Can You Vaccinate Your Practice From COVID-19 Bankruptcy?
In truth, there is no vaccine against COVID-19 Bankruptcy, but we can mitigate and even defeat the “infection” by making rightly timed informed decisions.
I was stopped in my tracks by an email about a MGMA webinar: The Financial Impact of COVID-19: Bankruptcy 101. The need for the webinar is understood, but it's alarming and begs the question: Can you vaccinate your medical practice against COVID-19 Bankruptcy? Like all things related to COVID-19, the answer is a “Definite Maybe.”
A Definite Maybe Because:
1. Some practices are currently beyond financial redemption. The COVID-19 financial “infection” is rampant, and the practice is doomed.
2. Other at risk practices will make poor decisions over the next 30-90 days and will unwittingly seal a similar fate.
3. Happily, still others, though also at risk, have the tools and wisdom to make informed business decisions that will rescue the practice; giving the impression they are immune to COVID-19 Bankruptcy.
In truth, there is no vaccine against COVID-19 Bankruptcy, but we can mitigate and even defeat the infection by making rightly timed, informed, and wise decisions.
Two Essential Elements:
1. Make an honest assessment of current Operational Cash including details related to the COVID-19 shut/slow down and what measures were taken to position the practice for survival.
2. Use a dynamic forecasting model that recalculates and predicts Cash Flow based on constantly updated real-time data AND experimental data inputs.
Five Essential Key Performance Indicators (KPIs):
1. Recalculate Volume: Coming out of shutdown, we expect to see reduced patient visit/case volume. However, it is vital to track and project volume trends (good or bad).
2. Reset the AR Clock: The revenue cycle has likely changed, so treat the practice as if it just started. Keep historic AR data (Days in AR, Aging “Buckets” etc.), but RESET your AR clock from the day the practice began to provide services this side of the shutdown.
3. Revisit the Waterfall Chart: Reverse engineer the Waterfall Chart from simply showing how quickly payers pay, to identifying when payers slow their payment patterns. Don’t wait until slow-paying accounts systematically show up in the 90 + AR Aged Bucket. Challenge payers the minute they depart from historically acceptable days to pay.
4. Payer Mix Changes: To date, over 40 million Americans filed for unemployment. Don’t underestimate the impact of the newly unemployed. Relatively small shifts in payer mix, especially from Commercial to Government payers, has a disproportionate effect on revenue. Faithfully track payer mix changes and understand how this affects revenue!
5. Review Staffing Levels: It’s tempting to bring all furloughed staff back immediately after opening back up (out of concern for furloughed staff). However, hastily bringing too many people back can sink the practice. Staffing levels need to mirror projected revenue.
The What Ifs
This is where dynamic predictive forecasting comes into play. Track the above KPIs as “What Is,” but experiment with “What Ifs.” Changing the practice’s KPIs to reasonable (even if scary) hypothetical values in simulation alters the outcome and provides actionable insight. Keep in mind the elements above are all connected, so treat financial forecasting as a multifaceted simulation exercise trying numerous combinations to see what the future holds IF such and such happens.
Quick Analogy: Notice how many companies, even countries, are working on COVID-19 vaccines. The assumption is the more attempts, the greater the likelihood of someone’s success. Similarly, multiple combinations of simulated actions to increase cash flow and reduce expenses will likely uncover a winning combination that will "vaccinate" your practice from COVID-19 Bankruptcy. Don’t be afraid of “crashing” in a simulation! Hit the Reset Button and try again.
Good Luck and Godspeed.
Grant Scott, President, Accord Healthcare Consulting