Medical financial management is the financial management tools and techniques that a medical practice or hospital uses to manage the finances of the medical business. These tools include putting a billing policy in place, billing and collection practices, controlling expenses and evaluating the financial performance of the medical business.
The first stage of medical financial management is for the doctor’s office, clinic, hospital or other medical related business to create a billing policy. The primary way that a medical business makes money is from collecting payments from both insurance companies and patients in a timely manner. For example, most medical practices collect the co-payment of an insured patient prior to rendering any medical procedures, except in an emergency situation.
The policy should also state how often the insurance companies will be billed. In addition, a schedule needs to be created to send out invoices to clients for the difference between what their insurance company paid and the balance that is currently due. Another part of the billing policy is how often follow-up will occur with insurance companies and how often the office will follow-up on patient payments.
After the billing plan is in place, the next part of medical financial management is actually billing and collecting money from the insurance companies and patients. In other words, it is the implementation of the plan that has been put in to place. Some medical businesses choose to outsource its billing and collections to a third party as part of its medical financial management. Other medical businesses have an internal employee that is responsible for all of the billing and collection process—typically known as the billing and coding specialist.
Another major aspect of medical financial management is to control the expenses of the office or business. This can range from finding a less expensive medical supply company for latex gloves, bandages, surgical tape and other typical medical equipment to saving on electricity by turning off all the lights and computers when the office closes for the day.
Finally, medical financial management is evaluating the income that the medical business is generating. This should be compared with the money that is going out of the medical business or the expenses. If the business has more money coming in than is going out, the more profitable the business. If there is more money going out of the medical business than is coming in then it needs to be determined how to cut costs and shorten the pay period between performing the medical procedures and collecting the payments from the insurance companies and the patients.