The Case for Cash Flow
Cash flow….some nights, I would toss and turn for hours, wondering whether or not I would be able to make payroll, pay the lab vendors, or even, pay the rent on my office. And then there was the Internal Revenue Service. So many times during my early years, I had to scrimp and scramble to pull together the payment to send into the IRS.
It was stressful. It was humbling. I knew I could do better.
That was my story during the first fifteen or more years of my medical career. It wasn’t that my practice didn’t generate profits, it did!
It wasn’t that my patients wouldn’t pay me, they would!
It certainly wasn’t that my medical practice was slow. I would sometimes see as many as one hundred, yes, one hundred patients a day.
What kept me up at night, the Gordian knot which had me bound and tied, was cash flow. My cash flow was weak, and it was strangling my ability to operate my medical practice in the way I wanted.
My bills were always paid, but on the late side.
My income taxes generally required an extension.
My staff was unable to earn an increase in their wages.
Like I mentioned, it was humbling. I needed to figure a way to grow my medical practice and improve cash flow. But how?
Eventually, I developed a system that freed me from the conundrum, forever. Since then, I have had the good fortune to put the financial worries that used to keep me up at night to rest. Permanently.
Now, I have a system for paying bills on or before they are due.
Today, my income tax payments are sent like clockwork, and I often receive a tax refund.
My staff can count on being rewarded handsomely for their diligent efforts and enthusiastic work.
When I fixed the problem with cashflow, my practice was able to grow, profitably.
So how did I do this?
As I mentioned, there is a system that I developed and put into practice. It has worked beautifully for more than fifteen years.
The linchpin was addressing and ending the dependence on insurance reimbursement that I had created within my medical practice. That’s right, I removed medical insurance reimbursements from my medical practice, and cash flow immediately improved.
Not only that, but can we talk about the efficiencies gained by taking this step? By eliminating insurance from my procedures, my staff and I began to
• Ask for, and receive payment IN FULL at the time my service was rendered,
• Eliminate the insurance claims administration,
• Eliminate precertification, preauthorization and post treatment paperwork,
• Drastically reduce accounts receivables,
• And dramatically increase the cash flow, cash on hand, and cash in my savings account.
There is a systematic way that you can incorporate this strategy into your medical practice if you are experiencing any of the financial stress similar to that described above.
To know whether cash flow is holding your practice back from its full potential, answer these questions:
1. How many insurance plans do you currently accept within your medical practice?
2. How much of your monthly charges are pending insurance reimbursement?
3. How old are your average accounts receivables?
4. How much time does your staff spend trying to collect from insurance companies?
5. What percent of your revenue has to be written off as uncollectable?
6. How many patients must you see daily to pay your overhead expenses?
7. What percent of your payables are older than 30 days?
8. Are you current on your estimated tax payments to the IRS?
9. Are you able to compensate your staff well and give merit increases when due?
10. Are you able to compensate yourself as well as you should?
It has often been said, the illusion of knowledge is the barrier to progress. Until you answer the above questions with facts, you cannot gain clarity, make new choices, or progress!
I believe you need a coach to build a successful medical practice so that you can have more time, more money and more freedom to enjoy your life.
If you need assistance, Hotze Elite Physicians can help.