrimental information in the event of litigation. Finally, Chapter Twenty-Four discusses the realities that medical practices are facing in the twenty-first century.

Many examples are included as illustrations. All the practices and physicians used in these examples are hypothetical examples developed out of the authors’ experience or based on contemporary medical news stories.

Essentials of Physician Practice Management Practice Aids

To assist our readers in gaining the most value they can from this book, we are also providing supplemental materials on the World Wide Web. Included are

Answers to the discussion questions at the end of each chapter

Selected mini–case studies

Two comprehensive case studies, one on human resources and one on general practice management issues

Templates where appropriate, in the form of checklists and spreadsheets, that illustrate best practices that can be used by physicians or their practice managers to effect change in the practice

Teaching notes to the comprehensive case studies (for instructors only)

Sample tests with answer keys (for instructors only)

PowerPoint slides to accompany each chapter (for instructors only)

• • •

Essentials of Physician Practice Management is a collaborative effort between a physician and a businessperson. We have tried to address the needs of physicians and their practice managers in practices of varying sizes (small to large) and types (for-profit and nonprofit group practices and faculty practice plans). Our goal is to give the readers of this book practical knowledge about and insight into the operation of medical practices. It is our belief that the challenges faced by practices today cannot be solved by either the physician or the practice manager alone. A team effort is needed to acquire and apply the deep knowledge and skills necessary to thrive in today’s challenging environment.

Blair A. Keagy and Marci S. Thomas

June 2004

Chapel Hill, North Carolina

PART ONE

FINANCIAL MANAGEMENT

CHAPTER ONE

BUDGETING FOR PHYSICIAN PRACTICES

Marci S. Thomas

Objectives

This chapter will help the reader to

Understand the purposes and advantages of budgeting.

Describe the process of budgeting.

Prepare a budget for a physician practice.

Each year physician practices go through the all-important exercise of planning for the coming year’s activity. As more fully discussed in Chapter Sixteen, this should be a joint activity between practice management and the physician-owners. The budget is the tool that group practice managers use to translate the practice’s goals and objectives for the year into dollars. The budget also serves as a vehicle to communicate financial targets to physician-owners and other stakeholders in the practice.

To the wise practice manager the budget is not just a financial plan. It is also a mechanism for monitoring and managing the activity of the practice on a periodic basis. Some practices compare actual results to the budget on a monthly basis. Others do it more or less frequently. The comparison of actual results to budgeted amounts enables practice management to

Focus on where the practice is going and what it will take to get there.

Determine where resources should be allocated.

Assess the productivity of the practice.

Foster accountability in department managers.

Analyze the areas in which variances in volume have occurred.

Identify rates paid by third-party payers that are either more or less than originally predicted.

Identify costs of various inputs to the practice, such as labor and supplies, that are either more or less than originally predicted.

Make the necessary changes on a timely basis to keep the practice healthy.

Note opportunities for future expansion.

Practice managers can use this information to make timely changes to practice operations. Corrective action is particularly important in times like the present when reimbursement is low in comparison to the resources it takes to adequately deliver services and manage a practice. Thus the budget as a control mechanism takes on additional importance. Figure 1.1 illustrates the relationship between the budget and the planning and control cycle.

FIGURE 1.1. THE BUDGET IN RELATION TO THE PLANNING AND CONTROL CYCLE.

The budget is the focal point of the planning and control cycle.