It was a big surprise to many people when the news broke earlier this year that many American doctors are going broke.
The reasons were many. Most physicians blame their cash flow issues on Medicare reimbursement cuts for certain major services. Others blamed changes in regulations and increased drug and business costs. Still others claimed it was the business acumen, or lack thereof, that many of these doctors possessed. A private medical practice is a business, and physicians do not go to business school.
So what can be done? The question is not “What is causing the problem?” Rather it is “What can we do to adapt?” The whole problem in most cases is cash flow. How can cash be better managed so that medical practices reduce their difficulties paying the bills?
Beef Up Collections
Step up collections efforts. Do what needs to be done to get on top of insurance claims and private collections. It may mean the actual physician making calls after hours or hiring an extra person. Another option is to evaluate the upfront pay policy. By having a dedicated financial person to determine co –pay at the time of service, the patient’s portion can be collected immediately rather than billed out. This front end collection can cushion cash flow quite a bit.
If collections are a real issue, factoring is an option. This involves selling receivables at a discount to get the cash. The collections agency they are sold to is then responsible for collections. The physician has the money and is free to use it without further concern.
Alternative Lending Sources
Banks and credit unions are not as loose with small business lending to private medical practices as they once were. Alternative lenders, however, offer plenty of options from short-term loans to revolving lines of credit. A line of credit can be a lifesaver as it can cover bills immediately while cash is tied up in collections. The interest rates can be a little higher than the rates of small business loans from banks, however.
Business Lines of Credit
Securing a business line of credit available is like having money for a rainy day. Use it when times are bad. Pay back the loan when times are good.
Doctors are going broke, but the key is not to stop whatever it is that is causing the financial decline. The key is for the doctors to learn to adapt for survival amidst the many factors that are causing this decline.
This article was submitted by Faith Stewart, he has a BBA with a major in accounting and spent 10 years working in the various aspects of accounting and finance before pursuing her passion for writing.