Accounting for Anesthesia Practices: 10 Financial Questions Every Anesthesia Practice Should Ask

Managing the financial side of an anesthesia practice comes with challenges that are different from many other medical specialties. Provider compensation, hospital and ambulatory surgery center relationships, staffing requirements, case volume, collections, payroll, locum tenens expenses, and fluctuating revenue can all affect the financial performance of an anesthesia group.

That's why accounting for anesthesia practices requires more than simply recording income and expenses.

Anesthesia practice owners and administrators need accurate financial information that helps them understand profitability, control expenses, plan staffing, manage cash flow, and make better business decisions.

Whether you operate an independent anesthesia group, provide anesthesia services to hospitals or ambulatory surgery centers, or manage a growing anesthesia practice with anesthesiologists, CRNAs, and anesthesia assistants, here are 10 financial questions you should be asking.

Accounting for Anesthesiology Practices

1. Do You Know How Profitable Your Anesthesia Practice Really Is?

A busy anesthesia practice isn't necessarily a profitable anesthesia practice.

A group may have significant case volume and substantial revenue while simultaneously experiencing rising provider compensation, locum tenens expenses, recruiting costs, administrative overhead, malpractice insurance, benefits, and other operating expenses.

Effective anesthesia practice accounting should allow management to see more than total revenue.

Practice owners should understand:

• Total practice revenue

• Provider compensation

• Payroll and benefits

• Locum tenens and recruiting expenses

• Administrative overhead

• Operating expenses

• Net income

• Profitability trends

An anesthesia group should be able to answer a simple but important question:

After paying the costs required to operate the practice, how profitable are we?

If the answer isn't readily available, the practice may need stronger financial reporting and accounting processes.

2. Does Your Anesthesia Practice Have Healthy Cash Flow?

Profit and cash flow aren't the same thing.

An anesthesia practice may appear profitable on its financial statements while experiencing periods of limited cash availability.

Provider payroll, employee benefits, malpractice insurance, rent, administrative expenses, taxes, and other obligations must continue to be paid even when collections fluctuate.

This makes cash flow management for anesthesia practices especially important.

Anesthesia practice owners should know how much cash is available today, how much is expected to be collected, what major expenses are approaching, and whether the practice maintains adequate cash reserves.

Cash-flow forecasting can help anesthesia groups anticipate potential shortages and make better decisions about staffing, compensation, distributions, and other expenditures.

3. Are Your Anesthesia Collections Keeping Up With Your Revenue?

Generating charges doesn't necessarily mean the practice is collecting the money it has earned.

Anesthesia practices should closely monitor billing and collections and understand whether accounts receivable is increasing.

Regular review of the accounts receivable aging report can help identify balances that remain outstanding for 60, 90, 120 days or longer.

Management should also understand trends in collections and investigate significant changes.

When collections slow down, the accounting and billing sides of the practice shouldn't operate independently. Financial reporting should help management recognize the effect that collection problems are having on cash flow and profitability.

4. Do You Understand the True Cost of Your Anesthesia Staffing Model?

Provider compensation is one of the largest expenses for many anesthesia groups.

An anesthesia practice may employ or contract with:

• Anesthesiologists

• CRNAs

• Certified Anesthesiologist Assistants

• Locum tenens anesthesia providers

• Administrative and support personnel

Understanding the total cost of this workforce is essential to anesthesia practice financial management.

Management should evaluate provider compensation, payroll taxes, benefits, overtime, bonuses, independent contractor costs, locum tenens expenses, recruiting fees, travel expenses, and other staffing-related costs.

This information becomes particularly important when determining whether the practice can afford another provider or whether temporary locum tenens coverage makes financial sense.

5. Are Your Facility Relationships Financially Sustainable?

Many anesthesia practices provide services under arrangements with hospitals, ambulatory surgery centers, and other healthcare facilities.

Each relationship can have different case volumes, staffing requirements, operating hours, payer mixes, reimbursement patterns, and expenses.

Anesthesia groups should understand whether their facility relationships make financial sense for the practice.

For example, management may need to evaluate:

How much does it cost to provide the required coverage?

Does expected revenue support the staffing model?

Are provider expenses increasing faster than revenue?

Are additional resources required to maintain coverage?

Good accounting for anesthesia groups should provide management with financial information that supports these evaluations.

6. Are You Receiving Useful Monthly Financial Statements?

Anesthesia practice owners shouldn't have to wait until tax season to learn how their business performed.

At a minimum, management should regularly review:

Profit & Loss StatementShows revenue, expenses, and overall profitability.

Balance SheetShows assets, liabilities, cash, debt, and the financial position of the practice.

Cash Flow InformationHelps management understand whether sufficient cash is available to meet upcoming obligations.

Accounts Receivable ReportsHelps management evaluate outstanding balances and collection trends.

Depending on the organization, additional management reports can help analyze provider costs, staffing expenses, budget variances, and other important financial indicators.

Monthly financial reporting for anesthesia practices gives owners the opportunity to identify problems before they become significantly larger.

7. Does Your Anesthesia Practice Have a Budget?

Anesthesia practices should have a financial roadmap.

An annual budget can incorporate expected revenue along with anticipated expenses such as:

• Anesthesiologist compensation

• CRNA and Anesthesia Assistant compensation

• Employee benefits

• Locum tenens coverage

• Recruiting

• Malpractice insurance

• Administrative payroll

• Technology

• Accounting and professional services

• Credentialing and licensing expenses

• Travel expenses

• Taxes

• Other operating costs

Budgeting for Medical Practices

Actual financial results should then be compared with the budget throughout the year.

For example, if locum tenens expenses are substantially higher than projected, management should understand why and evaluate the financial impact.

Budget-to-actual reporting for anesthesia practices can help identify these issues earlier.

8. Are You Planning for Taxes Throughout the Year?

Tax planning shouldn't begin when the tax return is due.

Anesthesia practice owners should work with qualified tax professionals throughout the year to understand estimated tax obligations and appropriate tax-planning opportunities.

Depending on the organization's structure and circumstances, planning may involve estimated tax payments, owner compensation, retirement contributions, equipment purchases, business expenses, entity structure, and other considerations.

Strong accounting for anesthesia practices also means maintaining accurate books throughout the year so tax planning is based on reliable financial information.

9. Does Your Anesthesia Practice Have Appropriate Financial Controls?

As an anesthesia group grows, financial controls become increasingly important.

Practices should establish procedures surrounding:

• Bank reconciliations

• Bill payments

• Vendor setup and changes

• Payroll changes

• Provider payments

• Employee reimbursements

• Credit cards

• Electronic payments

• Access to accounting systems

• Approval of significant expenses

Whenever practical, the person initiating a financial transaction shouldn't be the only person responsible for reviewing or approving it.

Strong internal financial controls can help reduce errors, improve financial reporting, and protect the assets of the anesthesia practice.

10. Can Your Financial Reports Help You Make Important Business Decisions?

The best accounting services for anesthesia practices shouldn't simply tell owners what happened last month.

Financial information should help management make decisions about what happens next.

For example:

Can we afford to hire another anesthesiologist or CRNA?

Should we hire permanently or use locum tenens coverage?

Can we afford to increase provider compensation?

Why are our staffing expenses increasing?

Is our current coverage model financially sustainable?

How much cash should the practice maintain in reserve?

Why did profitability decline this quarter?

Are expenses growing faster than revenue?

How much revenue does our anesthesia practice need each month to cover its operating expenses?

When financial statements can help answer questions like these, accounting becomes a management tool rather than simply a bookkeeping function.

Specialized Accounting and Financial Management for Anesthesia Practices

Anesthesia practices operate in a highly specialized environment. Their financial management should reflect that.

At Advanced Healthcare Business Management, we provide accounting and financial management services for anesthesia practices and anesthesia groups, helping practice owners gain greater visibility into the financial side of their organizations.

Our services include:

• Medical practice accounting and bookkeeping oversight

• Fractional controller services

• Monthly financial reporting

• Budgeting and forecasting

• Cash-flow management

• Payroll support and oversight

• Financial process and internal control review

• Tax services and tax planning support

• Healthcare business management

• Back-office financial management

Our experience in the anesthesia industry gives us an understanding of the business challenges anesthesia practices face, including provider staffing, anesthesiologist and CRNA recruiting, locum tenens coverage, provider compensation, and the financial impact of maintaining adequate anesthesia coverage.

Looking for Accounting Services for Your Anesthesia Practice?

If you're an anesthesiologist, anesthesia group owner, practice administrator, or healthcare executive looking for better financial visibility and stronger accounting processes, Advanced Healthcare Business Management can help.

Whether your anesthesia practice needs better monthly financial reporting, bookkeeping oversight, budgeting, cash-flow forecasting, payroll support, tax services, or fractional controller services, we can help you better understand the numbers behind your practice.

Contact Advanced Healthcare Business Management today to discuss accounting and financial management services for your anesthesia practice.