Money Matters

Orthopedic group budgeting: from annual plan to monthly reforecast

Orthopedic group budgets drift as case mix, implant costs and payer mix move. Learn how a monthly budget vs actual review and reforecast keep plans useful.

Published October 16, 20267 min read Share

An orthopedic group’s budget reflects assumptions about volume, schedules, costs and payer mix. Keep it as the approved baseline, and let a separate reforecast show what has changed and what leaders now expect.

This post covers why orthopedic budgets drift, how to run a monthly budget vs actual review that ends in decisions, and how to carry its findings into a reforecast leaders can plan around.

Key takeaways

• Keep the approved budget as a fixed baseline and save reforecasts as separate versions, so leaders see budget, latest forecast and actual side by side.
• Budget from the drivers that move an orthopedic P&L: case volume and mix by site, provider schedules and block time, implant cost per case, payer mix, physician compensation and staffing.
• Review budget vs actual by site and service line each month, and split material variances into volume, mix and price or unit cost.
• Separate timing differences from lasting changes, and update the forecast periods affected by either.
• Build the budget in the ledger’s entity, site and service line structure, so actuals compare with plan without remapping.

What we’ll cover

Why an orthopedic budget drifts

Annual budgets are set months ahead, and some are little more than last year’s revenue per entity grown by a percentage. For a multi-site orthopedic group running clinics, PT/OT, imaging and, in many cases, an ambulatory surgery center (ASC), that approach hides the variables that move results.

Case volume and mix. A partner takes leave, a new surgeon needs months to build a full schedule, and procedures shift between hospital and ASC settings. Each change lands at a specific site and service line.

Implant and supply cost per case. Include implant costs wherever the operation being budgeted bears them. Changes in vendor pricing and procedure mix then move supply cost per case.

Payer mix. Commercial, government and workers’ compensation payers each pay differently for the same procedure. Case volume can be on plan while revenue per case is not.

Staffing and ancillaries. Staffing follows capacity and workload, which don’t always move in step with volume. Forecast imaging and therapy from expected demand and available capacity.

Keep the approved assumptions for comparison, then revise the outlook as evidence changes.

Build the budget from drivers

We recommend budgeting revenue from expected cases or visits and net revenue per case or visit, by site and service line. Model variable costs, fixed commitments and staffing capacity separately. Test volume against clinic sessions, operating room availability and staffing. Model physician compensation under the actual pay plans, including work relative value units (wRVUs) or collections where the plans use them. Phase the year by the group’s own seasonal pattern and planned schedule changes.

Build the budget in the ledger’s structure (the same entities, site and service line dimensions, and accounts), so actuals line up with plan without remapping. Also write down the assumption behind each driver, such as a new surgeon’s expected cases in their first months, so a variance can be traced to the assumption that changed.

A monthly budget vs actual review that leads to decisions

Once the month’s actuals are final, run the review in the same order each month, so it ends in a short list of actions:

1. Start with sites and service lines. Compare revenue and costs with budget, using agreed dollar and percentage thresholds for follow-up.
2. Explain material variances. Split each into volume, procedure or payer mix, and price or unit cost, comparing like-for-like activity. Calculate the three effects in the same order every month, so no change is counted twice.
3. Check timing and actuals. A procedure moved into next month is a timing change. A late invoice may point to a missing accrual, so correct accounting errors before reading anything into performance.
4. Update the outlook. Put temporary shifts into the months they affect, and carry lasting changes, such as a surgeon cutting clinic sessions, into future drivers.
5. Assign an owner. Each material issue goes to the practice administrator, ASC manager, service line lead or physician leader who will follow it up.

From annual budget to monthly reforecast

A reforecast leaves the approved budget intact and adds a current view of where the year is heading. Each month, it combines actuals for the months already closed with a forecast for the months ahead. Some groups forecast to the fiscal year end; others roll the horizon forward a month at a time, so the outlook keeps the same length.

Update only the drivers that changed: volume by surgeon and site, payer mix, implant and supply cost per case, staffing and the timing of capital purchases. Record what changed and why. To judge forecast accuracy, compare each month’s actuals with the forecast saved before that month began.

Show partners and the board three numbers together: the approved budget, the latest outlook and actuals. Keep earlier forecasts too: they separate performance against plan from forecast accuracy.

What the reforecast is for

A reforecast earns its place when it changes a decision before the quarter ends. In an orthopedic group, that usually means:

• Cash and distributions: how much cash the group will collect, and when, allowing for the lag between a case and payment, before partners or the board approve distributions.
• Hiring: timing new clinical and therapy staff against expected volume rather than last year’s plan.
• Capital spending: committing to imaging equipment, a new clinic or added ASC capacity with the cash effect visible.
• Lenders and sponsors: run the forecast through the financing agreement’s own definitions and testing dates to see whether covenant pressure is building.

Choosing orthopedic practice financial planning software

Spreadsheets can carry the budget for a single practice. As sites and entities are added, workbooks multiply, versions drift and actuals are pasted in every month. When you evaluate orthopedic practice financial planning software, test it against your own budget:

• One structure for plan and actuals, by entity, site and service line, with the general ledger as the source of financial actuals and the relevant operational systems as the source of visit, case and wRVU data.
• Driver-based inputs that site and service line leaders can update, with a record of who changed what.
• Saved versions: the approved budget locked, each reforecast kept, and any two comparable.
• A group roll-up, so each entity’s plan consolidates the same way its actuals do in a multi-entity structure.

Sage Intacct tracks performance by site, surgeon, payer and service line through dimensions, and automates multi-entity consolidation. Separately licensed Sage Intacct Planning adds driver-based models, what-if scenarios and rolling forecasts, and integrates with Sage Intacct’s financial data and dimensions.

Reporting behind the decisions at Ventura Orthopedics and OSMC

Ventura Orthopedics grew rapidly before its move to Sage Intacct, acquiring a physical therapy practice and expanding to six locations. Each expansion meant manually adding new codes to its accounting system to meet its reporting needs. Sage Intacct let it track financials by department, provider, location, practice, business unit and service type, and it reduced manual processes with the same number of finance team personnel. “The system’s deep insights help us know if we’re on track or not and make changes very nimbly,” said John Hughes, Ventura’s CFO at the time. “I get the reporting I need to efficiently redirect the ship.”

At the Orthopedic and Sports Medicine Center (OSMC), every report once meant exporting data into Excel. OSMC went on to use the dimensional general ledger in Sage Intacct. “I have more confidence in our books and time to produce forecasts, identify trends, and make informed data-backed decisions,” said Lichelle Boyd, OSMC’s CFO at the time.

Frequently asked questions

How is a reforecast different from a budget?

The budget is the plan approved before the year starts, and it stays fixed as the baseline. A reforecast updates the outlook during the year, combining actuals to date with revised drivers for the remaining months. Comparing actuals with both shows progress against plan and whether the outlook is holding.

How often should an orthopedic group reforecast?

We recommend monthly for multi-site groups, because case volume, payer mix and implant costs move month to month. Update the drivers that changed rather than rebuilding the plan. If finance capacity is limited, set up a quarterly process first and move to monthly once it runs smoothly.

Read the Ventura Orthopedics customer story to see how its finance team tracked locations, providers and service types as the practice grew.

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