Medical practices need to generate enough cash flow to keep the doors open and pay the bills. One of the key factors in ensuring positive cash flow is billing in a timely and efficient manner. This means submitting clean claims to insurance companies and getting reimbursed in a timely fashion. In addition, practices need to have efficient collections policies in place to ensure that patients pay their portion of the bill in a timely manner. To understand what is cash flow in a medical practice, you need to see how your claim submission process is progressing and what factors are there that affect your cash flow the most.
What is Cash Flow in Medical Practice?
Factors affecting cash flow
In medical practice, cash flow is the money that comes in from patient treatments and insurance reimbursements minus the money that goes out for expenses like staff salaries, rent, and supplies.
One of the key factors in ensuring positive cash flow is billing in a timely and efficient manner. This means submitting clean claims to insurance companies and getting reimbursed in a timely fashion. In addition, practices need to have efficient collections policies in place to ensure that patients pay their portion of the bill timely.
The patient base can be defined as the number of inpatients and outpatients that a hospital treats on a daily basis. The size of the patient base can have a direct impact on the amount of money that a hospital brings in on a daily basis. Therefore, it is important for hospital administrators to understand the factors that can cause fluctuations in the patient base in order to maintain a healthy cash flow.
The mix of in and outpatients that a practice sees have a greater margin of affecting a practice’s cash flow. For example, if a practice sees a lot of patients who are covered by Medicaid, they may not generate as much revenue because Medicaid reimbursements are typically lower than those of private insurance companies.
Changes in weather affecting cash flow
There are a number of factors that can cause fluctuations in the patient base. One of the most common factors is the time of year. Hospitals typically see an increase in patients during the winter months due to the increased incidence of colds and flu. They also see an increase in patients during the summer months due to the increased incidence of injuries from outdoor activities.
Hospitals typically see an increase in patients during holidays due to the increased number of people traveling.
Local economy affecting cash flow
Another common factor is the local economy. If the local economy is doing well, then more people will have disposable income to pay for health care. However, if the local economy is struggling, then people may be less likely to pay for health care. This can be a particular problem for rural hospitals, as the local economy may be more volatile than the national economy.
One of the most obvious ways that expenses can affect cash flow is through an increase in the amount of money that a medical practice has to spend. This can include the cost of medical equipment, drugs, medical accessories, etc. If a medical practice or even a hospital has to spend more than it did in the past, this will obviously impact its cash flow.
Top payment challenges for healthcare providers
In the healthcare industry, providers are constantly facing new challenges when it comes to payments. From coding and billing new regulations to changing reimbursement rates, it can be difficult to keep up with the ever-changing landscape.
In addition, with the reimbursement rates going down with each passing year, this would affect the healthcare industry, especially private practices. Increasingly in the future, many patients owe the remaining balance from their portion and are reluctant to pay for years.
MGMA report says, 30% of patients have a healthcare facility and leave the practice without paying a penny. Due to the increasing number of patients, it gets difficult for the providers to send unpaid invoices to the patients. The same MGMA report states that about 3.3% of bills are paid by the provider in a year until the reimbursement is fully made.
This does not sum up the challenges. Another challenge that providers face is dealing with the technological requirements due to the advancement in the healthcare industry which made it even more critical to keep up with the trend. To survive with other practices, many providers hire staff to meet the necessary requirements for preparing, submitting, and claiming bills and claims by using correct codes. As they see that transforming themselves according to the guidelines might not be suitable for them and it will only delay the process.
How to Manage Cash Flow Effectively
Cash flow is the beating heart of any business either healthcare or any other business. Without it, a business will quickly grind to a halt. That’s why it’s so important to manage your cash flow effectively so that you always have enough money on hand to meet your healthcare obligations.
There are a few key things you can do to manage your cash flow effectively.
- First, you need to have a clear understanding of your incoming and outgoing cash flow. This means tracking all of your revenue cycle and expenses so that you know how much reimbursements are unpaid, paid, and how many claims you have to submit.
- Second, you need to establish a strong system of financial controls. This means having in place policies and procedures for things like filing claims, invoicing, payments, and collections. By having strong controls in place, you can avoid surprises and better manage your cash flow.
A study shows that more than 10% of patients have reached the bill for medical services that they usually cannot afford. The same study says, 25% of families keep their medical bills unpaid and over 20% want payment plans from a medical front desk to have options for payment plans.
Here are a few tips for how to manage cash flow effectively and ensure reliable payments:
– Reduced Supply
It’s quite common for doctors to get a bulk of medicines and medical accessories to store for future use. They are unnecessarily a huge expense and occupy greater storage which can be reduced. However, by keeping an eye on the necessary equipment and drugs, a significant expense can be saved from wastage.
– Collect Payments Upfront
It would be better to collect payment or make sure the collection of payments is made as early as possible. It is also important to make payment methods easy for out-of-pocket patients to recover the unpaid amount.
Whether a private business or healthcare facility, providing online payments, credit card options, or checks and cash options makes it safer and easier for patients and clients to make transactions easily and safely.
Cash flow management for healthcare is getting more complex each passing year. Practices are almost eliminated from the race who have not upgraded themselves with the flow. Hence, not just their cash flow gets affected but their future. To ensure a proper and effective cash flow, it is always mandatory to look for provided guidelines and see how they work in controlled strategies.