How to “Treat” The Biggest Headaches In Private Practice? Part2

Every business comes with its own set of headaches; that’s just the way it is.

Health care is no different; and running a practice has its own, unique set of challenges, including:

  • Getting paid by insurance and patients
  • Getting and staying credentialed
  • Creating consistent cash flow

Then there’s the ever-changing landscape of healthcare… but that’s a different topic for another time.

While patient payments didn’t account for much in the past, today they amount to a substantial part of your reimbursement. And if you’re not successfully collecting patient responsibility, you’ll stand to lose a significant amount of your income.

A few articles back, I discussed the challenge of getting reimbursed by insurance and collecting money from patients. If you missed the article, you will find it here.

Consistent Cash Flow

Today, I want to take a closer look at cash flow; specifically, creating consistent cash flow in your practice and why it’s so important.

While getting to consistent cash flow is a challenge for most businesses, small healthcare practices may find it even more difficult.


Well, it’s because most practices accept insurance. More often than not, health care providers are compensated well after completing their work.

Additionally, to get reimbursed, they have to work with third parties, including insurance companies, government agencies, and patients.

And here’s the problem…

Any time you get “paid later” the likeness of getting your money late or not at all increases. Claims get rejected or denied, patients lose coverage, services are excluded, and patients don’t pay what they owe you.

All of it has the potential to hurt your cash flow.

But before I continue, let me clarify one thing.

When I say “consistent cash flow” I’m not referring to a fixed amount of money coming in like clockwork. Inherent to the word cash flow is the idea of money flowing into the business in various amounts and intervals.

When I say “consistent cash flow” I’m referring to a range of revenue coming into your business throughout the cash flow period, let’s say a month.

With that out of the way, let’s continue…

What Is Cash Flow?

So what is cash flow and why is it so important?

Cash flow refers to the amount of money flowing in and flowing out of the business throughout the cash flow period.

  • Money flows into the business from revenue or other income (rental income, investment income, )
  • Money flows out of the business to pay expenses and other obligations (rent, utilities, salaries, taxes, interest on loans, etc.)

The concept of cash flow makes sense, right?

There needs to be enough money coming into the business so you can pay the bills and keep the business open… there must be positive cash flow!

Notice we’re not talking about making a profit yet, that’s a different discussion. But suffice it to say, you want enough money left after paying your bills (aka profit) to make it worth your while.

Back to cash flow…

Cash flow is crucial to the health of your business; it’s as crucial to a business as blood is vital to the body.

The body can’t function long without adequate blood supply. And in the event of a shortage, the body prioritizes which systems will continue to receive blood.

Brain and organs win; everything else has to wait. And if the shortage goes on for too long, you know what happens.

And it’s the same with a business facing a cash flow shortage.

Most businesses will pay what must be paid to keep “the lights on;” everything else is put on hold. And if the cash shortage continues for too long, the business may be forced to close.

For example, if there is not enough money…

  • The practice may not be able to purchase equipment that could be used to generate more revenue… increasing cash flow.
  • The practice may not be able to hire another employee who could help with billing and follow up… increasing cash flow.
  • There may not be enough money for ongoing marketing to bring in more new patients… which would create more cash flow.

Sure, occasional problems with cash flow may happen in any business. However, if they become the status quo, there is a problem with cash flow that must be addressed. 

Cash Flow: Two Sides

As I said before, temporary cash flow problems are not uncommon. There may be any number of reasons a business finds itself in a cash flow shortage; some may be difficult to control, while others may be preventable.

Since cash flow reflects revenue and expenses of the business, why not focus on both? This holds true when experiencing cash flow problems, but also when working to grow your business.

And here’s a tip, you want to increase revenue and decrease expenses whenever you can; unfortunately, the expense part of the equation frequently is forgotten.


The idea is to increase the revenue generated by your practice. But before you can do that, you must know the numbers, the financials for your practice.

  • Do you know all your sources of revenue?
  • Do you know your insurance mix, your payer mix?
  • Do you know your best payer? “Best” is not limited to payment; you also want to consider who is easiest to work with, has the quickest turnaround time, and offers a clear
  • Do you know how much of your revenue is stuck in AR and for how long: 30-days, 60-days, 90-days, or 120-days?
  • Do you know how much money is coming in from every source and when it will hit your books?

Unless you know your numbers, it will be difficult to boost your revenue. Chances are you’ll be limping along, finding it challenging to catch up, let alone get ahead.

But once you know your numbers, you can make informed decisions.

For example,

  • You may decide to adjust your payer mix and only deal with companies that reimburse on time.
  • You may focus on working your AR, bringing it up-to-date, and keeping it current.
  • You may increase your marketing efforts so that you consistently book new patients.

Whatever changes you implement, they should be geared toward increasing and stabilizing cash flow in your practice.


Do you know your expenses, both fixed and variable and how much you pay out each month? Are all your expenses necessary?

And what steps are you taking to control expenses?

Do you:

  • Renegotiate contracts?
  • Shop for better insurance policies?
  • Revisit and adjust your deductibles?
  • Shop for better data plans?
  • Consider leasing instead of buying?
  • Buy used instead of new?
  • Shop for suppliers with more favorable terms?
  • Know when expenses need to be paid throughout the month, quarter, and year?
  • Look for expenses that could be reduced or cut altogether?

Controlling, reducing, and even eliminating expenses can make a big difference to your bottom line and help you achieve consistent cash flow. Unfortunately, all too often business owners put off or forget to reevaluate their current expenses.

Consistent Cash Flow

The key to achieving consistent cash flow is in the details: focusing on revenue and watching expenses.

Getting to consistent cash flow ensures  you’ll stay in business and have peace of mind.

Knowing you’re generating revenue and money is coming in allows you get more restful sleep at night. It frees you from worry and lets you focus on what’s important in your business… the work you do with your patients.

And here’s the big take away from today’s article.

Always remember… Cash is King!


We’d love to know what you think… why not leave your comment below?


By Johanna Hofmann, MBA, LAc; regular contributor to the NPBusiness blog and author of “Smart Business Planning for Clinicians.”

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