Financial management skills can make or break a medical practice. But, these 5 tips can help you sustain a healthy and profitable business no matter what your level of business savvy.
Being a good doctor doesn’t necessarily mean you have the right skills to run your own practice. New doctors make rookie mistakes because they: “Tend to be so engrossed in the medical part,” says Dr Jeffrey Meltzer. “A practice is an all-encompassing job and takes a large portion of their time.”
Healthcare is a business like any other, and needs good financial management to run profitably.
“To run a functioning practice, the business needs to make a profit. Never feel ashamed to charge for your services. Doctors particularly have this problem where they are expected to give freebies, but nothing in life is free. If you can’t make a living, your business won’t survive and what kind of doctor would you be if you were out of business?” says Mike Jackson, chief executive at PPS.
Here are five ways to improve your practices’ financial management:
1. Set clear financial policies
To begin with, you’ll need to define clear financial policies and processes so that everyone involved in the running of your practice is on the same page. This even refers to whether patients must pay before they leave or whether you will be contracted to medical aids, for instance.
“The cost of managing medical aid claims, coupled with late payments, and reduced benefits and tariffs has led practitioners to charge cash upfront for their services. In this instance, the patient has to pay for the services in cash and then submit a claim to the medical aid for reimbursement,” according to Vita Care.
Related: 12 Business financial resources and profit tools
If patients need to pay before they leave, ensure your staff are aware of this policy. “Practices need to really do a good job collecting up-front when they can,” says Margo Williams, senior associate with the American College of Physicians’ Centre for Practice Support.
Williams adds that your team should remind patients to bring a form of payment with them (cash or card), when they schedule an appointment. This means it’s up to you to ensure your employees make patients aware that they are expected to pay for their portion of the consultation when they come in for their appointment.
2. Educate your patients and yourself
If a patient comes to you, and you need to refer them to another doctor, or specialist, or if they need to go for tests such as X-rays or blood tests, always ensure you make them aware that a few costs might not be covered by their medical aid, and that they must check with the service provider.
“A lot of patients don’t know their healthcare policy’s ins-and-outs or what’s required of them, and sometimes the practice has to educate them,” Williams says. “It suits the practices to figure out what the rules are and help the patients understand them.” If you don’t make it clear to patients in terms of who is fitting the bill, they might (unfairly) associate any unexpected bills with your practice – and you could lose a previously loyal supporter.
For successful doctors, many go on to take financial management and business courses to be able to handle the business side of the practice. “When I started out, I studied financial management so that I would be better prepared to run my practice,” says Dr Lorraine Becker. “It’s important to have the right knowledge to make the best decisions for your practice.”
Related: Why a financial plan is your blueprint to prosperity
3. Make it easy to pay
The more payment options you offer, the more convenience you offer your patients. “Many physicians don’t take credit cards due to concerns about having to give up 2% or 3% of each credit card transaction. But, that’s a short-sighted approach. If you have cash now you have the money in your possession. Is that worth 2% or 3%?” asks Maria K. Todd, PhD, chief executive officer of the Mercury Healthcare Companies.
A potential option would be integrating SnapScan from Standard Bank into your business. With SnapScan, your patient can experience quick and easy transaction. For more information on Snap Scan visit here.
Offering convenient payment methods will create a streamlined operation when your customers are paying for your services, which they will appreciate.
Remember, you want to present a professional and capable ‘front-office’ in all your dealings with patients, and you don’t want them frustrated every time they come to pay – because you only accept cash, which younger generations prefer not to carry around.
4. Manage large overheads
Depending on what type of doctor you are, you will require some medical equipment. And, if you’re a specialist, the equipment can become expensive, fast.
“Many doctors pay R30 000 a month in repayments on their equipment, with EKG’s and ultra sound machines costing around R1million,” says Becker. Besides the usual overheads of rent, water and lights, you need to manage your debt correctly or your practice won’t be profitable.
Ten years ago, doctors with five or more years of experience could earn up to R180 000 per annum in the public sector. “A colleague of mine, with a turnover in excess of R1 million per annum, complained to me that even with this large annual turnover his monthly take home salary amounted to just less than R13 000. Even though he was a skilled practitioner with a busy practice, he had no financial training, and managed his practice poorly. His main challenge was that majority of his turnover was being spent on unnecessary overheads,” explains Dr G Hukins in a practice management report.
If you don’t manage your overheads and pay them back consistently every month, an accumulation of debt can close your business down. “Debt incurs interest that leads to an intolerable financial burden. Once you start working longer hours to pay off the interest you start unbalancing yourself and you spend less time sustaining yourself,” Hukins adds.
Related: Financial management checklist
5. To contract or not to contract with medical aids?
Contracting with medical aids can lead to your name being on the list of preferred practitioners, opening up your practice to a wider customer pool.
“When a doctor or other health care professional is contracted into medical aid, he or she is simply saying that they will deal directly with your medical aid for payment of the services they render,” according to SA Medical Aid (SAMA).
“Doctors who contract into medical aid are simply taking on the task of submitting the claim to your medical aid and awaiting payment directly from the scheme.”
But, numerous doctors are choosing not to do this. “Doctors who are contracted out-of-medical aid simply opt-not to deal with a scheme, but directly with the patient with regards to payment of the services rendered. It is then the patient’s responsibility to claim back the money from the medical, or not,” says SAMA. Even though not being contracted-in could be your preferred option, keep in mind that this could frustrate some potential patients.
Something to also keep in mind when dealing with medical aids is that often there will be a waiting period between when you submit a claim and when you receive your reimbursement, which means you’ll need to effectively manage your cash flow to keep your business pumping.
If you use these five ways to improve your practice’s financial management, you can ensure your medical establishment grows from strength to strength. No matter how good you are at being a doctor, if you can’t manage your finances your practice isn’t going to last very long, or it will keep its head above water but you won’t get a lot out every month.
So, ensure your hard work is rewarded by managing your medical practice’s finances appropriately.