CHICAGO—Do you know your practice’s financial numbers? The financial stats may not be top of mind as you see patients, but they can make a big difference in your practice’s financial viability.
That’s what Adrienne Hollander, MD, of Arthritis, Rheumatic, and Bone Disease Associates, Voorhees, N.J., shared during the ACR Convergence 2025 session Practice Pulse: Tracking the Financial Health of Your Clinic.
Dr. Hollander’s practice in the Philadelphia area has 16 physicians and two advanced practice providers (APPs). When she joined the practice 21 years ago, the practice would get financial statements once a year. “No one knew what to do with them,” she said. “We didn’t know if we’d have enough money each month to make payroll.” Unknown factors over the financials would keep her awake at night.
As she got closer to becoming a partner, Dr. Hollander’s anxiety over the practice’s financial health grew significantly.
Physician-owners nowadays can take a deeper look at their practice finances with the help of electronic medical records and specialized software—and they should make a point to look at those numbers.
“If we think about the financial statements, it’s like taking the vital signs of your practice. Vital signs may not be enough with a patient, and you need to look at labs and X-rays. You often need to look deeper into other data to see what’s really going on,” said Dr. Hollander, referring both to patients and practice financials.
Financial Statements
One type of financial statement that physician-owners/partners should review monthly is the profit and loss sheet. This measures revenue, expenses and profit. This will often fluctuate from month to month. Your revenue, minus your expenses, is the net income, which you can put back into the practice if you choose to do so.
The second financial statement to review is the balance sheet, which focuses on the liquidity of the practice. This takes a closer look at what your practice owes but also what it owns—basically, assets vs. liabilities.
Cash vs. Accrual Accounting
As you dig a little deeper into the practice’s finances, you may use two approaches to accounting: cash basis or accrual basis. “Most small practices do cash-basis accounting. As we get bigger, we use accrual-basis accounting,” Dr. Hollander said.
With cash-basis accounting, you recognize revenue when you get it, not when a physician or APP provides the service. Expenses are recorded when they leave the practice bank account. Cash-basis accounting is useful to identify your cash flow, but it does not give the full picture of your practice’s financial position, Dr. Hollander said. It also can give a distorted impression of your practice’s health. For example, you may have had a very busy October but it doesn’t look like it because the government shutdown delayed Medicare payments.
