One of the initial steps you would use to determine your profit margin ratio is the analysis of cash flow at your practice. A better understanding of your practice’s financial health can be achieved through a thorough analysis. Cash flow is, simply put, the money that moves in and out of your practice through a given time period. A healthy cash flow should be considered a core part of your practice, without which it cannot function efficiently. Without a strong cash flow, every aspect of the practice, from patient treatment and care to practice management, can be affected adversely. One of the best ways to improve your cash flow is to streamline your payment processes.
A crucial first step would be to identify any challenges in your cash flow.
So, what are some of the common challenges affecting a practice’s cash flow?
Time and labor constraints
For a practice, handling its revenue cycle along with patient care and treatment can be a lot more stressful than one would think, especially with time constraints. With such an imposing workload, your staff may find it hard to focus on patient payment collection. Time constraints, along with the limited staff, can further slow down the payment collection process at your practice, thereby reducing the cash flow to a great extent.
High overhead costs
Dental practices typically have relatively significant overhead expenditures, including costs for treatment, equipment, and facilities. It takes a lot of money to keep your practice going and there will obviously be a high chance of increased overhead expenditures. Your overhead costs may be reasonable depending on the services you provide and the revenue you make. However, on the off chance that it does rise, a decreased cash flow would be imminent.
Dental insurance plans typically have a time limit, and not sending out the claims on time can lead to delays in payments. If any of the steps in the revenue cycle slow down, it could completely slow down your payment collection process. The situation is made worse by the fact that insurance companies frequently alter their billing policies and codes, which makes billing itself more challenging. This further complicates and delays the payment process.
Claim denials and bad debts
Claim denials are one of the most frequent causes of a decline in cash flow at a practice. Submitting clean claims can be a real challenge for your staff, especially with the constantly changing dental insurance policies and rules. A simple error can lead to denials, which, if not handled properly, can turn into bad debts. These bad debts end up disrupting your practice’s cash flow.
Like any other problem, cash flow issues can be addressed if they are identified early, and appropriate measures are promptly implemented.
Here are some ways in which you can improve cash flow at your practice:
Track and analyze your cash flow
The first step in improving your cash flow is understanding and breaking down what your current cash flow is like. The more information you have on your practice’s cash flow, the more prudent decisions you make. This helps you take preventive actions before any difficulties strike. Take your time to carefully examine the trends in your cash flow to see what is performing well and what needs to be improved.
Develop a checklist
Creating a checklist to make sure that the billing process is carried out accurately and within the given time frame can solve the payment delay to a certain extent. Having a checklist for billing processes can help staff members understand the billing process a little better and carry it out correctly. This can, to a greater extent, help your staff manage the billing process along with patient care and treatment.
Patient-friendly billing and collection
One of the responsibilities of your practice should be to make sure that patients have as great an experience as is possible with your services and at your practice. Remember that your patients’ primary focus would be on the service and not on the nuances of revenue cycle. They may not understand why making a payment can get complicated. You definitely do not want patients opting out of your services simply because your payment process is complicated for them. The simplest solution for this is to offer your patients a variety of payment options. Be sure to also inform your patients of their payment responsibilities in advance, so that they are not surprised at the time of payment and are not forced to spend out-of-pocket.
Follow up on payments
Ensure adequate follow-up is done in the case of pending payments. Among the gamut of responsibilities, they may have, making payments for one service may not be a priority for them. Keep a track of pending payments and make sure that you get paid for every service delivered.
Payments from insurance companies is also another component of your cash flow. Perform quality-checks before you submit claims so that the probability of accepted claims rises. In the case of denials, follow-up and resubmission need to be done as soon as possible in order to avoid unpaid services.
A single claim denial or late payment may not seem like a significant concern at first, but over time, these could accrue to cause serious cash flow problems and reduce your revenue significantly. Cash flow is what keeps your practice running, and not paying enough attention to it can be more disastrous than you think. If a healthy practice is your goal, now is the time to focus on enhancing your cash flow.