With competition is increasing, and reimbursements are decreasing, every dollar counts for most medical practices. Yet many practice owners have fallen into bad business habits that are costing them money. Patients and insurance carriers have changed their payment expectations, and practices are lagging behind, relying on outdated systems and processes to collect money. Practice budgets lack essential details needed for planning which leads to cash crunches at inopportune times. In this article, we shared some basic tips which will help in creating a strong financial structure for your practice.
Forecast Practice Collection
The first step to improving a practice’s cash flow is making sure a system exists to track and manage it. It’s the most common mistake that providers do not have a cash flow management system at all. Also, make sure your staff is well aware of this system and medical billing process flow. Practices need a thorough understanding of what’s going to happen in the practice in the next year, including when people get paid, whether it’s salary or bonuses and if investments in medical equipment are needed, as well as all the regular costs that need to be accounted for. It’s not the same as the P&L forecast because it’s the actual cash you need out the door that you’re going to need to make. The forecast needs to also consider expected patient volumes. For example, are you going to have a lot more patient visits during flu season? It’s just understanding all those nuances of your practice that is really key for any kind of forecasting ability.
The quickest way to boost cash flow is to cut costs, but for medical practices, most costs are usually salaries. Practices need to understand the costs of physicians, nurses, and office staff and be willing to make adjustments based on forecasts. A common mistake is having the same staffing all year when the volume is cyclical. In the down months, hours should be reduced. Whether to lease or buy equipment is another consideration. Likewise, buying an office space for the practice instead of leasing may make sense in some cases.
Understand Payer Contracts
Practices need to spend time understanding their payer contracts because the reimbursements are where the revenue cycle starts. Having copies of the contracts with reimbursement rates allows practices to project revenue based on past patient volume and current procedural terminology codes and to double-check those actual reimbursements match with the contracted rates. Practices should track key metrics for each payer. For example, if certain procedures are being denied but then paid on appeal 90 percent of the time, that’s something that can be discussed at the next negotiation. Eliminating denials will boost cash flow by speeding reimbursement from the payer and freeing staff time for other activities.
Collect Patient Responsibility
The system needs to also include a commitment to communicating with patients what their financial responsibilities are before the appointment and then collecting the money due while they are in the office. And more important than that, you also set up the outstanding balances from previous visits. Most offices send letters about balances due to patients but don’t always realize that the same patient might be coming in for a visit that week. One of the things that most organizations do not do well is they don’t have a firm policy and standards on how to set the plan up for the front office staff. To make sure patients can pay the practice, offer financing options. More patients are relying on high-deductible plans, putting more of the burden for payment on them rather than a payer. Be careful not to focus exclusively on the largest bills when trying to collect. It might be more expedient to offer a patient a settlement with a 15 -20 percent discount just to get cash into the practice rather than spending months trying to collect the full amount.
Improving cash flow doesn’t have to be complicated, but creating a strong financial structure can be the difference between success and failure. While you are creating a viable financial policy, we can assist you in collecting insurance and patient reimbursements. Medisys Data Solutions is a leading medical billing company providing complete medical billing services for your practice. We can handle the biggest challenge of your RCM i.e., accurate collection of insurance and patient reimbursements. To know more about how we handle medical billing challenges, contact us at [email protected]/ 302-261-9187