Improve cash flow at your small medical practice
Topic: Improve cash flow at your small medical practice
Small medical practices like a dentist or family doctor face unique challenges compared to businesses in other industries. The way people regard their bills, the services they receive and their obligation to pay you back are substantially different.
Top payment challenges for health care providers
- Health care companies can’t cut off service to incentivize people to pay them back more quickly like cell phone, internet, electric and other service industries can.
- Patients often don’t prioritize their health care bills, either because they’re too large or they were unexpected and weren’t in their budget.
- Cash flow for health care practices comes from both patients and insurance, which means that practices will need to plan for multiple sources of payment for a given invoice.
Changes in the insurance industry
Every invoice will be paid partly by the patient and partly by the insurance company; therefore, you might not know until the moment you submit the invoice to the insurance company which portion is coming from where.
In addition, the percent of bills paid by patients (rather than insurance companies) is on the rise. In 2007, patient responsibility was around 12% of total revenue, according to the National Association of Healthcare Access Management (naham). In 2012, that had risen to 30%, with numbers expected to continue to rise past 50% in the next few years. Copayments have also gone up, prompting patients to put more energy into negotiating pricing.
Finally, insurance reimbursement has been dropping for years. Historically, providers have been dependent on insurance money — 80 to 95% of practice revenue came from insurance companies. Now, insurance reimbursements have been plummeting, cutting into practices’ income.
Tips for managing cash flow
According to a study by the National Center for Health Statistics, 10% of families have a medical bill they can’t afford to pay. Additionally, 25% of families have an unpaid bill and 20% have worked out a payment plan to give themselves more time to complete the payment. Medical bills are unique in that they’re often unexpected, making it harder for patients to pay them.
Unfortunately, that puts medical providers in a bind since they rely on regular payment like any other business to pay their bills. Here are some tips to ensure reliable cash flow.
Topic Discussed: Improve cash flow at your small medical practice
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