What You Need To Keep In Mind As You Work To Improve Your Cash Flow

Step back and think about your medical practice for a moment. Not just your staff, your patients, or that leaky roof that will greet you each fall. Think about what it all represents—an investment. Your practice is the fruit of your years in medical school, the loans you took to buy the business, and your hard work to gain the trust of new patients.

Now think about the revenue your practice earns each month and what sufficient capital can accomplish:

• Hiring the best staff
• Paying your monthly expenses without stress
• Saving money for future investment into your practice
• Providing the best technology to care for your patents

All of this hangs upon one critical metric: your cash flow.

It is no secret that by improving your medical practice’s cash flow, you are also improving your practice’s financial health and future. However, in today’s dynamic economy, this takes some planning on your part. 

So what are the biggest obstacles to your cash flow? Or, more practically, what do you need to keep in mind as you work to improve your cash flow? 

Your Medical Practice Is Not Like Other Companies

Think about what would happen if you stopped paying your cell phone bill. Imagine what would happen if you paid only half your mortgage next month? How long would it take before you get reminder texts, emails, and phone calls about your missing payments?

Now think about this: how long can your patients go without paying you? What is your follow up strategy? A courtesy letter after 90 days? A follow-up call after 120? Can you imagine if your mortgage company was this laid back?

The harsh reality is that you are trying to collect from the same people that other corporations are, and more often than not, patients often place their healthcare bills at the bottom of the priority list. 

So, one of the most critical habits you can keep to improve your cash flow is being proactive in your accounts receivables and outstanding patent balances.

Your Patients Are Paying More Of Their Health Costs

The studies are confirming what your patients already feel: patient responsibility is up by 11% over a 1-year period. 

In fact, patient healthcare costs—including both deductibles and out-of-pocket maximum payments—have increased by almost 30% since 2015. It is no wonder that that same study found that 83% of physician practices with under five practitioners said the slow payment of high-deductible plan patients is their top collection challenge.

With the rise of High Deductible Health Plans (HDHP) and increasing self-pay patients, having a system in place to manage these outstanding balances is critical to your cash flow.

Your Insurance Reimbursement Rates Are Declining

It is no secret that most practices are heavily dependent upon insurance reimbursement. Historically, insurance reimbursements represented 80–95% of practice revenue. 

In fact, the latest analysis shows that cash flow will continue to decline at the current rate of 2% to 4% over the next 12 to 18 months thanks to meager reimbursement rate increases.

True, there is not much you can do about these declining reimbursements. Yet, this does underscore the absolute necessity of monitoring the varied influences upon your cash flow, being able to bend and flex as needed to accommodate these changes.

Your Operating Costs Are Rising

To improve your cash flow, it is essential to not only focus on ways to bring in more money but to lock down those areas that are costing you more money. With that in mind, when was the last time you sat down and evaluated ways to:

• Cut Out Unnecessary Expenses: as you look over monthly expenses try and put them in two categories – is this necessary, is there a more affordable alternative?
• Improve Your Business Process: think about cutting time, not just costs. For example, how confident are you in the promptness of your invoicing? When was the last time you evaluated your online payment options available to your patients?

Cash Flow Is More Than An Accounting Term

Once you begin to think of your medical practice’s cash flow as the onramp towards your plans and improvements, it transforms from a nagging accounting term into the roadmap by which you chart out your future. So, where do you want to go?