Business

Tough economic times call for vigilant business sense

A column answering your questions about the business side of your practice

By Karen S. Schechter amednews correspondent— Posted Dec. 1, 2008.

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Question: First it's cuts in reimbursement. Now we are experiencing an economic downturn that really has me worried about the future of my practice. What steps should I take to address my concerns?

Answer: This is a real concern for all small-business owners, and physicians have the added component related to reimbursement, including the increase in cash collections, thanks to health savings accounts and high-deductible insurance plans that employers tend to purchase in order to control benefit expenses.

Of course, the economic situation will impact physicians differently depending on specialty. Practices that rely heavily on elective, cash-based procedures and services may experience a greater decrease in revenues. Smaller practices that rely on credit to purchase supplies and equipment may struggle with an increase in expenses and a decrease in availability of credit.

In many ways, physicians should continue business as usual -- assuming that there are policies, controls and processes in place to ensure maximum revenues and appropriate expenditures. This means that consistent efforts should be made to bill and collect payment for services on a timely basis.

Practices should strive to maintain an accounts-receivable ratio of 1.0 to 1.5. This means that the average time to collect on an account is 30 to 45 days. No more than 20% of the accounts receivable should be greater than 90 days old, and the majority of accounts older than 90 days should be patient, not insurance.

Also, take a hard look at the managed care contracts. Those that are leaving the practice to just break even should be evaluated as to whether to continue participation.

It also is important to continue to monitor expenses, particularly the larger ones, such as salaries, supplies, drugs and benefits.

Look at your staff. Everyone on the payroll should be productive and have a positive attitude. They should support your values and the mission of the practice. Continue to monitor overtime and absenteeism, as these are additional costs to the practice.

Review vendors and make sure the practice is getting the best prices on supplies, drugs and other items, and that early payment incentives are available and used.

As the economy takes a plunge, physicians need to take control of their businesses. Typically, medical bills are the last on consumers' lists.

If your patient population is primarily in managed care, then co-pay collection requirements must be strictly enforced. Patients who self-pay or have indemnity insurance plans should be required to pay for services upfront, with the practice refunding any overages once insurance has paid. Consider ramping up the insurance verification process to minimize potential lost revenues.

When patients are struggling financially, they are more apt to cancel appointments or be no-shows. This affects the practice's bottom line, and perhaps more important, the lack of compliance could have a negative impact on the patient's health.

One way to prevent this is to enforce appointment-reminder procedures. If you don't have the staff to do this every day, then use technology.

On the subject of patient compliance, many patients, especially those without pharmacy benefits, may not want (or be able) to buy their medications. Find ways to work with the drug companies to make sure those patients get the help they need.

Don't forget that some of the people who are struggling might be your own employees. Work hard to maintain a positive atmosphere and assure them that they have job security as long as they, and the practice as a whole, continue to be productive.

With that in mind, now is the time to make sure internal control procedures are tight so that there is no opportunity for someone to embezzle money in order to help pay their own bills. Remember, these controls apply to the entire practice, not just to staff members who are handling money.

Finally, take a look at the practice's short-term strategic plan. Even though moving to a new location, adding another provider or purchasing new equipment might have seemed feasible six months ago, it might not be the best move now.

Consult with your advisers to make sure you are employing effective tax and money management strategies to keep you on a forward-moving path.

Karen S. Schechter amednews correspondent—

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