Medical Industry

The demand of the marketplace is causing ongoing changes in the medical industry. These changes may cause old beliefs about how medicine should be practiced to become obsolete. Physicians must therefore pay attention to the business aspects of a medical practice.

Numbers are data. What any physician needs from his or her CPA is information. In many clinical situations, the numbers are information. In business situations, most numbers are data – the value a physician CPA brings to the medical practice is applying his or her knowledge, experience and judgment to turn data into information, information that is the basis for decision making.

My accounting services are divided in to two categories – nontraditional and traditional:

Nontraditional Accounting Services

Finance Review
Diagnostic business planning begins with the evaluation of the overall finances of the medical practice. Particular emphasis should be placed on charges, collections, adjustments, and other write offs. Is the practice growing or are the doctors working harder to maintain the same income level?

Financial Percentages and Ratios
Ongoing review of the practice’s gross collection percentage, net collection percentage, and accounts receivable ratio or days in A/R. Assess whether all these statistics are reasonable for the practice’s particular medical specialty.

Overhead Review
Compare each overhead category to the same overhead category from the prior year. Identify and question significant changes. In addition, decide how the practice’s overall overhead can be reduced in the upcoming year.

Cost Accounting
Every practice needs to know what it costs to render a particular service. These calculations should be prepared at least annually.

Accounts Receivable
Conduct an in-depth analysis of a current aging of the accounts receivable, with emphasis on payer aging’s as well as staff following procedures

Managed care accounting
Review all managed care plans to assess their profitability. If the plan’s rates or profitability are not acceptable, assess the potential for renegotiation.

Traditional Accounting Services

A compilation of financial statements is defined as presenting in the form of financial statements information that is the representation of management (owners) without undertaking to express any assurance on the statements.

Independent Review of Internally Prepared Financials
For physician practices who prepare their own financial statements internally, it is often a good idea to have them independently reviewed by a CPA. This review can be conducted on a monthly, quarterly, semi-annual, or annual basis. You must make sure they are receiving accurate, reliable financial information.

Financial Forecasts and Projections
A physician practice might want or need to prepare a financial forecast for many reasons: [a] to budget income and expenses for the upcoming year, [b] for general business planning purposes, [c] to aid in the valuation of the entity, or [d] to fulfill a lender’s requirement for granting a loan. The difference between a forecast and a projection is that in a forecast, all the assumptions are expected to occur, whereas in a projection at least one assumption is not necessarily expected to occur and may be improbable. In other words, a forecast presents management’s expectations; a projection presents management’s expectations based on a ‘what if’ situation.

Personal Financial Statements
There may be a time when a physician needs to have a prepared personal financial statement. Personal financial statements are sometimes needed when obtaining a bank loan, for tax or estate planning, or during the preparation of a personal financial plan.

As a CPA dedicated to physicians and their medical practices, my goal is to minimize your tax burden and make sure there are no year-end tax surprises. My accounting services include the following:

  • Tax planning and analysis
  • Tax projections and analysis
  • Tax preparation Federal and State
  • Representation before taxing authorities
  • Problem resolution
  • Practice acquisition/divestiture tax consulting
  • Structuring of physician buy-ins and buy-outs
  • Tax impact of proposed practice merger
  • Practice valuation tax analysis

Medical Practice Revenue Building

Available Accounting Services to Physician Practices

The following is a partial list of the revenue building services I offer to physician medical practices. Please feel free to call me at 925-484-1658 to inquire about any of them.

Complete practice assessments/reviews.
At periodic intervals, a medical practice needs a complete review and assessment. The goal of this service is to evaluate the overall efficiency of the practice and to determine if it is losing revenue in some form or fashion. A review attempts to improve the bottom line. For example, if a practice has a decrease in cash flow, it may want to hire a CPA to conduct a complete assessment of its practice operations to determine the cause of the decrease.

Coding analysis.
A coding analysis determines if the practice is coding all of its services correctly. If the office members do not code the services correctly, the practice may lose revenue. The analysis covers both procedural coding and diagnosis coding.

Managed care contract analysis.
A review starts with an analysis of the key aspects of each managed care contract. A review identifies key contract terms, including effective dates, termination dates, claim filing and payment guidelines. It also identifies contract terms that would be considered to be a disadvantage to the medical practice. Next a fee schedule analysis identifies the code specific reimbursement rates for each managed care contract and outlines a plan-by-plan comparison.

Negotiation with managed-care plans.
Integrated delivery systems, group medical practices, and even solo practices need to increase their own reimbursement from managed-care plans. The way to do this is to negotiate an increase in price from these plans.

Review of Medicare/Medicaid billing practices.
Many medical specialties, such as cardiology, are provided for a large number of Medicare and even Medicaid patients. Specific rules apply to Medicare/Medicaid billing. An office that is not aware of certain billing rules will lose revenue. Therefore, Medicare/Medicaid billing must be reviewed on an ongoing or periodic basis.

Review of the practice’s receivables.
To optimize cash flow, a medical practice must manage its accounts receivable. All systems and procedures related to accounts-receivable management must be monitored and reviewed, either on an ongoing or periodic basis. The aging of receivables also must be monitored.

Financial benchmarking.
Benchmarking is the process of analyzing the indicators of business success and applying that information to achieve business growth and improvement. For medical practices, it is a way of taking a critical look or “snapshot” of your practice’s health. It provides you with an objective way to measure your practice’s performance. Throughout most of the business world, benchmarking is a key element to strategic planning, a vital necessity to all medical practices. Benchmarking of medical practices helps determine which of your practices and processes are the best and which ones need attention.

Revenue cycle management review.
Revenue cycle management means taking steps to assure that you get paid for what you do and that you get paid in a timely fashion. The revenue cycle starts when the patient calls your office for an appointment and your staff captures the patient’s name, phone number, and maybe the name of their insurance company. The cycle ends when the balance on their account is zero. A review of revenue cycle processes can lead to an increase is both revenue and cash flow.

Physician productivity analysis.
To maintain or increase revenue, it’s important to analyze physician productivity. Productivity should be compared to market benchmarks to create reasonable productivity ranges for physicians.

Process improvement.
It’s important that improvement events take waste out of the physician office and not just move the waste to the doctor’s corner. Efficiently designed and monitored processes can increase revenues.

Embezzlement review.
The fear of employee theft warrants some medical practices to seek an embezzlement review. A review can help prevent revenue loss.

Billing service review.
Many physicians use outside billing services to bill and collect their services. Often, these agencies are left unaccountable. The physician’s agency should be reviewed periodically to make sure services are being billed out correctly and that the agency is putting in the time and effort it takes to collect these services.

Capitation rate analysis.
Capitation is a common way doctors are paid by HMOs and other delivery systems. When presented with a capitation rate, most doctors are unaware whether or not such rate should be accepted and even more important, whether or not such rate will be profitable.

Real Estate and Construction Industries

We support many Real Estate and Construction clients with various accounting and tax services as well QuickBooks implementation, and support and general business consulting. Our philosophy is to provide personal attention and the best professional experience in the industry.

Real estate owners and related industries have benefited from a wide range of products offered by the talented professionals at Daniel M. Kavanaugh CPA. We provide advice to assist our clients in taking advantage of every benefit possible, using our expertise in accounting, consulting and tax planning services to guide our clients to success.

Entity Choice
We can assist in determining the best entity choice for real estate venture whether it is a Limited Partnership, General Partnerships and LLCs, Family Limited Partnerships, S Corporations.

Tax Free Exchanges
Section 1031 Exchanges can be utilized to help defer tax dollars and put your money to work with planning and structuring while avoiding taxable transactions.

Short Sales and foreclosures
We can advice you on the extremely complex tax laws of foreclosures, short sales and repossessions and the tax impact that comes with these type of transactions


For many years we have provided monthly accounting and bookkeeping services to numerous specialty trade contractors and subcontractors.

We have worked with many contractors and pay close attention to areas affecting the construction industry. We are innovative in finding ways to take advantage of tax benefits and bring more cash flow to the bottom line.