The COVID-19 pandemic is wreaking havoc on healthcare systems, due to lack of personal protective equipment (PPE), inadequate supplies and frontline healthcare workers putting their emotional and physical health at risk.
Physician practices are feeling the pain immensely, too. As with many small businesses, the pandemic has had devastating financial consequences on provider practices. Stay-at-home orders have resulted in postponed non-emergency surgeries, plummeting office visits and staffing shortages due to illness, lack of childcare, furloughs and layoffs.
“The very steps they are taking to protect their patients, their staff and their communities could mean their financial ruin,” opined Farzad Mostashari, CEO of Aledade and former head of the Office of the National Coordinator (ONC) for Health Information Technology. Mostashari further noted that none of the $2 trillion in coronavirus relief funds were earmarked for independent medical practices that are not treating COVID-19 patients, many of which are on the verge of shuttering their doors. These observations are supported by a recent MGMA survey, which finds that 9 out of 10 practices are experiencing negative financial impact from COVID-19 as a result of decreased patient volume and decreased revenue.
Providers who hope to survive and stay profitable need to know the financial impact the crisis is having on business today as well as long-term implications. After planning for declining revenues and understanding fixed costs, the next challenge is setting a timeline for getting back in action as states start to reopen businesses. This requires real-time analytics — not retrospective reports and pivot tables in Excel.
Financial forecasting leverages data found in practice management software. It helps providers predict future financial impacts based on their current and past trends, delivering up-to-the-moment, daily insight into the following key areas of business.
1. Net revenue loss and timing
It’s important to know not only how much money the practice may lose due to cancelled visits but also the timing of it, so that you have time to plan. Looking at biweekly data can help you plan for fixed cost reduction, such as payroll expenses or surgical supplies.
2. Impact to charges
Many providers may have a charge lag anywhere from two to 10 days and are now feeling the impact of declining charges with the drop-off in the number of patient visits. Financial forecasting can help practices understand the rate of change of declining charges and be able to apply estimated net revenue loss to plan for fixed cost reduction.
3. Impact to cash flow
Analytics can help practices know how quickly the decline in services will impact cash flow to plan for current and future needs. In addition to year-over-year period comparisons, practices should pay attention to the drop-off in insurance payments and patient payments.
4. Accounts receivable liquidation and timing
Current A/R runout
Looking at current A/R has never been more important, and applying analytics can help practices know when they can expect to collect it. There are exclusions to keep in mind to differentiate between the total balance of A/R versus the actual value, such as denials, past-due patient balances, claims that have yet to be filed and partial pays. For claims that are not denied, practices can then look at average days to pay to gain insight into the timing of future payments.
Need to know what claims on your open A/R are denied and the value and timing of expected reimbursement? For denied claims, you need to know the categories and probability of overturn. Hard denials, such as a noncovered service or maxed benefits, aren’t likely to change. However, some soft denials can be resolved with a quick change to a modifier or submitting the medical record to get the claim paid.
Another way analytics can help practices understand their future net revenue is to show how many cancellations have occurred compared to the number of patients they have rescheduled in the coming 30, 60 and 90 days. True insight comes from understanding the estimated revenue associated with the rescheduled appointments.
The COVID-19 pandemic has caused massive hardship on independent physician practices already. To adjust and survive in this new business environment, practice leaders need insights into their revenue and expenses 24 hours at a time. Analytics delivers real-time visibility into revenue, allowing providers to understand where they are today with their A/R and forecast collections for the coming months, helping them better budget upcoming expenses based on how much money they expect to have. Beyond cash needs, financial forecasting using analytics can also help providers plan appropriately for bringing business back online, anticipating call volumes, patient demand and payer mix — and get back to running a thriving practice.