Cash Flow Management for Your Weight Loss Practice: Strategies to Ensure Financial Stability
— By Karol Clark, MSN, RN
Effectively managing and optimizing the money coming into and out of your weight loss practice is essential for long-term financial stability.
Cash flow in any medical and/or surgical weight loss practice represents the money coming in and going out of your practice during a specific period of time. Your cash flow is an important financial indicator which directly affects your ability to meet your financial obligations, market your practice, invest in new technology and equipment, reward your team and yourself, and save money for known and unknown future expenses.
None of this information is likely a surprise to you, since you experience the positive or negative impacts of your practice cash flow every week. Cash flow management is particularly important now with the ever-evolving landscape of health care and the current challenges facing practitioners.
Ensuring a steady influx of revenue is crucial to sustaining your practice and providing quality care. However, it is not a skillset taught in most medical practitioner curriculums. It is often learned on the job, or outsourced to someone else for management and metric interpretation. To set yourself up for success, it is critical to understand the strategies that create financial stability in your weight loss practice.
Establish a Realistic Budget
Creating a budget is one of the most overlooked aspects of private practice. While often utilized for multi-specialty groups or health systems, it is often ignored in private practice unless required by financial institutions or investors. Yet, it is a wonderful tool for planning and keeping yourself on track with your financial goals by assessing your budget versus actual numbers each month. It can also provide warning signs of financial trouble and fraud.
You can start easily by creating a detailed budget that outlines your practice’s expected income and expenses. Be sure to account for fixed costs, such as rent, salaries, and insurance, as well as variable expenses such as medical supplies and marketing costs. With a clear budget, you will have a better understanding of your financial health and can identify areas where you can increase revenue, lower costs, and improve your overall profitability.
Review & Update Your Pricing
It is important to regularly review your fee schedule for insurance billing as well as your pricing strategy for cash pay services and products. In this way, you can ensure that it aligns with market conditions, is current with rising costs, and adequately covers your costs. If necessary, consider adjusting your pricing to reflect changes in reimbursement, demand or expenses. Give your patients plenty of notice and be transparent with them regarding any pricing changes and your desire to continue to serve their weight loss needs with valuable services and products.
Ensure Timely Billing & Collections
Whether you are an insurance based, cash based or hybrid practice, timely billing and collections cannot be understated. It is important to set timely billing standards in place, collect fees and co-pays prior to or at the time of service and ensure that your accounts receivable (AR) are collected as promptly as possible. Develop a system for tracking and following up on unpaid claims and ensure that patient balances are collected as promptly as possible. Payment up front and effective AR management can help prevent cash flow bottlenecks and improve the financial stability of your practice.
Embrace Technology & Automation
Compliant technology and automation have never been easier to implement to ensure timely filing of claims, HIPAA compliant communication with your patients, easy online payments, and implementation of automated payment plans. Such tools — often within your Electronic Health Record (EHR) system — can help reduce administrative overhead and minimize billing errors. Efficient billing and payment processes can significantly improve your cash flow. Regular reporting streamlines evaluation of any bottlenecks and recognition of issues in a timelier manner.
Diversify Your Revenue Streams
While focusing on maximizing your primary revenue stream is extremely important, relying solely on one primary source of revenue can cause concern, especially during uncertain times. Consider diversifying your revenue streams by expanding your patient base, or offering complementary services or products. A great example is integration of weight loss products or private label weight loss supplements. You can also explore adding a program fee for non-covered complimentary services, or partnerships with local referring providers. Diversification can help ensure a more stable income, even when patient volumes fluctuate.
Control Your Expenses
If you are interested in controlling your expenses, there are three primary areas you can review for modifications to get the greatest results. First is payroll. Over the years, adding more staff may have been the answer to inefficiencies or lack of having processes in place to streamline operations. Look for ways to eliminate overtime and have your team do a time audit to evaluate if they are doing tasks that no longer necessary or spending time on actions that could be automated and streamlined. When a position is vacated, thoroughly evaluate if it needs to be replaced or if the duties can be shared among other team members. Second is overhead. Perhaps it is time to re-negotiate your rent or mortgage. Then then dive into recurring payments you are making for marketing or professional services that do not have a good return on investment. Third, review other recurring monthly expenses that are no longer necessary. Look at your utilities, internet expenses, software expenses, printing expenses for your marketing/collateral/educational materials, biohazard waste removal, and bank/credit card fees as a start.
Maximize Team Performance
Your team is one of your greatest assets. Instilling a collaborative and communicative work environment where all team members are well-trained, and understand their role and responsibilities, helps maximize their performance. A great way to ensure this happens is to have a clear organizational chart, job descriptions with key performance indicators, regular performance appraisals, stay interviews, and ongoing open communication.
When you create a culture of accountability, where everyone is responsible for their actions and understand their impact on the financial health of the practice, you will see results. Efficiently delegate outcomes and responsibilities based upon each member’s strengths and expertise while providing them with a challenge to grow. When your team understands how important they are as well as how important their role is for patient and practice success, they tend to rise to the occasion and take greater pride and ownership for a job well done.
Be sure to provide your team with proper training and the resources they need to succeed. Show your gratitude in a variety of ways including prompt praise for a job well done, competitive salaries and benefits, as well as timely and clear information when their performance requires improvement.
Build a Financial Reserve
It is essential to build a financial reserve to prepare for unexpected expenses or revenue fluctuations. Aim to set aside a portion of your practice’s income into a dedicated savings account. Having a financial cushion can provide peace of mind during uncertain times and allow you to cover essential expenses even if revenue decreases temporarily.
Track & Interpret Your Financial Reports
At the very least, you will want to track your revenue and expenses compared to your budget and your profit margin. In addition, it is important to track your accounts receivable aging report, any debt levels and regulatory compliance reports. Interpretation includes determining trends and root cause of any discrepancies, excessive expenses, or losses.
Effective cash flow management is vital for the financial stability of your weight loss practice. By implementing these strategies, you can proactively manage your finances to ensure success.