Manage and Improve Cash Flow in Your Professional Practice
- Changes and uncertainty in reimbursement
- Increased difficulties in accounts receivable collection as financial responsibility shifts to patients through high-deductible health plans
- Consolidation of payers creating stronger rate negotiators
- Increased complexities in coding and reimbursement rules
Recommendations to maintain healthy cash flow:
- Train your staff. Train your staff to be confident and proficient in the accounts receivable collection process. Explain to them how the billing and collection process affects the bottom line of the practice and the practice’s ability to give pay raises and bonuses. Give them the tools they need, including up to date computer equipment, to do their job well.
- Verify eligibility early and often. Collect insurance information and verify and update patient information at each patient visit. If the patient’s insurance and other information is not correct in your records, at best, payment will be delayed and at worst, payment will be denied. Because of the grace period included in the Affordable Care Act, it’s important to check eligibility at the time the patient’s appointment is made and again one to three days before the appointment.
- Collect co-pays, deductibles and prior balances due at the time of service. Due to rising costs, employers have increased deductibles and co-pays for employee medical and dental insurance plans. As a result, a critical step in maintaining/improving cash flow is to collect co-pays, deductibles and prior balances at the time of service. Let your patients know at the time they make an appointment that deductibles, co-pays and prior balances must be paid at the time of service. Verify insurance coverage prior to the appointment to allow the practice to accurately communicate the practice’s expectations to the patient for payment prior to the appointment.
- Monitor rejected claims from the clearinghouse. This allows the practice to correct claims before it reaches the third party payer, allowing for quicker payment of the claim.
- Reduce claim denial rates by managing denials. Monitor denials to determine trends so that methods of reducing denials can be developed by the practice.
- Strengthen internal controls. Check our earlier post “6 Internal Controls Your Medical Practice Needs Right Now” to prevent cash leakage and fraud.
- Speed up the deposit of cash to your bank. Utilize remote deposit services which enable a practice to deposit checks into a bank account from its office by scanning a digital image of a check into a computer and the transmitting the image to the bank.
- Benchmark your practice’s accounts receivable billing and collection process. Compare your aging schedule, net collection percentage and days sales in accounts receivable with those or your peers by using surveys from MGMA, the AMA or other organizations.
- Review practice expenses. Benchmark your largest expenses for staff and office space with those of your peers. Look for other expenses that would be easy to reduce. Remember that a dollar saved in expense will result in a dollar increase in the bottom line and cash flow. Conversely, a dollar of additional revenue will not result in a dollar increase in the bottom line and cash flow because of variable costs associated with the production of the income.
- Plan for cash flow disruptions. Every practice experiences a disruption in cash flow from time to time. A doctor goes on maternity leave or takes a leave of absence, for example. Or perhaps you know from experience that next year’s conversion to ICD-10 will entail additional administrative time and payment delays. Cash flow modeling can indicate when and to what degree you can expect a cash flow crunch. This advance warning enables you to take proactive steps to smooth out rough patches in cash flow, such as taking out a short-term line of credit.