©2012 IntegraMed Fertility Proprietary & Confidential Financial Reporting
Dec 15, 2015
©2012 IntegraMed Fertility Proprietary & Confidential
Introduction – John Kearns
John J Kearns
• VP Finance & Corporate Controller
• IntegraMed America, Purchase NY
• 19 years fertility industry financial reporting experience
©2012 IntegraMed Fertility Proprietary & Confidential
Introduction – IntegraMed America, Inc.
IntegraMed America, Inc.
• Started in June 1985 as “IVF America, Inc”
• 2014 Patient revenues > $300 million
• ~ 17,000 IVF cycles in 2013
• Taken private in Sept. 2012
©2012 IntegraMed Fertility Proprietary & Confidential
Agenda
Financial Reporting for Fertility Clinics
1. Internal Control
2. Cash vs. Accrual Accounting
3. Revenue Cycle Management
4. Benchmarking
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control
Good Financial Reporting Begins with Internal Control
Internal Control is defined as….• a means by which an organization's
resources are directed, monitored, and measured. It plays an important role in detecting and preventing fraud and protecting the organization's resources.
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control
All public corporations are required by the Securities and Exchange commission to:
• Have a clearly defined set of internal controls, which,
• They must test annually
• Senior executives must personally sign-off on their effectiveness
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control
You may say, “But I’m not a public Corporation”
• Internal control is still critical as it consists of a series of checks and balances designed to detect events outside of standard policies and procedures.
• It starts with a segregation of duties among staff• Separate posting cash from depositing cash• Multiple individuals needed to disburse funds
• And includes a reporting element.
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control
You may know it by another name, but Internal Control:
• Also apples to non-financial activities• Who has keys to drug cabinets?• Are all patient encounters signed by provider• Is chain of control in the lab documented?• Are employees time-sheets accurate?
• At the end of the day, everything impacts practice financials
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
All businesses must select a philosophy for managing their financial records
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
All businesses must select a philosophy for managing their financial records
The two most common forms are Cash Basis and Accrual Basis
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
All businesses must select a philosophy for managing their financial records
The two most common forms are Cash Basis and Accrual Basis
Many business owners think that Accrual Basis is a trick accountants use to steal
from them…
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
All businesses must select a philosophy for managing their financial records
The two most common forms are Cash Basis and Accrual Basis
Many business owners think that Accrual Basis is a trick accountants use to steal
from them…
In reality, it’s good internal control!!
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
Cash Basis Accounting - Transactions are recorded when cash changes hands (i.e., when paid)
Revenue = Cash ReceiptsExpense = Cash Disbursement
©2012 IntegraMed Fertility Proprietary & Confidential
Cash vs. Accrual Accounting
Cash Basis Accounting - Transactions are recorded when cash changes hands (i.e., when paid)
Revenue = Cash ReceiptsExpense = Cash Disbursement
Accrual Basis Accounting - Transactions are recorded with the underlying economic event (i.e., when earned)
Revenue = When treatment is providedExpenses = When incurred
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control – Cash vs. Accrual Accounting
Cash Basis Accounting• Advantage – Simplicity
• Disadvantage – Looser controls. Higher chance of fraud or loss.
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control – Cash vs. Accrual Accounting
Cash Basis Accounting• Advantage – Simplicity
• Disadvantage – Looser controls. Higher chance of fraud or loss.
Accrual Basis Accounting• Advantage – Higher control environment
• Disadvantage – More complicated
©2012 IntegraMed Fertility Proprietary & Confidential
Internal Control – Cash vs. Accrual Accounting
Accrual Basis Accounting = Greater Internal Control
©2012 IntegraMed Fertility Proprietary & Confidential
Revenue Cycle Management
Revenue Cycle Management consists of:
• Scheduling of patients
• Accounting for all encounter forms
• Timely & accurate billing
©2012 IntegraMed Fertility Proprietary & Confidential
Revenue Cycle Management
Good Revenue Cycle Management consists of:
• …all the above, plus
• A denial review & management process
• Outstanding receivables management
©2012 IntegraMed Fertility Proprietary & Confidential
Revenue Cycle Management
Denial review & management consists of:• A formal process of continuous improvement
designed to identify and correct reasons for claims denial
©2012 IntegraMed Fertility Proprietary & Confidential
Revenue Cycle Management
Denial review & management consists of:• A formal process of continuous improvement
designed to identify and correct reasons for claims denial
Receivables management consists of:• A formal process for managing outstand receivables
which includes both the quantity and quality of receivables• Quantity - DSO (Days Sales Outstanding) • INMD $16.6 million with 27.2 DSO
• Quality – Aging by buckets• 84% 0 – 60 days• 10% 60 – 120 days• 6% 120 – 180 days
©2012 IntegraMed Fertility Proprietary & Confidential
Benchmarking
Benchmarking is the process of evaluating oneself against either:
(a) others within the same industry, or
(b) oneself over time.
©2012 IntegraMed Fertility Proprietary & Confidential
Benchmarking
Benchmarking is the process of evaluating oneself against either:
(a) others within the same industry, or
(b) oneself over time.Also know as, “How are we doing relative
to..???”
©2012 IntegraMed Fertility Proprietary & Confidential
Benchmarking
Inquiry
Schedule
Show
NPV
IVF IUI FET Surgery
Other No Treatment
Induction
©2012 IntegraMed Fertility Proprietary & Confidential
Benchmarking
Inquiry
Schedule
Show
NPV
IVF IUI FET Surgery
Other No Treatment
Induction
Schedule/Inquiry Ratio
Show/Schedule Ratio
NPV/Show Ratio
NPV/Inquiry Ratio