Got cashflow issues in your medical practice? We’ve got solutions.
Every medical practice runs into the occasional cashflow snag. However, what if not having enough revenue coming in the door is a constant problem? Spoiler alert: It’s not good news. There are many negative effects of cashflow problems, namely:
Inability to purchase supplies and medical equipment
Negative patient financial experience
Poor employee morale
Restricted growth
Unpaid staff wages
The key to solving business cashflow problems is understanding why they happen in the first place. In this article, we’ll address eight of the most common causes of cashflow issues in todays’ medical practices and provide strategies to avoid them.
1. No emergency fund or cash reserves. Some cashflow snags are inevitable—for example, when medical practices experience seasonal fluctuations in patient volumes. Other cashflow problems can occur when there’s a high tax bill, increase in supply costs, or repairs after a disaster, for example. This is when cash reserves become critical because they supplement unanticipated dips in revenue and can help the medical practice stay afloat. Without these reserves on hand, the financial up and downs become much more difficult to navigate. In lieu of an emergency fund, medical practices may also be able to secure a line of credit or obtain a loan from the Small Business Administration.
2. Low profits. If physicians haven’t negotiated fair rates with payers, they could be caught in a scenario in which they’re not being paid nearly enough for the high-quality services they provide. When cashflow problems persist, it might signal the need to renegotiate payer contracts to earn a more competitive rate or even terminate contracts with payers that don’t offer fair compensation. For example, many medical practices continue to debate whether it’s profitable to participate with Medicare.
3. No budget. Without a budget, medical practices have no sense of whether they actually generate enough revenue to cover all expenses. Seeing the budget helps identify areas where practices can potentially eliminate or lower expenses (e.g., by shopping around for better deals). If that’s not possible, then increasing income (e.g., through extended office hours or new service lines) may be the only option.
4. Uncontrolled growth. As medical practices grow and expand, physicians must be able to scale up—hire more employees, purchase new equipment, and perhaps even rent a larger office space. However, without a plan to obtain financing or using a business credit card for certain expenses, common cashflow problems can quickly occur. Taking the time to create and vet this plan with a trusted consultant or other resource is paramount.
5. Delayed revenue. Some payers are notorious for delayed and denied payments, both of which can significantly impact cashflow. Fortunately, physicians can leverage tools for end-to-end claim tracking and data analytics to understand specific payment cycles for certain payers. Then they can use this data to advocate for more timely payments that promote a healthier cashflow. They can also identify opportunities to improve internal processes that promote timely claim filing. At the center of these efforts? A dashboard that provides instant access to key health indicators, thereby enabling continuous improvement.
6. Minimal patient engagement. When it comes to common cashflow problems, payers aren’t the only problem. It’s patients, too. When medical practices don’t have a plan to address patient collections, this can have a negative effect. What are some potential solutions to collect the patient’s financial responsibility more effectively? Payment plans, clearer patient statements, and providing patients with multiple ways to pay.
7. Overlooked revenue. It could be something as simple as accidentally omitting a charge. However, it could also be a pattern of underbilling or failing to file claims for remaining balances with secondary payers. It all boils down to being paid completely and appropriately for the services rendered. Without this system of checks and balances, cashflow problems can occur and worsen over time.
8. Staffing gaps. When medical practices don’t have qualified revenue cycle staff to submit accurate claims in a timely manner, existing cashflow problems will only become exacerbated. The answer? Automate as much of the revenue cycle as possible while also considering outsourcing it to maximize efficiency.
Conclusion
Medical practices certainly can’t eliminate all types of cashflow issues. Any business struggles with them from time to time. However, cashflow snags shouldn’t be an ongoing problem. If it is, knowing why these cashflow problems occur and what to do about them can help medical practices survive and thrive. Learn how edgeMED can help and be sure to check the Healthy Snacks blog for more expert insights, best practices and industry trends.
