Career and Life Planning Guidebook for Medical Residents

SECTION I: T MINUS THREE YEARS Current Assets: Assets that are cash, or that can be easily converted to cash in a relatively short time. This includes the company’s bank accounts and its accounts receivables. Fixed Assets: Assets that have long lifespan, but tend to lose value over time. Investments in furniture and equipment are fixed assets. Accumulated Depreciation: Since fixed assets generally have a limited lifespan, they are depreciated over time. This means that the value of the item is marked down over a time frame that generally reflects the useful life of the asset. The value of fixed assets minus the accumulated depreciation is the net value of the fixed assets. Current Liabilities: Debts that an organization owes in the short term. This includes accounts payable and short-term debts to banks or other lenders. Long-term Liabilities: Debts that an organization owes but doesn’t need to repay for more than one year. This would include a mortgage or other long- term loan. Owners’ Equity or Net Assets: The accumulated value of the organization since its inception. For private entities, this is known as Owners’ Equity and represents the accounting value of the organization to its owners. The term Net Assets is used in the case of not-for-profits to represent the accumulated value over time. The balance sheet takes a little more time to learn than the income statement. However, it is an equally important tool for assessing the health of the organization. How to Use Financial Statements Managers use financial statements to make com- pensation and other resource decisions, monitor the health of the organization, and find areas of potential improvement. Here are some examples of each: Determining Compensation Physician partnerships often determine clinical salaries based on an individual income statement. The top line generally includes clinical revenue earned by the physician, in the form of payments from third-party payers and patients. Revenue can also include payments for ancillary services, including surgery centers, x-ray equipment, etc. Some practices determine share of revenue based on RVUs, or Relative Value Units, which are a measure of value of services determined by Medicare. Direct expenses are those expenses paid by the practice but incurred directly on behalf of the physician. This can include the salary, benefits, and other expenses of clinical staff (e.g. RNs, medical assistants). It also includes physician licensing, certification, and other expenses directed by the physician. Indirect expenses (also called overhead) are expenses for the practice that are shared by all of the partners. Support staff salaries, rent, computers and office equipment, billing services, and many CAREER AND LIFE PLANNING GUIDEBOOK FOR MEDICAL RESIDENTS 126