By: Angie Walters
Every dental practice experiences troubles, but in today’s dental climate of constant technology upgrades and regulatory changes, your practice’s financial well-being faces threats in every area from expenses to reimbursement. That’s why we’ve dedicated this article to exploring some of the most common causes of cash flow issues and possible solutions that you can easily implement when the financial health of your practice is in question.
What’s Causing the Issues?
Cash flow problems in the healthcare world are unique and tend to be more complex than in other types of professions and industries. They can stem from multiple internal factors, many of which you can easily manage; and external factors, many of which may be out of your control. Internal factors may include:
- Poor record keeping
- Excessive expenses
- Insufficient patient count/Local competition
- Patient mix issues
- Purchasing assets that do not issue a return on investment
- Tax problems
- Owners pulling out too much cash
- Inadequate financial controls and patient bill follow-up processes
Addressing Your Cash Flow Issues
Regardless of the cause, there are multiple ways you can improve your dental practice cash flows and address root causes of your financial problems.
1. Cleaning Up Your Claims
One of the most basic yet most frequently mismanaged areas of cash flow in dental offices is claim reimbursement. Tackling the revenue cycle in strategic ways may not have the long history in dental that it does in medical, but that doesn’t make it any less important.
Dental revenue cycle solutions can be integrated with your EHR software and will help you manage claim filing, and co-pay collection, as well as provide reporting to help you find areas of leakage and inefficiency. While purchasing a new system or service may not be feasible during a period of cash problems, you can make sure that you’re using the software and vendor solutions that you do have to the fullest extent. It is entirely possible that your system includes the features and informational resources specifically designed to keep your practice in good financial health that are currently being underutilized. Contact your vendor or solution provider to review the capabilities of your current system before you consider an expensive upgrade.
2. Clearing Up Communication
A payments report could help you determine if there is an issue getting patients to pay properly and on time. While payment lag is one of the most pervasive problems in the business of dentistry, it’s also one of the simplest to solve.
Many practice consultants stress the importance of communicating with patients from the time they set foot in an office, emphasizing front end explanations of bills, payment terms, and late payment penalties. Communication is a two-way street, though, and your front desk staff should also be trained on properly gathering and verifying insurance information as well as personal contact details so that no patient is “lost” after a procedure is performed.
3. Addressing Expenses
Overspending and poor budgeting are frequently present in practices with cash flow problems, so if you keep a budget (you should), make sure that it’s doing more than taking up space. If no one in your office is reviewing your actual expenditures to the budget, assign someone, even if only in the interim to help move your practice back to a healthy financial state.
A more radical solution to overspending issues is zero-based budgeting. This concept involves setting all budget items at $0, meaning that no purchase is made without approval or increased scrutiny. You may end up finding irresponsible or misguided spending in areas you never suspected.
Also, consider moving services you currently outsource (cleaning, food and beverage, shredding, etc.) to in-house personnel. It may not work as a long-term solution but can help take some of the strain off during a cash crunch.
4. Rethinking Your Business Model
If cash flow has been an issue for you for a while, and you know your financial controls and general practices are sound, it may be time to dig deeper into your practice.
One of the most pressing considerations on the minds of dentists right now is their relationship with Medicare. Dentists who treat patients over age 65 must formalize their relationship with Medicare by June of 2016, or their patients may not be able to have their prescriptions properly filled or discounted by a pharmacy. Since the deadline has been extended, now is a good time to reconsider how your patient mix is impacting your bottom-line, as well as whether your relationship with Medicare could be moved to a cash-only basis to address your cash flow issues.
Don’t limit the business model question to your elderly patients though. You may want to consider concierge services, as well as cosmetic and aesthetic options as the public’s relationship with dentistry expectations evolves.
Dental practice management needs to shift as your practice progresses and changes. What may have worked for you a few years ago may not be relevant today. It is important that you periodically reevaluate your practice management solutions to see if they still fit your needs. Solving the cash flow dilemma may take some time and effort but the payoff can be huge.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.