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Incontinence follows hysterectomy
A 33-year-old woman with a history of heavy menstrual bleeding underwent a total abdominal hysterectomy. She was discharged a week after the surgery despite continuing complaints of lower abdominal pain. An intravenous pyelogram after readmission revealed ureter injury.
After several unsuccessful attempts to place a stent to repair the injured ureter, a nephrostomy tube was inserted in the women’s kidney for urine drainage and she was transferred to another hospital.
During repair surgery, the ureter was found to be encased in suture material, necessitating ureteral reimplantation. Several years after recovery from this surgery, the woman had urinary incontinence that she blamed on the reimplantation.
In suing, the woman claimed her physician was negligent in suturing her ureter during the hysterectomy.
The physician contended that ureter injury is a known risk of hysterectomy and that the current incontinence was unrelated to the ureter reimplantation.
- The case settled for $150,000.
A 33-year-old woman with a history of heavy menstrual bleeding underwent a total abdominal hysterectomy. She was discharged a week after the surgery despite continuing complaints of lower abdominal pain. An intravenous pyelogram after readmission revealed ureter injury.
After several unsuccessful attempts to place a stent to repair the injured ureter, a nephrostomy tube was inserted in the women’s kidney for urine drainage and she was transferred to another hospital.
During repair surgery, the ureter was found to be encased in suture material, necessitating ureteral reimplantation. Several years after recovery from this surgery, the woman had urinary incontinence that she blamed on the reimplantation.
In suing, the woman claimed her physician was negligent in suturing her ureter during the hysterectomy.
The physician contended that ureter injury is a known risk of hysterectomy and that the current incontinence was unrelated to the ureter reimplantation.
- The case settled for $150,000.
A 33-year-old woman with a history of heavy menstrual bleeding underwent a total abdominal hysterectomy. She was discharged a week after the surgery despite continuing complaints of lower abdominal pain. An intravenous pyelogram after readmission revealed ureter injury.
After several unsuccessful attempts to place a stent to repair the injured ureter, a nephrostomy tube was inserted in the women’s kidney for urine drainage and she was transferred to another hospital.
During repair surgery, the ureter was found to be encased in suture material, necessitating ureteral reimplantation. Several years after recovery from this surgery, the woman had urinary incontinence that she blamed on the reimplantation.
In suing, the woman claimed her physician was negligent in suturing her ureter during the hysterectomy.
The physician contended that ureter injury is a known risk of hysterectomy and that the current incontinence was unrelated to the ureter reimplantation.
- The case settled for $150,000.
Was surgery to blame for ectopic pregnancy?
<court>Boyle County (Ky) Circuit Court</court>
During laparoscopic surgery to correct endometriosis in a 20-year-old woman, a blood vessel in the abdominal wall was nicked. The gynecologist switched to an open procedure with a transverse incision to repair the bleeding vessel. Patient recovery was prolonged, with slow healing of the incision. A year later, the woman had an ectopic pregnancy.
In suing, the woman claimed that the ectopic pregnancy was related to the open procedure. She asserted that the physician was negligent in nicking the abdominal wall blood vessel and that the low transverse incision during the open surgery complicated the healing process.
The physician denied negligence and countered that the injury was a known potential complication of the laparoscopic procedure. The physician contended that the ectopic pregnancy was related instead to the woman’s history of pelvic inflammatory disease.
- The jury returned a defense verdict.
The cases in this column are selected by the editors of OBG Management from Medical Malpractice Verdicts, Settlements & Experts, with permission of the editor, Lewis Laska, of Nashville, Tenn (www.verdictslaska.com). The available information about the cases presented here is sometimes incomplete; thus, pertinent details of a given situation may be unavailable. Moreover, the cases may or may not have merit. Nevertheless, these cases represent the types of clinical situations that typically result in litigation and are meant to illustrate nationwide variation in jury verdicts and awards.
<court>Boyle County (Ky) Circuit Court</court>
During laparoscopic surgery to correct endometriosis in a 20-year-old woman, a blood vessel in the abdominal wall was nicked. The gynecologist switched to an open procedure with a transverse incision to repair the bleeding vessel. Patient recovery was prolonged, with slow healing of the incision. A year later, the woman had an ectopic pregnancy.
In suing, the woman claimed that the ectopic pregnancy was related to the open procedure. She asserted that the physician was negligent in nicking the abdominal wall blood vessel and that the low transverse incision during the open surgery complicated the healing process.
The physician denied negligence and countered that the injury was a known potential complication of the laparoscopic procedure. The physician contended that the ectopic pregnancy was related instead to the woman’s history of pelvic inflammatory disease.
- The jury returned a defense verdict.
The cases in this column are selected by the editors of OBG Management from Medical Malpractice Verdicts, Settlements & Experts, with permission of the editor, Lewis Laska, of Nashville, Tenn (www.verdictslaska.com). The available information about the cases presented here is sometimes incomplete; thus, pertinent details of a given situation may be unavailable. Moreover, the cases may or may not have merit. Nevertheless, these cases represent the types of clinical situations that typically result in litigation and are meant to illustrate nationwide variation in jury verdicts and awards.
<court>Boyle County (Ky) Circuit Court</court>
During laparoscopic surgery to correct endometriosis in a 20-year-old woman, a blood vessel in the abdominal wall was nicked. The gynecologist switched to an open procedure with a transverse incision to repair the bleeding vessel. Patient recovery was prolonged, with slow healing of the incision. A year later, the woman had an ectopic pregnancy.
In suing, the woman claimed that the ectopic pregnancy was related to the open procedure. She asserted that the physician was negligent in nicking the abdominal wall blood vessel and that the low transverse incision during the open surgery complicated the healing process.
The physician denied negligence and countered that the injury was a known potential complication of the laparoscopic procedure. The physician contended that the ectopic pregnancy was related instead to the woman’s history of pelvic inflammatory disease.
- The jury returned a defense verdict.
The cases in this column are selected by the editors of OBG Management from Medical Malpractice Verdicts, Settlements & Experts, with permission of the editor, Lewis Laska, of Nashville, Tenn (www.verdictslaska.com). The available information about the cases presented here is sometimes incomplete; thus, pertinent details of a given situation may be unavailable. Moreover, the cases may or may not have merit. Nevertheless, these cases represent the types of clinical situations that typically result in litigation and are meant to illustrate nationwide variation in jury verdicts and awards.
Missed cancer leads to death
For several years a woman had had routine Pap smears that were read as normal. She came in to her ObGyn the following year complaining of vaginal bleeding and pain; no Pap smear was done because she was menstruating. The Pap smear done 3 months later was also read as normal.
Further evaluation because of continued profuse vaginal bleeding revealed a grapefruit-sized tumor on the woman’s cervix. Despite a radical hysterectomy, chemotherapy, and radiation, the woman died from the cancer 3 years after diagnosis.
The suit claimed that the woman’s ObGyn was negligent in not palpating the cervix or performing a colposcopy, which may have led to earlier detection of the cancer when it could have been treated successfully. Later review of prior Pap smears showed the presence of abnormal cells. The plaintiff claimed the ObGyn negligently reported the woman’s condition when the Pap smears were sent for evaluation, and that a proper history would have led to the Pap smears being read as abnormal.
The physician contended that the cancer was aggressive and difficult to detect, and that the lab had misread the Pap smears.
- The jury assessed damages at $11.8 million. The verdict found 55% fault against the physician and the remainder against the laboratory. Because the plaintiff made no claims against the laboratory, the award was expected to be reduced in proportion to the fault assessment.
For several years a woman had had routine Pap smears that were read as normal. She came in to her ObGyn the following year complaining of vaginal bleeding and pain; no Pap smear was done because she was menstruating. The Pap smear done 3 months later was also read as normal.
Further evaluation because of continued profuse vaginal bleeding revealed a grapefruit-sized tumor on the woman’s cervix. Despite a radical hysterectomy, chemotherapy, and radiation, the woman died from the cancer 3 years after diagnosis.
The suit claimed that the woman’s ObGyn was negligent in not palpating the cervix or performing a colposcopy, which may have led to earlier detection of the cancer when it could have been treated successfully. Later review of prior Pap smears showed the presence of abnormal cells. The plaintiff claimed the ObGyn negligently reported the woman’s condition when the Pap smears were sent for evaluation, and that a proper history would have led to the Pap smears being read as abnormal.
The physician contended that the cancer was aggressive and difficult to detect, and that the lab had misread the Pap smears.
- The jury assessed damages at $11.8 million. The verdict found 55% fault against the physician and the remainder against the laboratory. Because the plaintiff made no claims against the laboratory, the award was expected to be reduced in proportion to the fault assessment.
For several years a woman had had routine Pap smears that were read as normal. She came in to her ObGyn the following year complaining of vaginal bleeding and pain; no Pap smear was done because she was menstruating. The Pap smear done 3 months later was also read as normal.
Further evaluation because of continued profuse vaginal bleeding revealed a grapefruit-sized tumor on the woman’s cervix. Despite a radical hysterectomy, chemotherapy, and radiation, the woman died from the cancer 3 years after diagnosis.
The suit claimed that the woman’s ObGyn was negligent in not palpating the cervix or performing a colposcopy, which may have led to earlier detection of the cancer when it could have been treated successfully. Later review of prior Pap smears showed the presence of abnormal cells. The plaintiff claimed the ObGyn negligently reported the woman’s condition when the Pap smears were sent for evaluation, and that a proper history would have led to the Pap smears being read as abnormal.
The physician contended that the cancer was aggressive and difficult to detect, and that the lab had misread the Pap smears.
- The jury assessed damages at $11.8 million. The verdict found 55% fault against the physician and the remainder against the laboratory. Because the plaintiff made no claims against the laboratory, the award was expected to be reduced in proportion to the fault assessment.
D&C did not avert endometrial cancer
A 64-year-old woman diagnosed with postmenopausal bleeding underwent a dilation and curettage (D&C) after several ultrasounds. (Results of the D&C were not reported.) Despite continued bleeding, no follow-up testing was done at 3 months.
At a return visit 14 months later, the woman was still bleeding. Tests revealed she had advanced endometrial cancer that had metastasized to her lungs and bones. She died 3 months later.
The claim was that the physician had removed an inadequate amount of tissue during the D&C.
- The case settled for $400,000.
A 64-year-old woman diagnosed with postmenopausal bleeding underwent a dilation and curettage (D&C) after several ultrasounds. (Results of the D&C were not reported.) Despite continued bleeding, no follow-up testing was done at 3 months.
At a return visit 14 months later, the woman was still bleeding. Tests revealed she had advanced endometrial cancer that had metastasized to her lungs and bones. She died 3 months later.
The claim was that the physician had removed an inadequate amount of tissue during the D&C.
- The case settled for $400,000.
A 64-year-old woman diagnosed with postmenopausal bleeding underwent a dilation and curettage (D&C) after several ultrasounds. (Results of the D&C were not reported.) Despite continued bleeding, no follow-up testing was done at 3 months.
At a return visit 14 months later, the woman was still bleeding. Tests revealed she had advanced endometrial cancer that had metastasized to her lungs and bones. She died 3 months later.
The claim was that the physician had removed an inadequate amount of tissue during the D&C.
- The case settled for $400,000.
Brain damage follows group B strep infection
A 31-year-old woman was admitted for delivery of her first child 26 hours after her water broke. A rapid test to determine the presence of group B strep was negative. During the next shift the woman had no signs of infection and the fetal heart rate remained normal.
Shortly after the infant was born that night, the woman developed a fever. A second rapid test was positive for group B strep infection.
In the nursery the infant began having respiratory distress requiring resuscitation. The infant was eventually diagnosed with group B strep infection and was placed on a heart-lung machine. During the heart-lung treatment the infant had a cerebral hemorrhage, resulting in irreversible brain damage. Now 9 years old, the child has permanent neurological deficits and delayed cognitive development.
In suing, the mother asserted the defense failed to test for, recognize, and treat group B strep infection, claiming her prolonged rupture of membranes is one of the universally recognized risk factors for bacteria transmission. She contended her temperature was not taken within 4 hours before delivery. Moreover, she claimed the rapid tests for group B strep infection are inherently unreliable and that she should have been given prophylactic antibiotics when she passed 18 hours of labor.
- The case went to arbitration with the agreement that any award would be increased by 50%. The arbitrator ruled against 2 of the 3 physicians, awarding $3.4 million to the minor, $350,000 to the mother, and $175,000 to the father, bringing the entire award to more than $6 million.
A 31-year-old woman was admitted for delivery of her first child 26 hours after her water broke. A rapid test to determine the presence of group B strep was negative. During the next shift the woman had no signs of infection and the fetal heart rate remained normal.
Shortly after the infant was born that night, the woman developed a fever. A second rapid test was positive for group B strep infection.
In the nursery the infant began having respiratory distress requiring resuscitation. The infant was eventually diagnosed with group B strep infection and was placed on a heart-lung machine. During the heart-lung treatment the infant had a cerebral hemorrhage, resulting in irreversible brain damage. Now 9 years old, the child has permanent neurological deficits and delayed cognitive development.
In suing, the mother asserted the defense failed to test for, recognize, and treat group B strep infection, claiming her prolonged rupture of membranes is one of the universally recognized risk factors for bacteria transmission. She contended her temperature was not taken within 4 hours before delivery. Moreover, she claimed the rapid tests for group B strep infection are inherently unreliable and that she should have been given prophylactic antibiotics when she passed 18 hours of labor.
- The case went to arbitration with the agreement that any award would be increased by 50%. The arbitrator ruled against 2 of the 3 physicians, awarding $3.4 million to the minor, $350,000 to the mother, and $175,000 to the father, bringing the entire award to more than $6 million.
A 31-year-old woman was admitted for delivery of her first child 26 hours after her water broke. A rapid test to determine the presence of group B strep was negative. During the next shift the woman had no signs of infection and the fetal heart rate remained normal.
Shortly after the infant was born that night, the woman developed a fever. A second rapid test was positive for group B strep infection.
In the nursery the infant began having respiratory distress requiring resuscitation. The infant was eventually diagnosed with group B strep infection and was placed on a heart-lung machine. During the heart-lung treatment the infant had a cerebral hemorrhage, resulting in irreversible brain damage. Now 9 years old, the child has permanent neurological deficits and delayed cognitive development.
In suing, the mother asserted the defense failed to test for, recognize, and treat group B strep infection, claiming her prolonged rupture of membranes is one of the universally recognized risk factors for bacteria transmission. She contended her temperature was not taken within 4 hours before delivery. Moreover, she claimed the rapid tests for group B strep infection are inherently unreliable and that she should have been given prophylactic antibiotics when she passed 18 hours of labor.
- The case went to arbitration with the agreement that any award would be increased by 50%. The arbitrator ruled against 2 of the 3 physicians, awarding $3.4 million to the minor, $350,000 to the mother, and $175,000 to the father, bringing the entire award to more than $6 million.
Discordant fetal growth not noted
On the day of delivery of twins at 35 weeks’ gestation, a woman went to her doctor’s office, where the nurse midwife administered a nonstress test. Because one twin’s heart pattern was nonreactive, the mother was sent for evaluation of premature labor.
It was revealed that the cover letter to a report from an ultrasound at 29 weeks reported concordant fetal growth, but numbers within the report differed from data in the cover letter and suggested discordant fetal growth.
Upon hospital admission, the woman’s cervix was 1.5 cm dilated and 100% effaced, with the presenting fetus at +1 station. The membranes were intact. The nursing notes indicated that the woman had been evaluated for labor in the morning and that the covering Ob was present, but did not mention that one fetus was nonreactive. After rupture of membranes and placement of an internal scalp lead on twin A (the presenting fetus), the covering Ob left the area and had to be called several times over the next 1.5 hours in response to late decelerations in twin A’s fetal heart rate. Scalp blood sampling on twin A revealed severe acidosis.
Delivered by emergency cesarean section, twin A was floppy, blue, and without respiratory effort. (Twin B was healthy.) Five days after birth a head ultrasound revealed a left germinal matrix hemorrhage in twin A, consistent with hypoxic ischemia. He remained in the NICU for a month. He now has cerebral palsy, visual and speech difficulties, and requires a walker and braces.
- The case settled for $2.9 million.
On the day of delivery of twins at 35 weeks’ gestation, a woman went to her doctor’s office, where the nurse midwife administered a nonstress test. Because one twin’s heart pattern was nonreactive, the mother was sent for evaluation of premature labor.
It was revealed that the cover letter to a report from an ultrasound at 29 weeks reported concordant fetal growth, but numbers within the report differed from data in the cover letter and suggested discordant fetal growth.
Upon hospital admission, the woman’s cervix was 1.5 cm dilated and 100% effaced, with the presenting fetus at +1 station. The membranes were intact. The nursing notes indicated that the woman had been evaluated for labor in the morning and that the covering Ob was present, but did not mention that one fetus was nonreactive. After rupture of membranes and placement of an internal scalp lead on twin A (the presenting fetus), the covering Ob left the area and had to be called several times over the next 1.5 hours in response to late decelerations in twin A’s fetal heart rate. Scalp blood sampling on twin A revealed severe acidosis.
Delivered by emergency cesarean section, twin A was floppy, blue, and without respiratory effort. (Twin B was healthy.) Five days after birth a head ultrasound revealed a left germinal matrix hemorrhage in twin A, consistent with hypoxic ischemia. He remained in the NICU for a month. He now has cerebral palsy, visual and speech difficulties, and requires a walker and braces.
- The case settled for $2.9 million.
On the day of delivery of twins at 35 weeks’ gestation, a woman went to her doctor’s office, where the nurse midwife administered a nonstress test. Because one twin’s heart pattern was nonreactive, the mother was sent for evaluation of premature labor.
It was revealed that the cover letter to a report from an ultrasound at 29 weeks reported concordant fetal growth, but numbers within the report differed from data in the cover letter and suggested discordant fetal growth.
Upon hospital admission, the woman’s cervix was 1.5 cm dilated and 100% effaced, with the presenting fetus at +1 station. The membranes were intact. The nursing notes indicated that the woman had been evaluated for labor in the morning and that the covering Ob was present, but did not mention that one fetus was nonreactive. After rupture of membranes and placement of an internal scalp lead on twin A (the presenting fetus), the covering Ob left the area and had to be called several times over the next 1.5 hours in response to late decelerations in twin A’s fetal heart rate. Scalp blood sampling on twin A revealed severe acidosis.
Delivered by emergency cesarean section, twin A was floppy, blue, and without respiratory effort. (Twin B was healthy.) Five days after birth a head ultrasound revealed a left germinal matrix hemorrhage in twin A, consistent with hypoxic ischemia. He remained in the NICU for a month. He now has cerebral palsy, visual and speech difficulties, and requires a walker and braces.
- The case settled for $2.9 million.
How to Read a Balance Sheet
A balance sheet provides an essential picture of your practice's financial health, yet, amazingly, few physicians can make heads or tails of one. Medical schools don't teach that stuff, of course, but most doctors don't see a reason to learn about it anyway. After all, that's why you pay an accountant, right?
But it's your practice. You can't really get a handle on its finances and how they are trending unless you can interpret financial statements. With a basic understanding of what's going on, you'll be far better equipped to understand the advice accountants and other financial professionals give you, and you won't need to rely on them to make all the crucial decisions about your practice's future.
A balance sheet, like a blood pressure reading, is a snapshot—a measure of a practice's financial situation at a given point in time. And like a blood pressure reading, its main usefulness lies in how it compares with other snapshots at other times.
Essential components of a balance sheet include assets (what your practice owns outright), liabilities (what it owes others), and equity (value added to the practice, such as financed equipment and profits retained within the business.)
As the name implies, a balance sheet must balance. The fundamental equation is assets equal liabilities plus equity. In other words that I find easier to grasp: Equity equals assets minus liabilities.
Assets are typically divided into current and long term. Current assets are those that could be liquidated within 1 year, such as cash, accounts receivable, and inventory if you stock products for resale. Long-term assets include buildings, furniture, equipment, and other durable goods, less depreciation (the taxable value they have lost since they were purchased).
Liabilities are similarly classified as current and long term. Current liabilities must be paid within the next year and include accounts payable, wages, and payroll taxes. Long-term liabilities, such as mortgages, loans, and equipment leases, are due over a period of years.
Equity is basically the owner's money—theoretically what would be left if you liquidated all the practice's assets and paid all its liabilities. It is not a realistic measure of a practice's net value since it doesn't reflect the current, open-market value of assets and doesn't consider intangibles such as good will. That's not what a balance sheet is designed to measure.
So what does a balance sheet measure? It keeps track of two of the three key elements of financial strength: liquidity and solvency. The third element, profitability, is measured with a separate tool, the income statement.
Liquidity, as calculated by current ratio (current assets divided by current liabilities), is a measure of the practice's ability to pay its bills over the next year. Your ratio should be at least 2:1. If it's lower, the practice is probably carrying too much debt and may run into trouble, particularly if too many bills come due at once.
Solvency, or debt-to-equity ratio (total liabilities divided by total equity), is a measure of borrowing power. A 3:1 ratio is the upper limit of normal for most banks, meaning for every $3 in debt there is at least $1 in equity (owner's money). Any higher and the practice will not be able to finance expansion, or even weather an economic downturn, because loan money will not be available.
The time to do these calculations is not when you apply for a loan, but long before—by assembling and analyzing balance sheets regularly—so that negative trends can be identified and turned around.
Hopefully, the importance of regular financial analysis is becoming obvious.
Numerous other useful bits of information—asset allocation, collection efficiency, and cash utilization—can be gleaned from a balance sheet if you know what to look for.
So how often should you review your practice's balance sheet? In an established practice, during relatively stable economic times, once a year may be sufficient. If your practice is new, though, or you're having liquidity problems, more frequent analysis, perhaps quarterly, is necessary. When in doubt, have a look. Balance sheets are neither expensive nor difficult to produce. With modern financial software, a few keystrokes on your accountant's computer are usually all that's necessary.
It may take you awhile, however, to feel comfortable analyzing financial statements. You didn't master medical diagnosis and treatment overnight, and this skill won't come instantaneously either.
I suggest you ask your accountant to walk you through your practice's balance sheet the first few times. Ask questions. Get a feel for what he or she sees within it, and take the opportunity to review your plans for the future. A good accountant will welcome the chance to show you the financial ropes and to help you work toward your long-term practice goals.
A balance sheet provides an essential picture of your practice's financial health, yet, amazingly, few physicians can make heads or tails of one. Medical schools don't teach that stuff, of course, but most doctors don't see a reason to learn about it anyway. After all, that's why you pay an accountant, right?
But it's your practice. You can't really get a handle on its finances and how they are trending unless you can interpret financial statements. With a basic understanding of what's going on, you'll be far better equipped to understand the advice accountants and other financial professionals give you, and you won't need to rely on them to make all the crucial decisions about your practice's future.
A balance sheet, like a blood pressure reading, is a snapshot—a measure of a practice's financial situation at a given point in time. And like a blood pressure reading, its main usefulness lies in how it compares with other snapshots at other times.
Essential components of a balance sheet include assets (what your practice owns outright), liabilities (what it owes others), and equity (value added to the practice, such as financed equipment and profits retained within the business.)
As the name implies, a balance sheet must balance. The fundamental equation is assets equal liabilities plus equity. In other words that I find easier to grasp: Equity equals assets minus liabilities.
Assets are typically divided into current and long term. Current assets are those that could be liquidated within 1 year, such as cash, accounts receivable, and inventory if you stock products for resale. Long-term assets include buildings, furniture, equipment, and other durable goods, less depreciation (the taxable value they have lost since they were purchased).
Liabilities are similarly classified as current and long term. Current liabilities must be paid within the next year and include accounts payable, wages, and payroll taxes. Long-term liabilities, such as mortgages, loans, and equipment leases, are due over a period of years.
Equity is basically the owner's money—theoretically what would be left if you liquidated all the practice's assets and paid all its liabilities. It is not a realistic measure of a practice's net value since it doesn't reflect the current, open-market value of assets and doesn't consider intangibles such as good will. That's not what a balance sheet is designed to measure.
So what does a balance sheet measure? It keeps track of two of the three key elements of financial strength: liquidity and solvency. The third element, profitability, is measured with a separate tool, the income statement.
Liquidity, as calculated by current ratio (current assets divided by current liabilities), is a measure of the practice's ability to pay its bills over the next year. Your ratio should be at least 2:1. If it's lower, the practice is probably carrying too much debt and may run into trouble, particularly if too many bills come due at once.
Solvency, or debt-to-equity ratio (total liabilities divided by total equity), is a measure of borrowing power. A 3:1 ratio is the upper limit of normal for most banks, meaning for every $3 in debt there is at least $1 in equity (owner's money). Any higher and the practice will not be able to finance expansion, or even weather an economic downturn, because loan money will not be available.
The time to do these calculations is not when you apply for a loan, but long before—by assembling and analyzing balance sheets regularly—so that negative trends can be identified and turned around.
Hopefully, the importance of regular financial analysis is becoming obvious.
Numerous other useful bits of information—asset allocation, collection efficiency, and cash utilization—can be gleaned from a balance sheet if you know what to look for.
So how often should you review your practice's balance sheet? In an established practice, during relatively stable economic times, once a year may be sufficient. If your practice is new, though, or you're having liquidity problems, more frequent analysis, perhaps quarterly, is necessary. When in doubt, have a look. Balance sheets are neither expensive nor difficult to produce. With modern financial software, a few keystrokes on your accountant's computer are usually all that's necessary.
It may take you awhile, however, to feel comfortable analyzing financial statements. You didn't master medical diagnosis and treatment overnight, and this skill won't come instantaneously either.
I suggest you ask your accountant to walk you through your practice's balance sheet the first few times. Ask questions. Get a feel for what he or she sees within it, and take the opportunity to review your plans for the future. A good accountant will welcome the chance to show you the financial ropes and to help you work toward your long-term practice goals.
A balance sheet provides an essential picture of your practice's financial health, yet, amazingly, few physicians can make heads or tails of one. Medical schools don't teach that stuff, of course, but most doctors don't see a reason to learn about it anyway. After all, that's why you pay an accountant, right?
But it's your practice. You can't really get a handle on its finances and how they are trending unless you can interpret financial statements. With a basic understanding of what's going on, you'll be far better equipped to understand the advice accountants and other financial professionals give you, and you won't need to rely on them to make all the crucial decisions about your practice's future.
A balance sheet, like a blood pressure reading, is a snapshot—a measure of a practice's financial situation at a given point in time. And like a blood pressure reading, its main usefulness lies in how it compares with other snapshots at other times.
Essential components of a balance sheet include assets (what your practice owns outright), liabilities (what it owes others), and equity (value added to the practice, such as financed equipment and profits retained within the business.)
As the name implies, a balance sheet must balance. The fundamental equation is assets equal liabilities plus equity. In other words that I find easier to grasp: Equity equals assets minus liabilities.
Assets are typically divided into current and long term. Current assets are those that could be liquidated within 1 year, such as cash, accounts receivable, and inventory if you stock products for resale. Long-term assets include buildings, furniture, equipment, and other durable goods, less depreciation (the taxable value they have lost since they were purchased).
Liabilities are similarly classified as current and long term. Current liabilities must be paid within the next year and include accounts payable, wages, and payroll taxes. Long-term liabilities, such as mortgages, loans, and equipment leases, are due over a period of years.
Equity is basically the owner's money—theoretically what would be left if you liquidated all the practice's assets and paid all its liabilities. It is not a realistic measure of a practice's net value since it doesn't reflect the current, open-market value of assets and doesn't consider intangibles such as good will. That's not what a balance sheet is designed to measure.
So what does a balance sheet measure? It keeps track of two of the three key elements of financial strength: liquidity and solvency. The third element, profitability, is measured with a separate tool, the income statement.
Liquidity, as calculated by current ratio (current assets divided by current liabilities), is a measure of the practice's ability to pay its bills over the next year. Your ratio should be at least 2:1. If it's lower, the practice is probably carrying too much debt and may run into trouble, particularly if too many bills come due at once.
Solvency, or debt-to-equity ratio (total liabilities divided by total equity), is a measure of borrowing power. A 3:1 ratio is the upper limit of normal for most banks, meaning for every $3 in debt there is at least $1 in equity (owner's money). Any higher and the practice will not be able to finance expansion, or even weather an economic downturn, because loan money will not be available.
The time to do these calculations is not when you apply for a loan, but long before—by assembling and analyzing balance sheets regularly—so that negative trends can be identified and turned around.
Hopefully, the importance of regular financial analysis is becoming obvious.
Numerous other useful bits of information—asset allocation, collection efficiency, and cash utilization—can be gleaned from a balance sheet if you know what to look for.
So how often should you review your practice's balance sheet? In an established practice, during relatively stable economic times, once a year may be sufficient. If your practice is new, though, or you're having liquidity problems, more frequent analysis, perhaps quarterly, is necessary. When in doubt, have a look. Balance sheets are neither expensive nor difficult to produce. With modern financial software, a few keystrokes on your accountant's computer are usually all that's necessary.
It may take you awhile, however, to feel comfortable analyzing financial statements. You didn't master medical diagnosis and treatment overnight, and this skill won't come instantaneously either.
I suggest you ask your accountant to walk you through your practice's balance sheet the first few times. Ask questions. Get a feel for what he or she sees within it, and take the opportunity to review your plans for the future. A good accountant will welcome the chance to show you the financial ropes and to help you work toward your long-term practice goals.
Delayed cesarean blamed for injuries
Two weeks past her due date, a woman underwent artificial rupture of membranes in the morning; scant amniotic fluid was noted. Oxytocin was administered and late decelerations were noted.
Labor progressed slowly and the possibility of cephalopelvic disproportion was entertained.
Later that night the fetal heart rate demonstrated tachycardia. The plaintiff alleged that the nurses failed to make detailed notes in the patient’s record or question the obstetrician’s decision to continue with labor induction in the presence of a nonreassuring tracing. In the second stage, a vacuum-assisted vaginal delivery was attempted due to a prolonged deceleration of the fetal heart rate. Nine vacuum extractions were attempted and were unsuccessful.
The infant was delivered by emergency cesarean section with no heart rate, respirations, muscle tone, or reflex irritation. After resuscitation, the infant was transferred to another hospital, where seizures developed and cerebral palsy was diagnosed.
The woman sued both the obstetricians and the nurses. The defendants contended the fetal monitoring strips showed little, if any, signs of nonreassuring patterns. They also claimed the infant’s injuries had other causes.
- The case settled for $4 million.
Two weeks past her due date, a woman underwent artificial rupture of membranes in the morning; scant amniotic fluid was noted. Oxytocin was administered and late decelerations were noted.
Labor progressed slowly and the possibility of cephalopelvic disproportion was entertained.
Later that night the fetal heart rate demonstrated tachycardia. The plaintiff alleged that the nurses failed to make detailed notes in the patient’s record or question the obstetrician’s decision to continue with labor induction in the presence of a nonreassuring tracing. In the second stage, a vacuum-assisted vaginal delivery was attempted due to a prolonged deceleration of the fetal heart rate. Nine vacuum extractions were attempted and were unsuccessful.
The infant was delivered by emergency cesarean section with no heart rate, respirations, muscle tone, or reflex irritation. After resuscitation, the infant was transferred to another hospital, where seizures developed and cerebral palsy was diagnosed.
The woman sued both the obstetricians and the nurses. The defendants contended the fetal monitoring strips showed little, if any, signs of nonreassuring patterns. They also claimed the infant’s injuries had other causes.
- The case settled for $4 million.
Two weeks past her due date, a woman underwent artificial rupture of membranes in the morning; scant amniotic fluid was noted. Oxytocin was administered and late decelerations were noted.
Labor progressed slowly and the possibility of cephalopelvic disproportion was entertained.
Later that night the fetal heart rate demonstrated tachycardia. The plaintiff alleged that the nurses failed to make detailed notes in the patient’s record or question the obstetrician’s decision to continue with labor induction in the presence of a nonreassuring tracing. In the second stage, a vacuum-assisted vaginal delivery was attempted due to a prolonged deceleration of the fetal heart rate. Nine vacuum extractions were attempted and were unsuccessful.
The infant was delivered by emergency cesarean section with no heart rate, respirations, muscle tone, or reflex irritation. After resuscitation, the infant was transferred to another hospital, where seizures developed and cerebral palsy was diagnosed.
The woman sued both the obstetricians and the nurses. The defendants contended the fetal monitoring strips showed little, if any, signs of nonreassuring patterns. They also claimed the infant’s injuries had other causes.
- The case settled for $4 million.
What caused fecal incontinence?
A 37-year-old woman delivered a healthy infant after normal labor and vaginal delivery. After birth the woman had total fecal incontinence, and could no longer work or perform many activities. A sphincteroplasty to repair an anal sphincter tear was unsuccessful.
In suing, the woman asserted her physician failed to recognize, treat, or repair the tear during delivery.
Her physician countered that a history of hemorrhoidectomy and fistulotomy from 15 years before the birth should have been revealed in the medical history forms completed by the patient. The physician asserted that had he known about this medical history, he would have suggested a cesarean section. He also contended that some types of muscle tears are unrecognizable.
- After 2 mistrials, the jury returned a defense verdict.
A 37-year-old woman delivered a healthy infant after normal labor and vaginal delivery. After birth the woman had total fecal incontinence, and could no longer work or perform many activities. A sphincteroplasty to repair an anal sphincter tear was unsuccessful.
In suing, the woman asserted her physician failed to recognize, treat, or repair the tear during delivery.
Her physician countered that a history of hemorrhoidectomy and fistulotomy from 15 years before the birth should have been revealed in the medical history forms completed by the patient. The physician asserted that had he known about this medical history, he would have suggested a cesarean section. He also contended that some types of muscle tears are unrecognizable.
- After 2 mistrials, the jury returned a defense verdict.
A 37-year-old woman delivered a healthy infant after normal labor and vaginal delivery. After birth the woman had total fecal incontinence, and could no longer work or perform many activities. A sphincteroplasty to repair an anal sphincter tear was unsuccessful.
In suing, the woman asserted her physician failed to recognize, treat, or repair the tear during delivery.
Her physician countered that a history of hemorrhoidectomy and fistulotomy from 15 years before the birth should have been revealed in the medical history forms completed by the patient. The physician asserted that had he known about this medical history, he would have suggested a cesarean section. He also contended that some types of muscle tears are unrecognizable.
- After 2 mistrials, the jury returned a defense verdict.
Was force excessive?
At 36.5 weeks, a woman was admitted for labor induction. Delivery of the head was followed by shoulder dystocia. The infant was born with a severe left brachial plexus injury and left torticollis. Despite 4 reparative surgeries, the left arm and hand have little useful function.
In suing, the woman asserted the physician used inappropriate and excessive force to complete the delivery, a claim the defense denied.
- The hospital settled for $400,000 before the case went to trial. The jury returned a defense verdict.
At 36.5 weeks, a woman was admitted for labor induction. Delivery of the head was followed by shoulder dystocia. The infant was born with a severe left brachial plexus injury and left torticollis. Despite 4 reparative surgeries, the left arm and hand have little useful function.
In suing, the woman asserted the physician used inappropriate and excessive force to complete the delivery, a claim the defense denied.
- The hospital settled for $400,000 before the case went to trial. The jury returned a defense verdict.
At 36.5 weeks, a woman was admitted for labor induction. Delivery of the head was followed by shoulder dystocia. The infant was born with a severe left brachial plexus injury and left torticollis. Despite 4 reparative surgeries, the left arm and hand have little useful function.
In suing, the woman asserted the physician used inappropriate and excessive force to complete the delivery, a claim the defense denied.
- The hospital settled for $400,000 before the case went to trial. The jury returned a defense verdict.