Accounting Reports 101 for Private Practice Billing & Finance

person looking over charts and graphs

A few basic principles and some simple tools can help eliminate the mystery around billing and finances.

By Brian Gallagher, PT

The challenges faced by most physical therapy private practice owners generally fall into one of four basic categories:

  1. Billing and Financial Management
  2. Marketing/Branding
  3. Hiring and Retention
  4. Structure/Systems of Operations

In my experience, the least-understood concept from the above is billing and financial management for the private practice.

Maybe it’s because this topic is mostly foreign to us and not a part of the typical “physical therapist personality” of being a people-person, which explains why we all selected the area of social sciences versus math and economics as the focus of our careers.


The first step to fully comprehending the numbers component of your business is shifting your mindset.

Your success in any area is directly connected to your approach, so how you choose to view a topic will have a direct correlation to your successful handling and application of that topic. The operative word here is “choose.”

Should you choose to go into business with the idea of paying “cash on the barrel” and using up all your resources so as to avoid borrowing, I would argue that you are choosing a pathway of greater stress and risk. Banks are not your friend, insurance companies don’t care about you, and the government’s tax policies and business regulations are often not written for your benefit as the small business owner.

These facts need to be taken into account and not ignored when deciding to go into private practice. To be clear, I’m not interested at all in the politics of it, nor am I a harbinger of “doom and gloom.” But I do believe in facts, not bias, and that for every problem there must be a workable solution. Out-of-the-box thinking while sticking to the rules is a reflection of your personal integrity, so make your decisions wisely.

Success and happiness come to those who start with the right mindset and the willingness to confront challenges with ethics in hand. The only way you will have the power to succeed is if you value yourself enough to invest in your knowledge on these critical elements of private practice ownership that were not covered in physical therapy school.

The moment that I was forced to confront this area was back in 2004, when I had no choice but to let go of two of my three billers and sit in that billing chair myself for four straight months. At the time, I told myself that I owed it to myself to learn the billing rules of the road so that I could better align our company intentions and purposes behind our billing products (outcomes) and know how to accurately measure them (stats and metrics).

Remember: “That which is most important to us, we will closely measure.” So, what is most important to you, and how closely are you measuring it?


Let’s start by breaking down billing and finance into a usable format for you to master as a private practice owner. I will discuss the key elements in three separate sections typically referred to in physical therapy private practice as the front, middle, and back end. Each section has specific personnel involved as well as products, stats and tools to be applied to achieve the intended results.

Section 1: The Front End

The front-end personnel includes the front desk staff, regardless of post titles such as the front desk coordinator, receptionist, office manager, or office administrator. Their hats include new patient intake, patient registration, and insurance verification.

The most important training that one can provide the front-end personnel is to be a patient care advocate and scheduler extraordinaire. I believe the term “customer service” is way overused and diluted to mean just about anything these days. However, acting as an advocate for your patients cannot be mistaken.

Here are the most effective tools for patient care advocacy:

  1. The New Hire Status Sheet
  2. The New Hire Orientation Checklist
  3. The Front Desk Post Training Checklist
  4. The company Organization Chart
  5. A company Learning Management System (LMS) for consistency with ongoing professional enhancement.
  6. A Front Desk Management System

I would like to expand on #6: The Front Desk Management System.

This is the system that ties together all the players, thereby creating a close-knit team that are in support of one another. If you separate your admin personnel from your clinical staff, you’re moving the two further and further apart, making each more and more self-focused.

Many owners eventually come to a full understanding of all the functions and duties that are necessary to meet the intended targets in the front end, yet they lack the proper training system to ensure full comprehension and replication with ongoing consistency. Therefore, many will complain of having to go back over things several times and routinely struggle with excuses for an incomplete job.

Section 2: The Middle

The middle section consists of your clinicians, patient care representative (PCR), marketing coordinator (MC), and marketing director (MD). Whether you separately hire for the PCR, MC, or MD posts, your practice is surely in need of their efforts and results.

Financially speaking, we may have a wide range of patient demographics from Medicare, worker’s compensation, auto, litigation, commercial insurances (fee for service, flat rate payers, capitation), medical assistance, Tricare, out-of-network, and cash out-of-pocket. Your marketing team must know your patient demographics and referral sources in order to best position your practice to meet the needs of your public.

Again, this will require training on the right mindset for all the individuals in order to have physical therapy standard operating procedures (SOPs) that are conducive to meeting the goals of the practice. With the right SOPs, more will get done at a lower cost with greater patient and staff satisfaction. Evidently with this approach, the top performers will master innovative technologies with advanced operating procedures woven into their staff hiring, training and operations.

If this section is ignored, you can have the greatest billers, bookkeepers, and accountants on the planet, but there is no amount of magic they can conjure to make up for your middle section losses. All three sections are interdependent and rely on the owner’s knowledge of billing and financial management in order to confidently press down on the scale of net revenue.

Here, it’s more about the type of communication and level of one’s comfort that will make or break the team’s effectiveness. However, if your clinician is unaware of all the rules and regulations associated with coding and documentation, then their counterpart in billing is going to have a really tough time getting claims paid.

Without the following, the billing department will be severely hindered in their success.

Educate your clinicians on the fact that they do not bill.

In fact, they have nothing to do with billing, hence the job title “therapist,” not “biller.” A clinician is a highly-trained health care professional and should not let their integrity be called into question should they lose their focus and make decisions based on the finances, thereby coming across as “salesy.”

Therapists evaluate the patients’ conditions, plan out the patient’s scope of care, and document their interventions via notes and coding. They collaborate with the rest of the team, including the patient, to ensure that the greatest degree of optimum health is achieved within the shortest period of time.

Clinicians who have a solid grasp of the following will have a higher degree of clinical outcomes, patient satisfaction, and expanding practice viability:

  • Submitting correct charges/units
  • Patient agreement to plan of care
  • Team approach
  • Pay-for-performance model
  • Net Promotor Score®

Section 3: The Back End

The backend is predominantly handled by the billing team and your company bookkeeper in conjunction with your business accountant. However, it is the responsibility of your accountant to manage your business financials in accordance with generally accepted accounting principles (GAAP).

This may require intermittent reviews, suggestions, and quarterly guidance provided to the bookkeeper to ensure accuracy of your financials as well as full comprehensive reporting. You, as the practice owner, are ultimately responsible for your financial statements, tax returns, and any other documents or submissions referring or relating to them.

Accordingly, you should have periodic reviews of the bookkeeping and accounting work being produced and should never allow something to be submitted on your behalf that you lack full understanding of. The bookkeeper’s scope of work is to ensure top quality record-keeping and business books by applying accounting best practices. Included in this, a dedicated bookkeeper/accountant must log, categorize, and process all of your day-to-day transactional accounting information. They are also responsible for:

  • Paying bills that are scanned into a secure file sharing system
  • Logging and reconciling deposit slips scanned into a secure file sharing system
  • Translating reports from the billing manager by the fifth of each month to be reviewed with the owner
  • Managing non-taxable employee reimbursements and bi-weekly payroll
  • Monthly reconciliations of all corporate bank accounts and credit cards
  • Financial statements delivered monthly (balance sheet, income statement, statement of cash flows)

Many successful business owners will contribute their success in part to excellent record keeping. By keeping a clean and accurate general ledger that records every expense, plus every deposit that the business has coming and going, you will be able to minimize unnecessary costs and hence lower the overall cost of doing business.

Here are five reasons that the general ledger is so important for your business:

  1. Better financing opportunities: Lenders will be able to qualify you more easily based on the accuracy of your financial records.
  2. Better books: A general ledger that is accurately designed to fit the physical therapy private practice model will provide more clarity to the executives over operations.
  3. Better prevention against failing an audit: If you are audited by the Internal Revenue Service (IRS), it will be easy to prepare for the audit since your financial records are accurately recorded in the physical therapy model.
  4. Better protection against fraud and abuse: You will be able to more easily spot and mitigate fraud and abuse from within your organization.
  5. Better communications: With more accurate and accessible information, one will be better able to communicate financial matters both internally and externally.

A professional billing team consists of three posts; however, the number of people needed in these three posts is dependent upon the size of your practice.

The first post is called the billing officer (BO). This individual is responsible for making sure that all claims billed out the door make it through the clearing house into their desired insurance carrier clean and accurate for full payment.

The next post would be the explanation of benefits (EOB) officer. This individual is in charge of posting the EOBs within the EMR billing software system within 24 to 48 hours of receipt.

The last post is the account control officer (ACO)—typically the senior within the department managing the other members of your team. This role is in the unique position of inspecting and evaluating all of the touches that have happened to the patient account up into the point of collections. Your account control officer must be responsible for not only patient collections, but for insurance collections on all unpaid and partially unpaid accounts. Your account control officer should also be the mentor for professional enhancement to all members of the billing team on an ongoing basis.

Here are just a couple examples of the stats per post (out of many!) that every billing department should be tracking along with the full department metrics and company KPIs:

Billing Officer: # of claims billed, # of claims on unbilled list

EOB Officer: # of denials, $ amount posted

ACO: # of patient calls/emails, # of accounts worked

As we all know, rules, guidelines, and regulations surrounding billing and collections are constantly changing. The bottom line is don’t be the effect of what you don’t know. We are not trained billers or bookkeepers, yet we have to understand this vital area of our business if we want to operate in the top 10% of private practices nationwide. 

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Brian Gallagher

Brian Gallagher, PT, is a PPS member and Founder and President of MEG Business Management. He can be reached at and: LinkedIn @MEG Business Management | Instagram @megbusinessmgmt | Facebook @MEGBusinessManagement | Twitter @MEGbusiness

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