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Your Financial Health Check: Is Your Medical Practice Set Up for Long-Term Success?

Your Financial Health Check: Is Your Medical Practice Set Up for Long-Term Success? Frazier & Deeter

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Key Metrics Every Practice Should Track

Running a successful medical practice isn’t just about patient care—it’s about financial health. Many practices unknowingly operate with inefficiencies, missed revenue opportunities and cash flow challenges that can threaten long-term stability.

A financial health check ensures your practice stays on track. Here are the key metrics every practice should monitor to maintain profitability and financial security.

1. Cash Flow: The Lifeblood of Your Practice

Cash flow is the foundation of financial stability. Practices must ensure they have enough cash on hand to cover payroll, rent, supplies and unexpected expenses. Warning signs of poor cash flow include frequent shortfalls, delays in patient collections and difficulty covering operating costs. Tracking inflows and outflows regularly can help practices avoid financial strain. Getting with your practice banker and having a standing line of credit is essential to aid during the ebb and flow of patient care during the year.

2. Revenue Cycle Efficiency: Are You Getting Paid on Time?

Efficient revenue cycle management is essential for a practice’s financial health. Delays in collections, frequent claim denials or a growing accounts receivable balance can indicate underlying inefficiencies. Regularly reviewing billing and reimbursement processes helps identify areas for improvement. A knowledgeable billing manager can provide oversight and ensure the team operates smoothly, reducing financial bottlenecks.

3. Staffing & Retention: The Hidden Cost of Turnover

Being short-staffed or unable to retain key employees can significantly impact your practice’s financial health. High turnover leads to increased recruitment and training costs, decreased productivity and disruptions in patient care. By addressing staffing challenges proactively, practices can improve operational efficiency, reduce costs and ensure long-term stability.

Real-world Example: Conducting a thorough analysis of your practice’s pay and benefits ensures that your compensation packages are competitive, helping you attract and retain top talent. Read how FD helped a $24M medical practice improve employee retention and satisfaction here.

4. Overhead & Expense Ratios: Are You Spending Wisely?

Operating costs such as rent, payroll, equipment and supplies should be closely monitored to ensure profitability. A high expense ratio could indicate excessive spending, inefficient vendor contracts or unnecessary overhead. Regular expense audits help practices identify cost-saving opportunities while maintaining quality patient care.

Did You Know: Many medical practices engage in research and development (R&D) activities without realizing they may qualify for valuable tax credits. If your practice is investing in innovative procedures, new treatment methods or improved patient care technologies, you could be eligible for federal R&D tax credits.

5. Compliance & Risk Management: Mitigating Financial and Security Risks

Medical practices face a range of compliance risks, from financial reporting to data security, that can have serious consequences if not managed proactively. Waiting until tax season or an audit to address compliance often leads to unnecessary stress, potential penalties and even security breaches. By implementing a proactive compliance strategy and regularly reviewing risk areas, practices can reduce vulnerabilities and strengthen financial and operational stability.

Did You Know: Medical practices can streamline compliance and save time on audits by adopting multiple risk management frameworks together, such as HITRUST and a SOC 2 examination. These frameworks help ensure that both financial and data security protocols are not only aligned with, but exceed, industry standards, minimizing risks and improving overall security posture. Read more here.

Taking Control of Your Practice’s Financial Health

For many practices, tracking and interpreting these financial metrics can be overwhelming. Without the right systems in place, inefficiencies can go unnoticed, leading to financial instability.

Frazier & Deeter specializes in helping medical practices improve financial visibility, streamline operations and plan for long-term success. From cash flow forecasting to risk compliance support, our team ensures you have the real-time insights needed to make informed business decisions.

Is your practice financially healthy? Let’s talk. Connect with us today.

Contributors

Kathy Moore, Tax Partner

Courtney Mishoe, Tax Partner

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