Physician practices operate in a unique environment of financial asymmetry. It would be unthinkable for a customer to go to the grocery store and leave without paying. It would be equally far-fetched to expect your electric company not to cut the power off if you went months without paying your utility bill. Yet physicians are routinely paid late (often very late, and sometimes never) by both the insurance companies they enter into contracts with and their patients. Imagine being 90 days late on your mortgage and telling the bank that you are “still processing” your payment- yet this is what physician practice staff hear from insurers frequently.
While the typical practice’s insurance revenue is slow to trickle in, physicians don’t have the luxury of delaying payments for staff wages, rent, supplies, utilities, and taxes while they wait. This uneven flow of cash in and out of the practice is a recipe for cash flow problems. Fortunately, part time CFO services can help your practice better position itself to understand and manage cash flow.
Managing Cash Inflows from Patients
The January 2013 Census compiled by America’s Health Insurance Plans showed that 15.5 million people in the U.S. were covered by health savings account/high deductible plans. This represents annual growth of approximately 15 percent. The reality for physician practices is that many of their patients have high deductibles they either can’t afford or have not planned for. The Kaiser Family Foundation reports that 72 percent of workers with single coverage have a deductible, the average of which is $1,097, with a high deductible plan average of $2,086. Meanwhile, the Huffington Post cites a Bankrate survey showing that more than a quarter of Americans have no savings or reserves at all. Since a large percentage of patients lack the means to meet their obligations under their health plans, any practice aiming to optimize its cash flow needs to pay attention to up front collections.
One way to help patients meet their obligations as they are incurred is to offer multiple, convenient methods of payment. For example, allowing patients to pay with credit and debit cards, pay online, or to finance more expensive procedures through CareCredit or other financing options helps to strike a balance between keeping patients coming to your practice while not getting stuck with bad debt after treating them. While there are fees associated with offering some of these methods of payment, generally they are far less than the costs of uncollectible accounts receivable. CFO Business Growth Solutions is able to help you find and quantify the return on several options.
Another key to maximizing upfront collections is to make sure that your staff knows what the patient owes when the patient arrives. Practice staff who lack confidence in their ability to determine patient responsibility often will not collect from patients at the time of the visit because they feel unable to defend the amount they are asking for. Payer and contract “cheat sheets” or spreadsheets with common codes billed to high volume payers are a good starting point for smaller practices lacking more sophisticated patient responsibility estimator software. Often practice staff find it difficult to identify a particular plan from the insurance card, so making a “cheat sheet” with examples of the faces of cards for various plans can be helpful.
2013 Census. America’s Health Insurance Plans. http://ahip.org/News/Press-Room/2013/Health-Savings-Account-Enrollment-Reaches-15-5-Million.aspx
Berman, J. (2013). 75 Percent of Americans Don’t Have Enough Savings to Cover Their Bills for Six Months: Survey. Huffington Post. http://www.huffingtonpost.com/2013/06/24/americans-savings_n_3478932.html
Rae, M., Panchal, N., ad Claxton, G. (2012). Snapshots: The Prevalence and Cost of Deductibles in Employer Sponsored Insurance. Kaiser Family Foundation. http://kff.org/health-costs/issue-brief/snapshots-the-prevalence-and-cost-of-deductibles-in-employer-sponsored-insurance/
CFO Business Growth Solutions, LLC is a provider of part time CFO and interim CFO Services, Debt Restructuring and Management Turnaround, Business Intelligence Applications, Due Diligence Support Services plus Nationwide Accounting & Bookkeeping Services. For more information go to http://www.cfobgs.com/