It is no secret that the medical field, and by extension, those who work in or own medical practice, are under an immense amount of financial pressure. The rising costs of healthcare and the declining reimbursement rates from insurance companies have put many practices in a difficult position when it comes to their cash flow. This can often lead to doctors turning to loans as a way to bridge the gap and keep their practice afloat.
However, taking out a loan is not always the best solution and can sometimes do more harm than good if not done correctly. In this guide, we will discuss some common cash flow problems in the medical field and how you can deal with them without resorting to borrowing money.
Understanding Cash Flow in Medical Field or Practice
Cash flow refers to a business’s total inflow and outflow of cash during a given period. When you are generating more revenue than you are spending, your practice is profitable and has a positive cash flow. If the opposite is true, your practice will have negative cash flow.
In medical practice, cash flow is determined by the number of patients being seen, how quickly insurance companies are reimbursing for services, and how much money the practice has on hand to cover expenses. A good cash flow allows a practice to meet its financial obligations on time and have money left over to reinvest back into the business.
7 Proven Tips to Deal with Cash Flow Problems in the Medical Field/Practice
To help you and your medical practice overcome cash flow problems, we have gathered together some proven tips.
1) Audit Your Accounts Receivables
Before you implement any changes, it’s crucial to audit your accounts receivable. You should check the amount of outstanding invoices and get a sense of how long it may take for them to be paid in full. If you have a lot of accounts receivable on the books, consider implementing a collection policy to attempt to collect on the debt more quickly. This might include using an outside company or professional firm for debt collecting.
Further, if you have customers that habitually pay late, consider implementing a late fee to incentivize them to be timely with their payments.
2) Don’t Accept Every Insurance Plan
If your practice is struggling to keep up with the costs of patient care and you need a solution, review the list of insurance plans that you currently accept. It may be time to stop accepting certain ones or all together.
If an insurance company is providing very low reimbursement rates, it might not be worth your while to continue contracting with them. This will obviously require a review of your financials as well as some conversations with key stakeholders in your practice (e.g., providers, support staff), but it could be a necessary change if you want to keep costs down without compromising the quality of patient care.
3) Improve Your Clinic’s Processes and Work on Improving Its Overall Efficiency
In many cases, cash flow problems are a result of inefficient practices. Whether it’s a lack of proper billing or insufficient patient communication, the answer is to make improvements in your practice’s processes by implementing new technologies that help you track and manage your revenue cycle more effectively. By automating as many of your processes as possible, you can reduce the amount of time it takes to get paid and ensure that your invoices go out on time. This should also reduce the number of accounts receivable days outstanding (ARO) that you have, which can also improve your cash flow.
In addition to implementing new technologies, it’s a good idea to create a uniform collection process and enforce it in an effort to get patients to pay their balances on time. You may also want to consider offering financing options to patients who are struggling to pay their medical bills. There are a number of companies that offer patient financing, and they can help you get the money you’re owed without putting your patients in financial hardship. By offering these services, you can improve your chances of getting paid while also showing your patients that you care about their financial wellbeing. Ultimately, by improving your revenue cycle management processes, you can improve your bottom line and increase patient satisfaction.
4) Understand How Your Medical Claims Are Being Processed
Before tackling your cash flow problem, it might help to understand how you’re handling the process of filing and processing medical claims. If you’re not sure what is going on, ask questions of your billing office or leave a message with the person in charge of this process. You want to make sure that you are submitting accurate and complete documentation. If there is something missing, then the claim may be rejected. Another option is to outsource your billing process. This can be a great way to take the burden off of your staff and make sure that claims are being filed correctly.
5) Try To Minimize Waiting Times and Keep Patients Informed
Your patients are your best source of new business. If they are happy and satisfied with your service, then they will be more likely to tell their friends and family about you. In turn, those people may become patients as well. But if your clinic’s waiting room is always packed and patients have to wait for long periods of time, then they may not be so eager to recommend you. Instead, try to minimize waiting times by hiring more staff or extending your hours. You should also keep your patients informed about any delays that cannot be helped.
For example, if you know that the doctor will be running late for an appointment, call the patient ahead of time and let them know. By doing this, you can help reduce anxiety and make sure that everyone is on the same page. Another great strategy you can take in order to keep patients informed about their upcoming appointments and let them know what’s happening with scheduling is by implementing an email marketing program. The benefit of email marketing, as opposed to other platforms like mass text messaging or social media posts, is that it’s a one-to-one communication method, which means each person receiving the message gets personalized information and can follow up on how they want to be contacted.
6) Build Long Term Relationships with Patients and Health Insurance Companies
Another way of thinking about how to reduce patient no-shows is by focusing on prevention rather than reaction. If you’re able to keep patients coming back for their appointments and maintain goodwill with health insurance companies, then you won’t have as big of a problem with cancellations or last-minute changes in the first place.
Building long-term relationships with both patients and health insurance companies can be difficult, but it’s important to remember that they both ultimately want what’s best for the patient. By collaborating closely with each other, everyone can ensure that patients receive the quality care they need while also reducing appointment cancellations and no-shows.
7) Don’t Take on New Debt or Obligations Until You Know for Sure That You’ll Be Able to Pay for Them
If a medical practice is struggling with cash flow, one way to improve the situation is by being more mindful of expenses. This means not making large purchases or taking on new debts or obligations until you know for sure that you’ll be able to pay for them. If necessary, consider cutting back on your expenses and/or increasing revenue in order to balance out the budget.
Another way to address cash flow problems is by applying for a medical practice loan. With a medical practice loan, you can obtain the financing you need to cover expenses, as well as pay off any existing debt that’s causing cash flow problems. Unlike traditional bank loans, there is no collateral required, and you can get approved within 24 hours.
Hopefully, these strategies will help you resolve your medical practice’s cash flow problems and get your finances back on track. Remember, though, that cash flow problems aren’t always a bad thing. They can be temporary and could even indicate that your practice is growing—just make sure you have the means to manage it.