Fractional CFO for Healthcare Practices & Medical Groups
Financial leadership that understands the business of medicine.
Key Takeaways
- •Revenue cycle management—from charge capture to collection—drives profitability
- •Payer mix significantly impacts reimbursement and cash flow timing
- •Provider productivity (RVUs, visits) must be managed alongside quality
- •Practice valuation requires understanding healthcare-specific multiples
Healthcare practices and medical groups face unique financial challenges at the intersection of clinical care and business operations. Revenue cycle complexity, third-party reimbursement, regulatory compliance, and provider productivity create a financial environment unlike any other industry.
A fractional CFO with healthcare experience can bridge clinical operations and financial performance—ensuring the practice captures revenue appropriately, manages cash flow effectively, and positions for growth or partnership opportunities.
Revenue Cycle Management
The revenue cycle—from patient scheduling to final payment—is the lifeblood of healthcare finance. Breakdowns at any point reduce revenue and increase costs.
Revenue Cycle Stages
Pre-service
Scheduling, registration, insurance verification, prior authorization
Point of Service
Copay collection, charge capture, documentation
Post-service
Coding, claim submission, payment posting
Follow-up
Denial management, appeals, patient collections
Key Revenue Cycle Metrics
- Days in AR: Average time from service to payment (target: <40 days)
- Collection rate: Net collections / charges (varies by specialty)
- Denial rate: % of claims denied on first submission (target: <5%)
- Clean claim rate: % of claims paid on first submission (target: >95%)
- Point of service collections: Copays/deductibles collected at visit
The Cost of Denials
The average cost to rework a denied claim is $25-40. For high-volume practices, denial management can cost tens of thousands annually—plus lost revenue from claims that are written off rather than appealed. Prevention through clean claim submission is far more cost-effective than rework.
Payer Mix Management
Not all revenue is equal. Payer mix—the distribution of patients across commercial, Medicare, Medicaid, and self-pay—significantly impacts reimbursement and profitability.
Higher Reimbursement
- • Commercial insurance
- • Workers compensation
- • Some Medicare Advantage
Lower Reimbursement
- • Traditional Medicare
- • Medicaid
- • Self-pay/uninsured
Payer Mix Considerations
Reimbursement rates: Commercial may pay 150%+ of Medicare for same service
Payment timing: Medicare pays faster; some commercial much slower
Administrative burden: Prior auth requirements vary dramatically
Patient responsibility: High-deductible plans shift collection risk
Provider Productivity
Provider productivity directly determines revenue capacity. Understanding and optimizing productivity is essential for practice profitability.
Productivity Metrics
RVUs (Relative Value Units)
Standard measure of work performed; basis for Medicare payment
Patient Visits
Volume measure; varies by specialty and visit type
Revenue per Provider
Collections attributed to each provider
Work RVU per Hour
Efficiency measure accounting for schedule time
Productivity Benchmarking
Industry benchmarks (MGMA, AMGA) provide comparison data by specialty. A CFO should track provider productivity against benchmarks and identify improvement opportunities.
- Below benchmark: May indicate scheduling inefficiency, documentation burden, or clinical issues
- At benchmark: Meeting expectations but room for optimization
- Above benchmark: Validate quality metrics aren't being sacrificed
Quality vs. Volume
In value-based care environments, productivity must be balanced with quality metrics. A CFO should track both—ensuring productivity improvements don't compromise patient outcomes or satisfaction that affect reimbursement under value-based contracts.
Practice Economics
Understanding the economics of medical practice helps make strategic decisions about staffing, services, and growth.
Cost Structure Analysis
Typical Cost Categories
Ancillary Revenue
Many practices generate additional revenue from ancillary services that can significantly impact profitability.
- In-house lab: Testing performed and billed by the practice
- Imaging: X-ray, ultrasound, other diagnostic imaging
- Pharmacy/dispensing: Medications provided in-office
- Procedures: In-office procedures with facility fees
- DME: Durable medical equipment sales
Practice Valuation
Healthcare practice valuation is increasingly important as consolidation continues. Understanding value drivers helps with strategic decisions and exit planning.
Valuation Considerations
PE Interest in Healthcare
Private equity continues to invest heavily in healthcare practices. A CFO can help position the practice for partnership or acquisition—ensuring clean financials, documented processes, and value-driving metrics that attract buyer interest.
Related Resources
Healthcare Practice CFO Support
Eagle Rock CFO understands healthcare practice finance. Let's discuss revenue cycle optimization and practice growth.
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