by Katie Nunn, MBA, CMPE
Many practices that we work with are in financial distress of some sort. The reasons behind this distress vary to some degree from practice to practice, but the reasons go deeper than just poor revenue cycle management, which can certainly be a huge contributor to financial woes. Some practices have lost providers, so their revenue is down.
Others are suffering because they haven’t kept pace with the times. They are finding their offices are old and outdated. They don’t even have a website, so it is hard for new patients to even know they exist. Some practices are over staffed so their payroll expense is exorbitant. This can all seem overwhelming, but there are signs and symptoms to look for to help avoid this situation. There are also options for getting out of financial distress beyond selling a practice to a hospital system or to a private equity firm.
Signs and Symptoms of Financial Distress:
It is important to know how to spot things that can lead to financial distress:
- Employees that are unhappy, complaining, calling out sick, or leaving.
- Office Space, is the office presentable? Is it up to date and in a decent area?
- Out of date technology
- No website
- Not managing online reviews
- Not using EMR
- Providers are not working enough
- Schedules are light
- Few New Patients
- Cash-flow problems
- Fraud or theft
- CMS audits
- Accounts payable growing
- Accounts receivable growing
Having any one of these “signs and symptoms” doesn’t mean that a practice is in financial distress, but it is important that the practice knows the reason behind any of these symptoms. Just like having a chronic cough doesn’t mean that a patient has lung cancer, but a physician would still want to have it evaluated to make sure.
Seek Help in Financial Distress Sooner Rather Than Later
The first thing to do if a practice is worried about their finances and the future is to get help and the sooner the better. A trusted accountant or attorney are good places to start to ask for help. They might not be the right person to help with the problem, but they may know someone that is the right fit. Getting help sooner rather than later is vital.
Just with cancer, early detection can be key to fighting the disease and of course the longer you wait, the harder it can be to write the ship. Many practices are embarrassed that they are in financial distress and don’t want to admit it, but they shouldn’t be. The business of healthcare is difficult and it isn’t getting any easier.
Managing Financial Distress Problems
Most doctors or other healthcare professionals need to be spending their time doing what they do best, which is treating patients. That is what brings in the income, so if they are spending their time trying to get their arms around their financial issues that could be taking away from revenue.
Have a practice assessment done by an expert in medical practice management. This is something that can be beneficial even when everything is going fine. Think of it as a preventative physical exam. People shouldn’t only go to the doctor when they are sick, they should be having regular testing and physicals to make sure they are not sick. Any business should be assessed regularly as well. Once every 2-3 years if you are not having issue would be ideal. When a practice is having issues, you might need more help.
Selling to a hospital system or to private equity isn’t the only option.
For some groups, it makes perfect sense to sell their practice. But others do it out of desperation or frustration. If a group wants to maintain their independence, but is struggling with the question of “should I sell my practice”, it is worth meeting with a practice management consultant to see if there are solutions that would make a big difference.
A consultant can look at your practice and help you develop a plan for the future. This plan could help you fix any issues a practice has; it could also involve starting new services that would help with revenue generation. It may take time and a good consultant can have a significant price tag, but if a practice is able to turn their finances around and maintain independence, it could be worth the effort. Most consultants offer free consultations, so it never hurts to talk and explore the idea.