DVM, MBA, CPA
Dr. Joy Fuhrman has extensive experience in financial consulting and corporate accounting. She is a certified public accountant, a graduate of Colorado State University’s combined DVM/MBA program and an adjunct faculty member at the Midwestern University College of Veterinary Medicine. Originally from South Africa, Dr. Fuhrman is a partner in a small animal general practice as well as an industry consultant and national speaker.Read Articles Written by Joy Fuhrman
Missed charges, a problem in veterinary practice for as long as the profession has been around, is not about clients or employees walking out of your hospital with unpurchased products. It’s not about pet owners declining medical recommendations or staff members forgetting to offer additional services. It’s not even about discounting a nail trim or giving away a bottle of ear cleanser. Rather, missed charges is simply about unintentional neglect in charging clients for services performed. What many practice owners fail to recognize is that not documenting all charges on the client invoice has far-reaching effects.
For example, if you forget to charge for a heartworm test, the client might think the test wasn’t performed and could mistrust your practice. The lack of documentation might mean you don’t send a reminder for a repeat heartworm test in six months. Your ability to capture revenue for current and future exams, heartworm tests and heartworm preventives is severely impacted.
Some of the most common missed charges during outpatient appointments include those for fecal exams, medical progress exams, ultrasound-guided cystocentesis and blood draws. Often missed with in-patients are daily hospitalization fees, injection fees and IV fluid pump charges. All those missed charges can easily add up to tens of thousands of dollars in annual lost revenue and hundreds of thousands of dollars in reduced practice value.
Missed charges in veterinary practice are estimated at 5% to 10% of actual revenue. This means a hospital grossing $2 million a year could have let an additional $200,000 go uncollected. Assuming the practice is valued at five times earnings, that’s a $1 million reduction in hospital value.
Let’s examine a few advanced tools that can easily be leveraged.
1. A fast way to identify where missed charges occur is to analyze your income-to-expense ratios by category. For example, if reference laboratory costs increased but the revenue did not grow proportionally, then there’s a good chance that not every test ordered was billed to the client.
Start by having matching expense and revenue categories. The AAHA/VMG Chart of Accounts — learn more at bit.ly/3hUPIh9 — can get you set up.
2. Data analysis apps, such as those from VetSuccess and iVET360, integrate with your practice information management system. You can see metrics and, more importantly, trends in those metrics in one click.
For example, if your diet revenue-to-expense ratio for the past three months was 1.5-to-1, your gross margin on food sales was 50%. If this month the ratio fell to 1.2-to-1, your gross margin is only 20%, suggesting that either the cost of the food you purchased rose without a proportionate increase in the sales price or some dispensed food was not documented.
If your PIMS does not integrate with a data-analysis program, consider an app that works with your accounting platform. Fathom, for example, integrates with QuickBooks and Xero.
3. Once you identify commonly missed revenue opportunities, set up bundled charges. For example, if the charge for fecal testing is forgotten when a client brings in a sample for a routine adult wellness exam, create an Adult Wellness Bundle that includes the exam, fecal test, bloodwork and urinalysis, heartworm test, and vaccines or vaccine titers. Doing this allows you to:
- Quickly prepare estimates
- Ensure that all charges are invoiced.
- Discount prices if the client chooses all the services in the bundle.
4. Make sure your in-house lab equipment and reference lab have bidirectional PIMS integration. The American Animal Hospital Association reported in 2013 that 17% of lab tests were not billed to clients in the average clinic, costing practices almost $1.1 million a year. Even with bidirectional integration, periodically review the statements from your reference lab to ensure clients were invoiced for all the services you had to pay for.
5. Choose a credit card processor that not only integrates with your PIMS but also allows you to securely keep a client’s credit card on file. Integrated processing prevents discrepancies between the invoice and the charged amount. The secure storage of credit cards allows you to quickly and efficiently check out regular clients and process payments for charges that are inadvertently missed. (Be sure to contact the client first when it occurs.)
6. Paper medical records require a doctor or staff member to enter all treatments and services into the point-of-sale system. Redundant data input is prone to errors of omission, duplication and inaccuracy. The answer: Go paperless.
Converting to paperless or paper light is worth the time and cost. One way to make the transition as painless as possible is to review the next day’s patient schedule and scan only those records into your PIMS. This also ensures that the time spent is limited to active clients and patients. An alternative is to hire a third-party company, such as Scanning America or Docufree, to do the scanning for you.
7. Even if you use electronic medical records, you might have a disconnect with the point-of-sale or invoicing system. Some PIMS feature automatic billing, meaning products and services recorded in the medical record are automatically added to the invoice. A Shepherd App case study found that automatic charge capturing increased practice revenue by an average of 13%.
8. What if your PIMS does not have automatic billing? Here are three ideas.
- Use a form builder like JotForm to create a fillable electronic document that your team can complete during each stage of the patient visit. The document can be accessed simultaneously by multiple team members using Google Drive. The front desk personnel can compare the electronic encounter form against the invoice to ensure that all administered services and procedures are included.
- Use laptops and tablet computers in exam rooms and treatment areas. This way, doctors and technicians can document in real time all the procedures performed and products used.
- Use spreadsheets to analyze average doctor transactions by revenue category. The information can tell you which doctors achieve greater compliance with diagnostics tests or dentistry procedures. Have new associates shadow these doctors.
If you aren’t doing something to reduce or eliminate missed charges, you are leaving valuable dollars on the table. Keep in mind that what isn’t measured cannot be managed. Determine what missed charges cost your practice and then choose strategies to minimize the problem.