How many times have you asked one of your patients the question: when was the last time you had a checkup?
This is a common question physicians ask patients every day, in every type of practice. A checkup gives the physician an overall picture of a patient’s health status. The information gained will be evaluated, and a plan of action will be put in place, taking the necessary steps to improve the patient’s health.
As a physician and business owner, when was the last time your practice had a checkup? Is your practice suffering from a “cash crunch”? If so, you could have a serious problem which could put your business on life support. Do you need a plan of action to improve the health of your practice?
Cash crunch refers to reduced cash flow, as a result of an inadequate revenue cycle management program. You may ask, What is revenue cycle management? Basically, it is setting up controls to ensure that you get paid for your services in a timely manner. As with many health crises, we often ignore the symptoms until we have a major problem. A heart stops when the blood flow is interrupted and a business fails when the cash flow stops. While it may be difficult to run a practice and manage a business at the same time, it needs to be done. Taking a head in the sand approach doesn’t work for the health of a patient, nor for your business’ health.
Four common mistakes, in thinking, that medical practices often make regarding cash flow are:
It’s normal to have cash flow problems.
If cash is coming in and I can make payroll and pay the bills, there’s no cash flow problem.
It’s normal to have revenue peaks and valleys.
I don’t need to worry because I have an office manager and accountant watching my finances.
If, as a managing physician, you have ever uttered one, or more, of the above statements you are probably in denial. Just as a patient who ignores your medical advice to get a checkup before their circulatory system clogs up and fails; the same can happen with your practice if your cash flow pipeline is clogged.
So, what steps do you need to take to make sure your practice is vibrant and healthy, regardless of the overall economic conditions? Actually, the process is simple; it’s the implementation that can be difficult and, in some cases, painful. No matter what systems you put in place, you will need to make sure you have the right people in the right jobs.
Your processes will fail if you have the wrong personnel on your team.
The two areas that need to be analyzed are your human capital, as well as your cash flow pipeline.
While this article is meant to point out the importance of cash flow, the life blood of your business, it would be remiss if I did not mention the extreme importance human capital has regarding the success of your practice. (Our next article in this series will be dedicated to Human Capital).
What are some signs and symptoms you may have a cash flow problem?
Slow insurance reimbursements
High rejections rates
Expensive medical billing costs and claims processing
Late or no patient payments
You can easily address these problems by making sure your office has a prompt, error-proof, data gathering system and a mechanism for insurance verification, before the patient arrives at your office. If you discover a patient has no coverage, it is important to inform the patient that the appointment will need to be a cash visit or a patient payment plan may be set up through an agreed upon monthly bank deduction or credit card charge.
By verifying coverage your practice can improve its first time submission denial rate; a denial rate over 3 percent is indicative of a cash flow problem due to resubmission costs. Time spent managing denials, can easily be in the thousands of dollars. Claims denial costs are most often a result of improper verification and coding errors, which can create cash flow issues or lost revenue due to improper or under-coding. Of course, over-coding can be a problem as well, due to substantial fines from Medicare and Medicaid.
Spend some time and think about the health of your practice, as it relates to your cash flow pipeline. It starts with your current or new patients, moving along to service delivery, patient visits, and then collecting money for services in a timely manner. The cash doesn’t flow into your practice until all of your expenses are met.
To put everything in simple terms, think of a store owner who buys a product for $100.00 and sells it for $140.00, which results in a gross profit margin of 28 percent. The owner needs to pay store employees’ salaries, rent and operating expenses out of the $40.00 before a net profit is realized. In the same way, a medical practice needs to pay all of its expenses before realizing a profit. It is essential to start the revenue cycle off correctly from the beginning, by taking the right steps:
collect accurate patient data
verify insurance eligibility
insure error free coding
timely billing
strong expense control
Many practices are achieving positive cash flow results by outsourcing their claims and billing activities, utilizing patient payment plans, auditing current and past coding procedures, evaluating aged accounts receivables and instituting current collection techniques.
It is important to stay on top of the latest business developments and keep an open mind regarding current practice management technologies that may support you in maintaining a healthy medical practice.
Remember, good revenue cycle management is simply using current proven techniques to assure that you get paid for the services you provide and starts with the patient initial encounter.
David Williams, RN, is CEO of RegisterPatient.com a company specializing in medical office patient work flow and efficiency, using the latest in Health IT. He can be reached at david@registerpatient.com
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