Get Your Cash Flow in Order Just by Collecting Your Co-Pays
If you’re in private practice, it’s no secret to you that one of the most pressing problems in today’s healthcare business environment is cash flow. In fact, every day, countless businesses shut down or become insolvent despite being profitable because they run out of cash. Yes, you can be profitable and run out of cash. How? Because the time when you earn money doesn’t equal the time you’re paid. This is commonly known as the “cash conversion cycle” and failing to understand it can kill a practice.
We regularly work with clients to repair the mismatch between their profitability and cash flow, and it is a problem as unique as the healthcare practices themselves. However, there are a few critical things that every practice should do to improve cash flow that will provide instant results.
So, what’s the best way to increase the amount of cash in a healthcare practice? Start collecting more cash. Easy, right?
Co-payments are a risk-sharing tool used by insurance companies to discourage frivolous use of insurance. The argument goes that: if a claim doesn’t cost you anything, you’re much more likely to engage in risky behavior. If crashing your car cost you nothing, why bother driving carefully? (Unless you are deeply in love with the paint job on your new Accord.) If seeing the doctor doesn’t cost anything, why not go for everything?
Collecting co-payments is a mandatory condition of accepting insurance, but many of you have very lenient procedures with co-pays. Data from the National Center for Health Statistics indicates that 25 percent of families have an unpaid medical bill, 20 percent are paying one over time and 10 percent have a bill they cannot pay at all. The vast majority of these bills are co-payments.
If you suddenly collected 100 percent of your co-payments, you would have a materially better cash position. So how do you do it? You make it clear, easy, and mandatory.
Make sure your office is equipped to take any and all forms of payment. Merchant services have never been easier to find, more flexible or less expensive. Commercial banks are desperate for your business and will help you be able to scan checks immediately. Have a cash drawer and drop, and accept myriad mobile and online payments like PayPal, Apple Pay, Bitcoin, etc.
Make sure you let a patient know their co-pay is due when they arrive. Have a staff member look it up and put a note on the chart, so they can make their payment before they see the doctor.
Finally, be firm. The copay is a legal obligation for you and for the patient. Hardship exceptions should be few and far between – and difficult to get. It may seem harsh, but patients who truly care for their physician will understand – and patients who don’t, don’t need to be your patients.