To keep your practice doors, you need to generate revenue. Enough revenue to keep the lights on, keep vaccines in stock, hire great staff, and still have enough to to upgrade your reception room, you need a revenue cycle that works. While your practice is as unique as your community is, there is consensus on the ways to run a profitable revenue cycle; here are 3 habits that will make your revenue work for your business.
Habit #1: Cash Flow Analysis
Addressing how much money you spent last week, month, or year can be intimidating, but it doesn’t have to be. The trick to successful cash flow management is, like many other things, consistency. In its simplest sense, cash flow management is about tracking money going out and coming into your practice. So grab your biller, and get started:
Calculate your practice overhead and net income. How much does it cost to pay your clinicians, keep the lights on, pay the rent, and purchase swabs, gloves, and Disney stickers? This total sum is your overhead, and this number minus your total revenue is your net income. Your net income lets you know how much you’ve got to work with to solve problems or achieve goals that come up during your work, such as repairing the vaccine fridge or expanding the office.
"Most independent practices run tight ships, but it’s vital -- as a small business owner -- to track down all of your expenses. Are you using a vaccine buying group? Is your A/R going up, going down, or staying steady? Can you predict any change to your expenses in the next few months?" -- PCC's Director of Pediatric Solutions Chip Hart
What about margins and compensation models? Compensation models can be set up in several ways, the best of which varies by practice. PCC’s Chip Hart recommends that most practices keep a minimum margin of about 10% to account for that broken vaccine fridge and as a cushion for other unexpected fluctuations throughout the year. Visit Chip’s blog to learn more about compensation models.
Don’t forget: these numbers aren’t the type to “set and forget.” Revisit your income statements, overhead costs, revenue, cash flow, and margins consistently – about once a month. This makes producing annual reports and tax documents much easier, too.
Habit #2: Invest in Yourself
Once you’re into the black and out of the red, what’s your first move (besides setting aside that 10% minimum cushion)? For many practices, you should consider investing profits back into your business so that your revenue cycle continues to spin in a positive direction. Here are some ways to invest revenue back into your office:
- Staff and clinician training, MOC, or QI projects. Projects that will help your staff perform better and enjoy their jobs, earn MOC or CME credit, or improve your practice’s workflows with a Quality Improvement project are great investments. Spend a little to hire an expert, take a class on leadership, or purchase supplies for a QI project that will help your practice reduce pains and increase gains.
- Invest in a new physician, NP, or MA. PCC’s Director of Pediatric Solutions Chip Hart will be the first to say that great employees are made, not hired. Nonetheless, hiring a quality candidate when you have the funds can help your practice grow.
- Pay ahead. Pay bills when you’re ahead! Taxes are one option, but you could also pay for services like your EHR, phone vendor, merchant services, rent, and much more. Many vendors offer a pre-payment discount. When the office is slow, it will give you peace of mind that you’ve got one less bill to worry about.
- Update your website, reception area, and exam rooms. These spaces, online and off, make valuable first impressions on your families. Your website should be a resource for important office information and be easy to navigate. You don’t need an espresso bar at the office (although maybe coffee is important to your parents!), but updating outdated wallpaper, floors, or furniture can refresh your space and help make families feel welcome. Kid-safe furniture, a privacy nook for nursing parents, and a corner for teens away from the little kids can elevate the quality of that all-important first impression.
Investing in your business doesn’t always have to mean updates or large-scale changes. As a small business, you also have the opportunity to invest outside of your practice – by purchasing your office space, renting out the building, or investing in other properties. Of course, there’s always the tax-friendly option of donating to causes important to you and your community.
Habit #3: Don’t Leave Money on The Table
One of Chip’s favorite ways of helping pediatricians run successful pediatric practices is to help them identify the money that they’re leaving on the table. That is, the revenue that you’re missing out on is revenue uncollected and thus unavailable for the investments and that 10% margin mentioned earlier. Here are some of the ways we recommend to make sure you’re making the most of your practice revenue.
Bill for services, and collect for what you bill for. This simple statement is easier said than done, but the work of great pediatric billing is worth it. Make sure that your biller or billing service is billing for all of the services you might be tempted to dismiss, such as fluoride varnishes, after-hours care, and of course, vaccines.
Collecting what you’re owed from insurance companies is consistent in its shifting nature. To be sure you’re paid what you’re owed, get comfortable with insurance negotiations, with reaching out to your payor representative, comparing notes with your pediatric colleagues, and in circumstances where the insurance company is giving you the run-around, contacting the AAP’s Payer Advocacy Advisory Committee and/or Section on Administration and Practice Management (SOAPM) for a powerful ally and defense team. These organizations have the weight of the AAP behind them, and can step in to help your office get the revenue you deserve.
Code appropriately. The 2021 E&M guidelines change the way that pediatricians are expected to code. If you’re not already, get familiar with the guidelines and be sure you’re coding for the severity of the visit that’s most appropriate for the visit. Check out this video from PCC’s Jan Blanchard for an in-depth look at the E&M changes and how to enact them at your practice.
Habits don’t have to be enormous changes made all at once. It’s fine to make one small change to try to improve your revenue cycle at a time, and actually, we encourage you to! Small changes have a better chance of sticking in your current workflows, and you’ll also have the benefit of determining if a single change doesn’t work for your team or practice. Successful revenue cycle management may not look like increased net income, but more investments in yourself or your staff, improved workflows, or better relationships with your payors.
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