While the March 1st automatic cuts will affect many areas of the economy it is estimated that up to 766,000 health care related jobs could fall victim to the 2% cuts in Medicare spending. (Joint report AHA, AMA & ANA Sept 12, 2012.)
But the risk of being lost is not limited to jobs alone. Private practices will also be affected by the cuts and some, undoubtedly, will close their doors.
Numerous reports of financially struggling small healthcare practices have surfaced in the media and while the 2% cut, even though a small percentage, will impact Medicare providers across the board the question is: Will small practices be hit harder?
The media mentions one factor contributing to financial struggle is the lack of business skills on part of the practice owner. And while business skills are not taught as part of most medical or Nurse Practitioner programs, they are a necessity in today’s healthcare industry.
While running a small healthcare practice certainly has its rewards it also has its challenges. These challenges have increased over the past few years due to rising costs of operating an office all while reimbursements have been declining.
Faced with similar “challenges” most other businesses, outside of healthcare, would simply raise prices to make up for lost revenue. But you don’t have this option, since most reimbursement rates are set by a 3rd party.
However, you do have the option of decreasing the number of Medicare patients you see, adjusting the way you conduct your visits (perhaps a single complaint per visit) or adding more cash services to your service mix, all to offset the loss in revenue.
But this alone may not be enough. So what else can you do?
Overall, the financial success of any business can be reduced to a very basic equation:
Revenue – Expenses = Income/Loss – Taxes = Net Profit/Loss
While you don’t have total control over any one of these areas, careful planning and administration will allow you to affect these areas. Therefore I suggest you focus on three basic areas of your practice to help you survive and thrive in today’s challenging times:
- Your revenue streams:
How do you generate your revenue? What is your insurance/cash pay mix? What are your reimbursement rates per payer and per code? Do you know how to evaluate your revenue streams? - Your expenses:
Do you know where your money goes? Can you eliminate or reduce certain costs? Can you implement cost saving measures in your office? Do you know how to track the expenses in your office? - Your customer – aka Patient:
While your customer is not a direct part of the above equation, he/she is key to the success of your practice. Without a patient walking through your door nothing happens! Do you know where your patients come from? Do you know why they come to your office and what they’re looking for? Do you know how to attract new patients to your office?
Incidentally, a working knowledge of the above is not limited to business owners alone but is just as important for employees to understand.
If you are employed by a clinic you want to have a high level understanding of how your employer generates the revenue for the practice, what the overall costs are to run the office and how the office brings in new patients, since patients are the blood and life of any office.
Understanding these business areas or being able to effectively manage them will take some level of business skills. You can develop these skills by way of trial and error or by setting out to learn them, the choice is yours.
However you decide to acquire these skills, the fact remains that in today’s healthcare environment you have to have some business skills, no matter if you are the employee or the employer.
Feel free to share your experiences below.