Managing cash flow well is essential for any business. But it’s especially important for managing cash flow in medical practices. With unpredictable income mostly due to erratic claims and payments, it can be tricky to know how much money you’ll have in the bank at any given time.
Although this may sound daunting, there are ways to forecast your cash flow and make sure your medical practice runs smoothly. Keep reading for best practices on how to make sure your cash flow conundrums remain under control.
Calculating cash flow in medical practices
By now you’re wondering: how do I calculate cash flow in medical practices?
Let’s start with a simple equation: cash flow is the net balance of cash inflows (revenue or cash moving into your business) and outflows (expenses, or cash moving out of your business) for your business at a given point in time.
While this two-part formula looks quite simple, on a practical level, the sheer volume of invoices, bills and other paperwork piling up can make it difficult to actually calculate or predict your cash flow into the future.
How to improve cash flow in medical practices : High-impact tactics
Part 1: Ensuring healthy cash inflows
1. Make sure that you’re actually getting paid for your services
Since the majority of patients depend on insurance to help them pay for medical care, the majority of the money coming into your business will probably come from outside sources. Errors with classifying patients’ treatments can result in lost claims, underpayments, or claim denials. These mistakes may cause payment delays, which can lead to cash flow issues. It’s worthwhile to take some time to examine your payment circumstances in order to determine which payers are most problematic. This could be a single payer (one specific insurance company) or an entire payer mix category. After you’ve located them, you must look into the causes of these problems. It can be beneficial to work with a qualified claims management provider.
2. Find the right payer mix for your practice
As you know, different payers — government health plans, private insurance, or self-pay, have different repayment rates. Who’s paying is a major factor for how much cash you will receive from a particular service or patient – and when you will receive it. Therefore, managing your payer mix — the percentage of patients with either government, private insurance, or self-pay – is an important step in managing your cash flow.
3. Streamline your scheduling
Appointment scheduling is a critical component of managing cash flow in medical practices. Ensure that you are optimizing the time of your personnel and facilitating patients’ speedy admission and departure. Do you allow patients to schedule their own appointments? Are you making appointments for telehealth sessions whenever you can? Can they complete the digital intake forms at their own pace? Are you also refusing to accept no-shows? Patients should be reminded—automated reminders are preferable—and should be provided with incentives to keep their appointments even in the event that they must cancel without giving enough notice.
4. Use credit or funding solutions when you need them
When you predict a shortfall of cash or need to finance a large expense, healthcare practice loans will be the way to go. These are medical practice loans that are tailored to the specific needs of medical professionals and provide access to working capital. This allows doctors to make improvements within their practice while still ensuring that their practice is running smoothly.
5. Maintain a growth mindset
While it’s important to maintain consistent cash inflows, and to maximize the cash you get from what you’re already doing, it’s also important to find and act on opportunities to expand your reach and your revenue. Whether it be medical business loans or something similar, always think about how you can be on the up-and-up.
Part 2: Getting your cash outflows under control
1. Disperse your costs over time
The things you need to run a medical practice – especially items like medical equipment can be very pricey. Equipment rental or financing programs can help you disperse this cost, giving you a bit of breathing room and predictability. And many of the leading tech services and tools you’ll need are available on a subscription basis.
2. Automate your routine operations
With today’s user-friendly tools, you don’t have to be a tech wizard to automate key processes. There are tools and tech that will put onerous tasks on autopilot – like billing, appointment booking, and even reminders. Make automation your best friend.
3. Centralize your operations
Last, but by no means least – make sure you have visibility of and control over what’s happening in your practice. Having it all available in a single dashboard helps in several ways. First, because you and your staff should not be spending time finding the information you need or spending money on redundant systems. Second, because medical practices are complex operations, with lots of different variables that affect your financial health.
Final Thoughts
In conclusion, managing cash flow in a medical practice is a challenging yet crucial aspect of maintaining a successful operation. By focusing on both cash inflows and outflows, and implementing the strategies outlined—such as optimizing payer mixes, streamlining scheduling, using financial tools when necessary, and automating routine operations—you can ensure that your practice remains financially healthy.
Additionally, maintaining a growth mindset and centralizing your operations will not only help you navigate day-to-day challenges but also position your practice for long-term success. With these practices in place, you’ll be better equipped to handle the unpredictable nature of income in the healthcare industry, allowing your medical practice to thrive.
