Business and Financial Management
Core concepts
Practice finance questions pivot on the revenue cycle: scheduling, registration and eligibility, coding and charge capture, claim submission, adjudication, payment posting, and collections. Candidates must separate three numbers that questions deliberately blur - charges (the gross fee schedule), the allowable (the contracted or fee-schedule amount the practice may collect), and reimbursement (payer payment plus patient responsibility). Medicare payment is built from relative value units: total RVUs (work + practice expense + malpractice) multiplied by a conversion factor. Know budgeting (operating versus capital), variance analysis, break-even (fixed costs ÷ contribution margin per visit), payer mix, and days in accounts receivable. Understand compensation models - salary, pure productivity, and blended - and why capitation transfers utilization risk to the practice.
Traps
- Raising charges does not raise Medicare payment. The fee schedule governs; higher charges only inflate gross charges and distort collection-rate math.
- Gross versus net collection rate. Gross divides payments by charges; net divides payments by allowable. Only the net rate exposes denials and write-offs.
- Overlooking patient responsibility. A claim with zero insurance payment can still be fully collected through coinsurance, copay, and deductible.
- Assuming volume is always good under capitation, where extra visits add cost without adding revenue.
Worked example
Allowable = total RVUs × conversion factor. With 2.50 RVUs and a $33.00 conversion factor: 2.50 × $33.00 = $82.50. Medicare's 20% coinsurance means $66.00 from the payer and $16.50 from the patient, assuming the deductible is met. Use this arithmetic to sanity-check any payment-posting scenario.