Just like any other business, medical practices may also face cash flow problems. Cash flow is basically the soul of any business and the better-managed it is, the more profitable it would be. In recent times, insurance providers have been declining a significant amount of reimbursements for medical practices.
This has resulted in budget cuts and tighter budgets all around. And we have physicians desperately trying to find ways to either improve cash flow or reduce operating expenses. However, all of these can be easily avoided to a great extent. Here are some tips that are super effective and would definitely help:
1. Define Your Practice’s Credit Policy
Defining the credit policy for your practice is one of the foundation steps to take in improving cash flow. You need to clearly state the limits and the time interval and have it in writing as well. This eliminated excuses from clients such as the fact that they were not notified of the credit policy. The policy should contain terms like:
- Broken appointment charges
- Interest charged on late payers
- Acceptable payment terms
So you would need to put it in a really obvious place and intimate clients about it as they come in. Similarly, you need to ensure that your staff/employees are in the know concerning the practice’s credit policy.
Apart from just handing it over to them, organize some form of training and answer any questions that they may have. Most importantly, ensure that the policy is one that works for you and would be effective for the practice.
2. Invoice Promptly and Send Out Statements Regularly
If you want to get paid promptly, then you should not play around with your invoicing. The earlier you send out.your invoices, the greater a guarantee you have of being paid on time. You can easily create your invoices online and send them to your clients promptly.
Accounts receivable is constantly your practice’s largest asset which is why you need to treat it as such. Cash hanging outside because of invoices that you didn’t send out early could easily drive your practice into the ground. Statistics show that patient responsibility has increased from 12% in 2007 to 40-45% in 2014 and is up to 59% in 2019.
This implies that you need to make this a priority. Therefore, you should have a system in place for sending statements out regularly, else, there is a high probability that you would lose cash.
3. Confirm Patients’ Insurance Coverage Regularly
You really should make this a point of duty so that you don’t end up running into debts. Confirming your patients’ insurance coverage every time that they visit is essential to ensure you stay in business.
There is always the possibility that they change jobs or insurance carriers. This way, you are certain of who to send their medical bills to. There have been occurrences of practices shutting down due to debts accrued from lapses in insurance monitoring.
If you have some regular clients who come in very often, you could carry out this process periodically. However, you should never take anything for granted so that you remain on the safe side.
4. Be Firm About Collecting Your Fees
There is always the possibility of allowing your emotions to interfere with business and it may be inevitable in some cases. However, if you are not careful, you may end up driving your practice into the ground this way. Practices that enjoy constant cash flow ensure that all the decisions that they take are guided by their policies.
They do not deal based on familiarity or length of time that a particular individual has been a patient. When it comes to the finance side of things, deal with your patients objectively – gently, yet firm. If you know that you might become too sentimental, you could try covering up patient names when going through your aging report.
This way, you are doing yourself, the practice and your patients a whole world of good. Because if your practice shuts down, you are without a job and your patients lose their beloved doctor.
5. Know the Law
Finally, you need to be aware of the stand of the state and federal laws on the collection of debts from your patients. This is because whatever you are doing needs to be within the confines of the law.
You need to know debts that are covered and debts that are not as well as the right way to communicate debts to your patients. All of these can be found in the Fair Debt Collection Practices Act (http://www.federalreserve.gov/boarddocs/supmanual/cch/fairdebt) and should guide every step that you take.
Provided you are requesting debts the right way, then your patients are obligated to pay and may be subject to fines if they default.
Medical practice and the health care sector, in general, are pretty lucrative. However, you need to ensure that you protect yourself from debt which can be easily incurred. Similarly, for investors, there are great health care REITs that are worth investing in.
The older demographic spends a lot more on health care and projections show that there are bound to be a lot more of them in the coming years. Therefore, you could be a medical practitioner and an investor as well. Just remember to keep your finances in the green.