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Healthcare businesses face specialized finance needs: insurance reimbursements, HIPAA compliance, physician compensation models, and practice management tools.
Revenue cycle management is the complete process of converting clinical services into collected payments—from patient registration through claim submission, denial management, and patient collections. In healthcare, this is complex because reimbursement comes from multiple insurance payers with different rules, fee schedules, and claim formats. Poor RCM can reduce a practice's collections by 20–40% compared to a well-managed revenue cycle.
QuickBooks for general accounting purposes and Gusto for payroll typically do not require BAAs because they do not process clinical PHI. However, if financial data imported into these systems includes patient names, diagnoses, or treatment information, consult your HIPAA compliance officer. Practice management systems and medical billing platforms that handle billing records with clinical data always require BAAs.
A Relative Value Unit (RVU) is a CMS measure of the relative work, practice expense, and malpractice cost of each medical service. RVU-based physician compensation links income to productivity—physicians who see more patients and perform more complex procedures earn more RVUs and therefore more compensation. RVU models are common in group practices and hospital employment because they align physician incentives with practice productivity.
Outsourcing at 4–8% of collections makes sense for most small practices (under $500K in annual collections) where in-house expertise in denial management, coding, and payer rules is hard to maintain. For larger practices with sufficient volume and stable coding patterns, in-house billing is often more cost-effective. The decision depends on your denial rate, AR aging, and available management capacity for billing oversight.
Net collection rate measures the percentage of collectible revenue that is actually collected—adjusting for contractual write-offs and legitimate write-offs, but measuring performance against what should reasonably be collected. A benchmark of 95% or above indicates strong revenue cycle performance. Below 90% suggests significant leakage in denial follow-up, patient collections, or both, and warrants a detailed revenue cycle review.
2026/05/20
Healthcare finance is among the most complex of any industry. A medical practice must manage insurance claim submission and follow-up, electronic remittance advice (ERA) processing, patient collections with compliance requirements, HIPAA considerations in billing systems, and physician compensation models that may tie income to productivity metrics like relative value units (RVUs).
Layer on top of this the administrative burden of prior authorizations, claim denials and appeals, coordination of benefits for patients with multiple insurers, and the ever-changing landscape of payer fee schedules, and you have a finance function that requires specialized expertise and purpose-built tools.
This guide covers the finance stack for healthcare businesses ranging from solo practitioners to group practices with 20+ providers, including medical offices, dental practices, behavioral health practices, and physical therapy clinics.
The Core Tool: Practice Management Software
In healthcare, the practice management (PM) system is the center of the finance stack, not the accounting system. The PM system handles:
Unlike most businesses where accounting software is the financial hub, in healthcare the PM system holds the financial source of truth for accounts receivable and collections.
Kareo (Now Tebra): Best for Independent Practices
Kareo/Tebra ($300–$800/month) is the most popular practice management platform for independent and small group practices. It covers scheduling, billing, EHR (in its Kareo Clinical module), and revenue cycle analytics. Key strengths:
athenahealth: Best for Mid-Size Practices
athenahealth ($500–$2,000/month) is a cloud-based platform used by larger independent practices and hospital-affiliated groups. Its standout feature is its rules engine that automatically detects claim errors before submission, reducing denial rates by 20–40% compared to manual processes. athenahealth also handles coding assistance and includes a revenue cycle management service where athena's team works denials on your behalf.
AdvancedMD: Strong option for behavioral health and mental health practices with robust documentation tools and strong payer integrations.
SimplePractice ($29–$99/month): The standard for solo and small behavioral health, therapy, and counseling practices. Simpler than Kareo with excellent telehealth integration and insurance billing.
Every medical practice should monitor these metrics monthly:
If your PM system cannot produce these reports automatically, you are operating blind on revenue cycle performance.
QuickBooks Online for Medical Practices
QuickBooks Online is the dominant accounting system for medical practices. The PM system handles AR and collections; QBO handles general ledger accounting—recording deposits when insurance and patient payments are received, tracking operating expenses, and producing P&L for tax purposes.
The key integration point: most practice management systems can export financial data to QBO. Kareo, athenahealth, and others have native QBO integrations that post daily deposit summaries to the GL.
Chart of Accounts for Medical Practices
Medical practice income accounts should break down revenue by payer type:
This breakdown enables payer mix analysis—understanding what percentage of your revenue comes from each payer type and how it trends over time. Payer mix is a key driver of overall practice profitability, as Medicare and Medicaid typically reimburse at 60–80% of commercial rates.
In-House vs Outsourced RCM
Revenue cycle management encompasses the full process of converting clinical services into collected payments: charge capture, claim submission, eligibility verification, denial management, and patient collections. Many practices outsource part or all of RCM to third-party billing companies.
Outsourced billing companies typically charge 4–8% of collections. For a practice collecting $1M/year, this is $40,000–$80,000 annually. The case for outsourcing: specialist expertise in denial management, coding compliance, and payer-specific rules that most in-house billing staff lack.
The case for in-house: lower cost for high-volume, well-managed practices, faster turnaround, and more control over the patient financial experience.
Prior Authorizations: The Hidden Revenue Drain
Prior authorizations—insurance company approval required before certain procedures, medications, or imaging—consume enormous administrative time and can delay or deny revenue. Practices typically spend 2–4 hours per week per physician on prior authorization follow-up. Tools like Rhyme (formerly Olive AI) and CoverMyMeds automate prior authorization submission and follow-up, reducing denial rates and administrative burden.
Physician Compensation Models
Physician compensation in group practices is often based on productivity, not just salary. Common models:
Gusto handles the payroll mechanics (cutting checks, withholding taxes) but does not calculate RVU-based compensation. Practices with productivity-based models typically calculate compensation in a separate spreadsheet or physician compensation tool before entering the numbers in Gusto.
Gusto vs ADP for Medical Practices
Gusto ($40 base + $6/employee/month) works well for practices with straightforward payroll—all salaried or hourly staff with no complex bonus structures. ADP Run ($50–$200/month) is worth considering for practices with:
Benefits for Medical Practices
Healthcare practices often provide above-average benefits to attract and retain clinical staff. Gusto's benefits marketplace handles health insurance, dental, vision, life insurance, FSA/HSA, and 401(k) enrollment. For larger practices, working with a healthcare-focused benefits broker who can negotiate group rates is worth the effort.
What HIPAA Requires of Financial Systems
HIPAA's Security Rule applies to electronic protected health information (ePHI). Financial systems that contain patient data—including billing information, payment history, and insurance information—must have appropriate technical safeguards. Requirements include:
BAA Requirements
Every vendor who accesses or processes ePHI must sign a Business Associate Agreement. This includes your PM system vendor, medical billing company, and payment processor. Most healthcare-specific vendors have standard BAAs available.
For general business tools like QuickBooks, Gusto, and Ramp—which hold financial data but not clinical PHI—BAA requirements are less clear. Best practice: use healthcare-specific alternatives where available and consult with a HIPAA compliance officer for your specific situation.
QuickBooks Online does not handle clinical data and does not require a BAA for accounting purposes. However, if you import billing data that contains patient names and diagnosis codes, consult your compliance team.
The Patient Financial Experience
Patient financial responsibility has grown significantly as high-deductible health plans have become the norm. Practices that make it easy to pay—online portals, payment plans, price transparency—collect more from patients. Practices that mail paper statements and require phone calls to pay collect significantly less.
Stripe: Used by many healthcare tech companies for patient payment processing. Stripe's healthcare mode supports HSA/FSA card acceptance, a critical feature. Cost: 2.9% + $0.30.
InstaMed: A healthcare-specific payment network that connects directly to payers and patients. Better suited for high-volume billing departments in larger practices.
Payment Plans: Offer automated payment plans for large balances. Most PM systems include payment plan functionality. Patients who cannot pay large bills in one payment will often pay over time if given the option.
Not tracking denials: Claims denied by insurance companies can be appealed and collected, but they expire. Track denial reasons and appeal systematically. A 5% denial rate on $1M in collections is $50,000 in potentially recoverable revenue.
Letting AR age without follow-up: Claims beyond 90 days old have significantly lower collection probability. Implement a systematic AR follow-up process: 30-day review, 60-day escalation, 90-day appeal or write-off.
Ignoring payer contracts: Your payer contracts specify fee schedules and billing rules. Billing for procedures not covered in your contracts, or failing to bill at contracted rates, creates underpayments and audit risk.
Mixing practice and personal finances: Even solo practitioners should maintain separate practice bank accounts. Commingling creates legal, tax, and credentialing problems.
Healthcare finance requires purpose-built tools starting with your practice management system. Kareo or SimplePractice for small practices, athenahealth for larger groups. Add QuickBooks Online for accounting, Gusto for payroll, and a dedicated revenue cycle focus to maximize collections. Track your key revenue cycle metrics monthly—net collection rate, days in AR, and denial rate—and the financial performance of your practice will follow.