It’s difficult to understand just how challenging cash flow management for healthcare companies is until you have to tackle it yourself. People often look at the cash physicians bring in and assume staying on top of accounts payable is easy. In reality, funds are gone to wages, supplies, equipment, and overhead faster than you can blink.
The COVID-19 pandemic and subsequent economic downturn made healthcare cash flow management that much more challenging. Patients largely put medical care on the backburner, including preventative medicine. High deductible plans with minimal coverage have made it difficult for those with limited resources to get much more than diagnostic tests. Meanwhile, the cost of PPE and other essential supplies went through the roof.
While there may be no absolute solution with the healthcare system operating as it currently does, there are some things facilities can do to alleviate strain on their financial health and keep better tabs on working capital.
Cures for Healthcare Cash Flow Challenges
Just as physicians handle prevention, diagnosis, and treatment for patients, healthcare services providers can address cash flow management in much the same way.
1. Boost Production and/or Reduce Staffing
Practices lose production in many ways. Some of the most common include:
- Failing to schedule the ideal number of patients in a day.
- Overlooking procedures a patient needs that can be performed in one visit.
- Missed appointments and last-minute cancellations.
- Allotting too much time for appointments.
A single mishap might not seem like much, but let’s say you miss out on a single $100 opportunity per day. That’s $500 lost in a week, $2,000 in a month, or $26,000 in a year lost.
It’s important to work with physicians, physician assistants, nurse practitioners, and other providers to identify the ideal length of time for specific procedures and structure the schedule in a way that feels balanced to them, so each day is full but not overwhelming. Set production goals and create a scheduling framework around them.
Administrative teams must also build in processes to reduce cancelations and no-shows. Establishing a fee for these situations, and ensuring patients are aware of the charge, can help.
2. Cut Poor-Paying Insurance Companies
Working with Medicare and Medicaid services may be a labor of love, and the federal government can generally be counted on to make payment eventually, but healthcare providers must be mindful of the plans they choose to accept. Take stock of all the insurance companies your practice is contracted with, compare fee schedules, and make note of any that take longer to pay than others or routinely reject claims.
When you have a list of health insurance companies, check to see which ones are bringing you patients. If you’re not getting value from the relationship, consider cutting them or, at the very least, reach out to see if your contract can be renegotiated.
3. Update Your Fee Schedules
Administrators sometimes set up fee schedules and then forget to maintain them. That’s not necessarily a problem if you’re billing your standard fee each time and then writing off the in-network discount at the time payment is received. However, many practices bill with the insurance company’s fee schedule, then leave money on the table by billing an outdated lower fee. Update all your fee schedules on an annual basis. Then, use your annual updates as an opportunity to evaluate which companies to remain in-network or renegotiate terms with.
4. Improve Documentation and Billing Processes
One in seven claims is denied, according to AARP. Incorrect diagnostic codes and other paperwork errors account for many. A growing number of claims are being denied as not being medically necessary too.
- Ensure charts are thoroughly documented on the date of service.
- Always include details on why a procedure was necessary in the notes.
- Outsource billing if you don’t have a coding expert on staff.
- Be ready to appeal. Nearly half of those polled in the latest U.S. Federal Reserve Board’s Survey of Household Economics and Decisionmaking (SHED) said they wouldn’t be able to pay their bills if faced with an unexpected $400 expense. If your patient gets an unexpected bill, your payment is likely to come even slower.
- Consider sending patient bills as soon as insurance pays in full. Don’t wait until the end of the month to send batch statements.
- Go digital. Use an e-claims service and give patients online payment options.
- Be mindful of the No Surprises Act. The new regulation is designed to help people who seek emergency health services and those who see an out-of-network provider in an in-network facility avoid unexpected bills for low insurance reimbursements. It can also impact your uninsured patients when you provide them with good faith estimates and affects collections. A single violation can result in a $10,000 fine, so every health care provider should become familiar with it and ensure their team has proper training.
5. Monitor Unsent Claims
Once providers complete their documentation on the day of treatment, practices in the medical industry tend to have fewer unsent claims. However, they can still be overlooked. Set a hard limit for the number of days a claim can go unsent, such as ten days, as well as a soft limit to confirm most claims are sent, such as within 48 hours of service.
6. Target Claims 60+ Days Overdue
It’s common for insurance companies to pay up to 45 days after a claim is submitted, but once they hit the 60-day-mark, they must be investigated. Likewise, patient bills should be paid within 30 days. Your software should make it easy to identify outstanding payments at 30, 60, and 90+ days.
Sometimes medical practices collect more or collect faster when additional team members are enlisted to help collect. Incentives for collection may also help. If you’re still struggling to get your receivables paid promptly, consider outsourcing your billing.
7. Explore Ordering Options
Dig into how your company is handling its ordering to see if there’s some wiggle room. For example:
- Can you split up orders to reduce the burden and keep your working capital reserves steadier?
- If your vendor offers bulk discounts, could you order more?
- If you have a good relationship with your vendor, are they willing to give you longer payment terms?
- Are other vendors offering similar products at lower prices?
8. Have a Short-Term Funding Solution Ready to Go
Banks can often be good funding sources if you’re well qualified and need a loan to open or expand a practice. However, they’re not always ideal when coping with cash flow issues because providers are sometimes debt-averse, and they take an extended period to close. Even PPE loans took weeks to clear after Congress approved them.
Because of this, it’s essential for businesses in the healthcare industry to have backup short-term business funding solutions ready before they need them. Opening a line of credit is one option, but it typically only works for well-qualified applicants. Another solution is invoice factoring. When you work with a medical factoring company like Viva, you submit your unpaid B2B receivables to them and get immediate payment. It works well when your money’s tied up by Medicare, Medicaid, or private insurance companies that are slow to pay, and there’s no debt to pay back because the payments coming from claims are covering it.
Get a No-Obligation Healthcare Factoring Quote from Viva
If your healthcare company is currently struggling with cash flow issues or might in the future due to the pandemic, economic shifts, rapid growth, or any other reason, become established with Viva to have funding ready when you need it. Invoice factoring is a simple, easy, short-term funding solution that can help solve your healthcare business’s cash flow problems. To get started, request a complimentary rate quote.
- 10 Corporate Compliance Areas Every Business Should Address - September 28, 2022
- 10 Collections-Simplifying Accounts Receivable Management Tips - August 4, 2022
- 7 Simple Tips to Help You Manage Payroll Effectively - June 20, 2022