Managed care, Medicare and Medicaid reimbursements, and the Affordable Care Act (ACA) all present challenges for a medical practice. On the other hand, many problems that arise are self-inflicted. Is your medical practice not performing as well as expected? Are revenues dropping? Are you having problems covering costs? Take a hard look at your practice and diagnose the problem. To help put you on the road to recovery:
1. Improve cash flow
Follow three basic steps to improve cash flow: First, make sure you’re collecting outstanding accounts receivable. Second, prioritize your disbursements, with mandatory expenses first, such as payroll and payroll taxes. Third, ensure your cash reimbursement projections are realistic.
2. Cut costs and control expenses
It’s time to be tough. Are there unreasonable overhead expenses or unnecessary luxuries? Can you renegotiate leases?
3. Discharge unprofitable patients
Review your pricing strategy. Do you have an unusual number of unprofitable, nonpaying, or “pro bono” patients? If possible, it might be time to let them go.
4. Turn around debt/cash flow
Make sure your practice has the necessary cash to finance a turnaround. This can be a combination of “turnaround debt” and equity capital. Clearly define requests for turnaround funding in terms of amount, what it will be used for, and the repayment plan.
5. Work with creditors
If you’re bleeding cash, stop it as quickly as possible. If you have unpaid debts to creditors that will hurt the practice, deal with it. Work with creditors — they also want customers to be solvent rather than declare bankruptcy. Share a comprehensive turnaround plan and reschedule payments.
6. Find partners
You might need to hire a turnaround professional. He or she will be able to unemotionally assess the problems and spot issues that you may not see.
7. Measure the turnaround
Early turnaround is usually about correcting problems. The later stages are about profitability and restoring equity. It’s imperative that you evaluate each of these steps to determine how well it worked, or is working.
8. Rebuild credit
Pay bills promptly. Make sure creditors consistently report your practice’s payment history to the credit bureaus. Contribute to your practice’s credit profile.
9. Work with your local bank
Your local bank — the one that receives your deposits from patients and insurance companies — is a good resource. They want to help.
10. Develop a new plan
Think about the old saying: The definition of insanity is doing the same thing over and over again and expecting a different result. The best prescription for an ailing practice is to take a look at your business plan, identify the processes that got you into trouble in the first place, and try something new.
Contact one of our financial professionals TODAY to learn more about how we can take you to the next step.