Where's the money? It's a good question to ask to understand your cash flow

November 1, 2007

Almost any medical practice is prone to ebbs and floods in cash flow. But when the decline in revenue becomes a downward spiral and you're strapped for cash, there is cause for major concern.

Finding the root cause of cash flow problems, and understanding what actions to take requires focusing on practice performance, productivity, and accounts receivable.

When work that has been performed has not been reported or entered into the practice management system, the result is a negative impact on revenue. I recall a high-profile practice I consulted with a few years back that ran into this problem. Stacks of charts with accompanying encounter forms were sitting on a physician's desk. When I began to review them, I quickly discovered that a number of these were for services rendered 2 or 3 months ago, and the dollar amount was staggering. The physician simply hadn't completed the encounter forms and submitted them for data entry. He was doing what he does best, practicing medicine. Sure, the paperwork is a nuisance, but it's necessary to get paid for what you do.

The culprit of delayed charge reporting often lies in hospital services, where the larger dollars exist. Urologists should strive to work in "real time" and record services as they are performed. Technology is making this easier as we move to handheld reporting devices and get on board with electronic medical records.

Once the physicians report their charges, it's equally important that staff take responsibility to expedite recording and submitting charges. This means getting accurate demographics from patients, verifying insurance eligibility, and accurate and timely charge entry. Best practice performance gets charges in the system the day the service is performed and billed to the third party the following day, with perhaps a 24-hour delay for hospital services.

Practice productivity

We understand charges are down if the services performed are not being reported, but what other reasons would cause a decline in charges?

Technology is marvelous, but urologists planning to implement EMRs need to understand that there is an adjustment period that results in lower production during the period the physicians learn to enter their documentation in the computer as services are performed. It may take several months to get production up to speed and see the volume of patients you did prior to the implementation. It's important to recognize this in advance so you can plan accordingly, from both a resource and a financial point of view.

A legitimate reason for dips in productivity is physicians' time out of the office for vacations or conferences. To reduce the potential impact, spread these events throughout the year among the physicians. It's tough on finances when two physicians in a three- or four-person urology practice are out at the same time.

Other reasons for lower productivity include a decline in patients. You'll need to dig deeper to find out whether this is due to a reduction in new patient volume or growing attrition. Either of these indicators could be a result of patient or referring physician dissatisfaction. It might also be the result of a shifting payer mix. If one of the major employers in your community shifted to a different insurance contract, it might have an adverse effect on you. Patient loyalty is tied directly to their insurance coverage, and if you aren't contracted with the new payer, your practice just might fall off the radar.

A decline in practice growth can also be a result of new competition entering the market. Regardless of why you are experiencing a decline in patient volume or a reduction in services, you'll need to carefully plot out a strategy to overcome the obstacles. It may be time to turn to your favorite practice management consultant for advice.