- Many healthcare practices face cash flow issues for reasons beyond their control, including insurance reimbursement delays, seasonal fluctuations that complicate forecasting, and reduced cash flow earlier in the year as patient responsibility increases due to the prevalence of high-deductible health plans.
- Creating a stronger financial foundation may help your healthcare practice stabilize its cash flow and reduce the impact of billing delays. One way to achieve this may be to ensure patients are prepared with their payment at the time of their appointment. Training staff and using modern patient payment systems may help improve overall non-payment rates and collect funds faster and more cost-effectively.
- Even with proactive management and planning, cash flow interruptions are unavoidable. Banking solutions, such as business lines of credit, fraud protection tools, and cash flow dashboards, may help minimize these gaps.
Healthcare practices, including those privately held, may depend heavily on consistent cash flow to maintain their daily operations and provide patient services. Cash flow interruptions may cause difficulties in meeting payroll and paying vendors promptly, which may ripple into patient experience and care quality. To help you build a stronger financial foundation, we’ve created a roadmap with strategies and banking solutions that may better equip your practice for cash flow fluctuations.
Common Causes of Cash Flow Issues in Healthcare Practices
Some of the more common reasons for cash flow issues in healthcare practices are delays in insurance reimbursements, rising patient responsibility, and administrative inefficiencies. Let’s take a closer look at these factors and others to gain a better understanding of possible solutions.
- Slow insurance reimbursements: Insurers may take weeks or months to pay, and denials may drag out reimbursements longer.
- Coding and claim errors: Even small mistakes made during the billing process may delay payments.
- Patient responsibility growth: A growing number of patients have high-deductible plans. That means practices now collect more money directly from patients, leading to payment delays as patients struggle to meet large deductibles.
- Outdated billing processes: Some small, independent practices may still rely on printing and mailing paper invoices instead of submitting them electronically. Others don’t use automation effectively to help improve patient payment rates.
- Unpredictable patient volume: Seasonal fluctuations, such as flu season and elective procedure timing, may make accurate cash flow forecasting more challenging.
While just one of these causes of cash flow disruptions may be enough to leave practice owners financially strained, the reality is that many healthcare practices may face several of these issues simultaneously.
3 Strategies To Reduce Billing Delays and Accelerate Revenue
Having the right systems in place may provide visibility and predictability into your cash flow, helping to prevent interruptions or reduce the severity of fluctuations. There’s no one-size-fits-all solution across healthcare practices, but here are some top strategies to consider that may help you have fewer billing delays and faster revenue cycles.
Automate and Streamline Billing Processes
Some ways you might be able to automate and streamline your healthcare operations include:
- Optimizing your existing practice management systems. You can often handle scheduling, insurance eligibility verification, claim submissions, and payment posting from the same practice management software platform. The next step is moving toward advanced automation, such as automatically pulling billable services from physician notes to cut down on missed charges and manual data entry.
- Utilizing medical clearinghouse tools that automatically check claims for errors before submitting, cutting down on the number of denials. These third-party services act as a checkpoint. They flag missing or incorrect information so that staff may correct it before sending the claim to the insurer.
- Using predictive payment analytics to flag individuals who might be at higher risk of non-payment at the time of service, such as self-pay patients and those on high-deductible health plans. Your staff can help patients prepare by providing cost estimates and collecting copays or partial balances upfront.
Improve Insurance Coding Accuracy
Regular internal chart audits may help improve the quality of patient notes. For example, you may decide to audit 10 random charts per month for each of your physicians. Billing codes are based on what’s written in the patient chart, so accurate and complete patient charts are essential to improving coding accuracy.
Verify Insurance Eligibility Upfront
Verifying insurance eligibility at least one day before the patient’s appointment may help reduce surprises for both staff and patients. Moreover, making sure to follow insurance pre-authorization protocols for procedures and high-cost imaging may help to prevent denials after care is already given.
How To Strengthen Patient Collections and Payment Processes
Reducing billing delays is a crucial step in potentially mitigating cash flow challenges. Another approach is to strengthen your patient collections and payment processes by being proactive and transparent in your billing and collections. Here are some ideas that may help you do that.
- Offer upfront estimates and transparent pricing: Your patients may be more willing to pay when they know exactly how much they’ll owe beforehand.
- Flexible, digital payment options: These make it easier for patients to pay, potentially reducing the time it takes to settle accounts. Consider offering payment plans, keeping credit cards on file, and accepting mobile pay.
- Provide self-payment portals: Create secure online account management portals that allow patients to view their charges and balances and make payments at any time. This gives patients more ownership over managing and paying their bills and helps reduce administrative follow-up.
3 Important Financial Tools to Improve Cash Flow Stability
Having the above systems in place may help with cash flow fluctuations. Still, there’s likely no strategy that will completely close the gap between when services are rendered and payments received. However, some financial tools may help improve your cash flow stability when other strategies aren't enough. Below, we go over three of the most important ones to ask your Healthcare Banking Relationship Manager.
1. Business Lines of Credit and Short-Term Working Capital Loans
These financial tools may help bridge insurer reimbursement delays and ensure that there are no disruptions to payroll, rent, or supply purchases. It may also help cover the seasonal cash flow fluctuations mentioned earlier and enable your healthcare practice to maintain a stock of critical clinical supplies.
2. Cash Flow Tools and Digital Dashboards
Digital cash flow management tools are invaluable for monitoring and planning your cash flow. A basic cash flow management tool might allow you to:
- Schedule your bill payments
- Send invoice reminders
- Make transfers
- Track expenses and compare to prior months
More robust ones may have additional features like:
- Comparing how your actual and projected transactions impact your business’s finances
- Running different present and future financial scenarios
- Monitoring employee spending through individual purchasing cards
- Automatically forecasting your payment for your bank credit card when your statement is available
3. Fraud Protection Tools
Fraud protection tools may help safeguard your practice's bank accounts. Tools that verify transactions, stop unauthorized withdrawals, and send real-time transaction alerts may help catch fraud events before transactions clear. By flagging irregular activity early, these services may help your healthcare practice avoid unexpected cash flow shortfalls.
Building a Healthier Financial Foundation
Cash flow issues are a persistent challenge for healthcare practices, particularly for privately-held healthcare practices, where steady cash flows may be crucial to ensuring smooth practice operations and seamless patient care. However, combining strategies like modernizing billing processes and leveraging banking solutions may be helpful in stabilizing your practice's cash flow.
PNC is a leader in providing solutions for the healthcare industry. Talk with a PNC HealthCare Business Banker today to discuss which solutions may best help minimize your cash flow issues.
