As many of you know, in health care there is the term “I and O.” It’s fairly simple and stands for a patient’s intake and output. It is a key measurement that is essential for patient assessment. In finances, we also deal with I and O. This involves an inflow of money (we call that revenue), and outflow of money (we call that expense.) It does not take, as the expression goes, an “MBA from Wharton” to understand this concept. At its fundamental level, it is no different than what you do at home with your household finances. Money comes in and it gets spent for needed things. Hopefully some money is saved.
At Texas Tech Physicians, the magic of financial I and O is for a large number of employees to plan, organize, control, and make decisions that achieve the most beneficial outcome for our practice. We want to make decisions that move us toward our vision of becoming a top-tier medical practice that is nationally recognized in quality patient care, satisfaction, and value. We use managerial accounting to manage our enterprise. Managerial accounting deals with transactions that have already occurred—but, by necessity, it is also interested in future transactions.
As we look at the year that we just concluded, we see a number of good things that happened—charges and collections were up. The rate of collections (year over year growth) was 4.4% about twice the growth rate of charges, which is a good sign. Total revenue (input) from all sources was up $5,310,896. Expenses (output) were down over the prior year by $2,891,378 which improved our bottom line greatly.
With professional fee collections up, DSRIP funding, earned contract revenue from our hospital partners, and our Dean making some discretionary money available, it ended up a fine year. Keep in mind that any “excess earnings over expenses “or profit is retained by the practice for future needs. Just like that savings we mentioned earlier in connection with a household budget.
Now, we look to this current fiscal year, which will end August 31, 2020. September collections were good compared to September of last year, but we are just getting started on FY20. One thing is for sure. Working together as “one team” we can meet our goals. We just need more “I” and a little less “O!”