Physicians not drawing a check or adjusting their pay need to carefully consider any changes because of tax implications, says Kremke. Practices structured as S-corps have greater limitations on physician pay changes than sole proprietorships or partnerships, but even the latter can face higher tax bills with the wrong strategy. “You need to plan and budget and involve your accountant and tax adviser,” he says.
In addition to lowering early-year expenses or reducing physician salaries, practices can look to increase revenue at the end of the year to help build a reserve fund. “Look at November and December and see what invoices you have outstanding and try to bring that money in,” says Kremke.
Another way to bridge the cash flow gap is through a line of credit, says Kremke. A line of credit usually carries a flat percentage fee based on the amount of the withdrawal, and there might be an additional yearly fee of $500, for example, for a line worth $100,000. “It’s a way to help themselves through lean times, but it does cost money. If you go this route, make sure the bank you are working with understands medical practices.”
Collecting money owed
Physicians need to be proactive in collecting what patients owe to ensure they are getting the funds needed to operate their practice in those early months. “The practices that are successful at bringing money in and managing their revenue stream are those that are working in advance, ensuring patients are covered prior to a service rather than post-service, and they are gathering information on copays, deductibles and coinsurance prior to a visit,” says Ken Hertz, FACMPE, principal of the Medical Group Management Association. “They are also making payment arrangements prior to a service being provided.”
By discussing costs beforehand, practices can identify which patients can pay and which ones cannot, says Wiik. “Those patients who are unable to pay should be financially screened early in the process to establish candidacy for public or internal financial assistance,” he says. “Patients who are able to pay should have flexible and easily accessible payment options.”
Accepting credit and debit card payments is a must, and having the technology to convert checks to cash with minimal delay—known as remote deposit capture—helps avoid many issues related to insufficient funds, says Hertz.
Kremke adds that offering the option of online payments is effective in improving collections. “It’s a lot easier for patients to go to a portal and submit a payment than it is to put a stamp on an envelope,” he says.
Physicians can also offer payment plans for those who may not have the ability to cover the bill in full, but experts say guidelines need to be established to avoid getting entangled in state lending laws.
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“If they are setting up payment plans, the state may view physicians as a lender,” says Kremke. If that’s the case, the practice might have to comply with banking rules and regulations.
Richard Gundling, FHFMA, CMA, senior vice president with the Healthcare Financial Management Association, says that practices also need to balance the needs of the patient with those of the practice. “You probably don’t want to go over a year for any payment plan you set up, but you want to make sure the monthly payment is something the patient can actually handle,” he says.