In the past, insurance companies more or less kept the cash flow of a medical practice healthy. Not any longer. Increasingly, medical practices are relying on their patients to pay their bills. The problem is that most patients are not prepared to foot the entire amount. Instead, it’s not uncommon that they ask to pay in installments—if they pay at all.
According to the National Center for Health Statistics, 25 percent of families have an unpaid medical bill, 20 percent are paying in installments, and some are not likely to be able to pay at all. What’s more, according to a McKinsey & Co. report, patients pay more than twice as slowly than commercial payers. In fact, they are more likely to pay cell phone and internet providers, and a host of other bills, first.
The challenge is greatest at the beginning of the year when deductibles start over, making patients responsible for covering the entire (once adjusted) bill. When deductibles increase significantly from year to year, it compounds the problem.
This all adds up to making the management of cash flow quite challenging. Experts agree—as patients are expected to pay more, practices are experiencing cash flow shortages and must plan ahead to ensure they have enough cash flow to get through the lean times.
With that in mind, Goldin Peiser & Peiser offers the following five considerations for improving the cash flow of your medical practice:
- Due diligence: How often do you ask the patient whether they have a copay? Be prepared for each patient visit by investing the time to know which insurance they have and exactly what is required for an office visit. When you don’t know, there is a greater chance of not being paid the full amount of the bill.
- Accept multiple payment options: In other words, make it easy for your patients to pay the way that is most convenient for them at the time of the visit, including cash, credit cards or check. You might even ask to keep their credit card on file, as long as you follow the rules of the credit card company. To relieve the fear of bounced checks, consider installing a system that treats the check as cash.
- Payment plans that stick: When you must work out a payment plan with a patient, make sure it’s a formal legal document, and then make sure the patient makes those payments on time. When you don’t stay on top of these plans and then multiply that by the number of payments on a plan, you will likely end up in a poor cash flow situation. Overall, a good rule of thumb is to have 60 percent to 75 percent of all receivables paid in the first 30 days.
- Timing: Most patients know they have a deductible to meet. However, they may wait to pay a bill until they see the adjusted amount they owe. Still, it is a good idea to issue the invoice sooner than later. By the time the insurer sends your practice notification of the patient’s responsibility, you could be a month out and have another month to wait to be paid.
- Reducing expenditures: Another way to improve cash flow is to keep a careful handle on cash outflow. Your staffing can account for more than half of your practice’s budget. Prepare an assessment of staffing versus the number of patient visits seen. Could you arrange staffing to better cover the busiest times without overstaffing for times that are slower? Also, examine how your staff is spending its time. There could be a more efficient use of their time.
Also look at vendor contracts and lease agreements. Make sure you are getting what you paid for. If you are purchasing new equipment, take advantage of Section 179 deductions, which allow you to deduct the full purchase price of qualifying equipment from your gross income.
Treat the business side of your practice the same way you treat your patients—invest every best practice you know to keep your cash flow as healthy as possible. Have questions about increasing profitability in your medical practice? Contact the healthcare team at GPP or Angie Walters at 214-635-2547.
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.