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[D387]Direct And Indirect Cash Flow

by James Casey, Jam

Most doctors enter the health care profession because they want to care for people. But it doesn't take long for many to realize that they are spending just as much time running the business as caring for patients. Providing outstanding health care, while keeping the revenue cycle running smoothly, is a big challenge. But today's technologies can make it easier and, as one physician practice has learned, it can be as easy as using a mobile phone or PDA.

Room for Improvement:

As pay-for-performance programs become the norm, terms such as efficiency, effectiveness,patient satisfaction and ease of doing business are becoming an integral part of the language of running a practice. These terms have become the watch-words of businesses around the world as they institute change to improve customer service and management of the financial side of the business.

At the same time, we have seen a shift toward a more consumer-driven healthcare system and demands for higher quality healthcare. Patients expect a comfortable office with efficient service, accurate billing, and a reasonable response time when they have an urgent question. In this environment, the business side of the practice has a bigger impact on the patient experience than ever before.

It's time for the healthcare industry to take a page from general business management and gain the performance improvements that come from optimizing practice management. Several areas within a typical practice provide an opportunity for increased accuracy and optimization. Three of the most prevalent are coding, billing and collections, since they represent a significant opportunity for managing cash flow, with a high potential for solid financial returns.

Going Mobile: One Case Study

In one five-physician nephrology practice, an investment of $2,679 in coding, billing and collections generated an annual increase in revenue of $37,473.

The improvement process began with a thorough analysis of the practice's existing processes and procedures, as well as the tools used during rounds and for billing and collections. Interviews of key personnel revealed issues in the following areas:

* Down-coding too frequently when code selection was not clear
* Reduced charges due to coding errors
* Lost charges due to misplaced forms
* Lower collection rates when records were incorrect
* Increased insurance denials due to late submissions
* High denied-charge write-off rates that seemed to track insurance denials

The physicians had been capturing patient information, diagnoses and codes using paper forms, which were collected throughout the day and returned to the office for processing at the next available opportunity. Frequently, the forms were misplaced, illegible or incorrectly coded, requiring the doctors to take extra time away from their patients to get them right.

Over the course of an entire year, the total revenue impact of this lost time alone totaled $12,558. The lengthy process also often exceeded the allowed processing time, and insurance companies were refusing to pay.

To overcome these challenges, this practice implemented a Web-based mobile software tool to capture patient information, procedures and diagnoses. Because these physicians spend the majority of their time away from the practice, working at patients bedsides in local hospitals, they needed a solution that would allow each doctor to capture data while on the go.

This charge capture solution can run on PDAs as well as other mobile devices, such as mobile phones. Data can be sorted by patient or by doctor, the software handles scheduling for rounds, and allows the transfer of patients between providers. It also provides a customized set of codes, so the doctors don't have to page through codes that don't apply to their specialty. It even has text recognition so a description can be automatically completed by the software after typing three to four initial characters.

These mobile devices synch with a central Web-based database, so all patient data resides in a central location accessible by authorized staff members, with no special technical expertise required. The mobile devices can synch utilizing multiple technologies such as cellular, blue tooth, wireless, IRDA or cradle. When synchronization occurs any new data on the mobile device is sent to the central servers and new data on the central servers is sent to mobile device. In fact, when one of the doctors devices was accidentally damaged he feared that he'd lost many records. But because the data had been synched with the central servers within minutes of finishing his rounds, all the data was intact on the central servers.

Best of all, the solution can be uploaded to a mobile device and operational in less than an hour.

Because the new system dramatically reduced errors and re-work time, the practice recaptured its $2,679 hardware and software investment in less than two months. Over one year, the practice increased revenue more than $37,400.

An Investment that Pays Off

By investing a small amount of time and money in implementing and learning a new technology, practices can dramatically simplify billing, coding and collections processes; increase charge capture and revenue collection; decrease denials and write-offs; and free up more time to spend with patients. And isn't that why you became a physician?

"If it can be manufactured, it can be leased." For the past decade or so, this statement has become more and more true to fact. From computer software to commercial aircraft, equipment leases are utilized day in and day out in a constantly changing and highly aggressive business environment worldwide. To gain or to keep the edge over their competitors, companies of every type and size are constantly looking for creative ways to conserve working capital while expanding operations. Many have turned to leasing their equipment to help in the effort. For this reason, the leasing industry is being defined as a major player in equipment financing today.

So, why should you join these businesses in choosing to lease? Well, one key factor is that the commencement of a lease can be done with very little out of pocket expense. Two advanced payments or an equal security deposit is usually all that's required. Couple this with the fact that for many leases, particularly those under $75,000, a simple one page credit application is all that is needed to be considered for approval. Compare this against an equipment loan, with it's more extensive paperwork and the resulting 10 to 50 percent down payment required to begin the transaction.

Leasing will also allow your business to maintain credit lines with the banks. This preserves the company's borrowing power for future expansion, investing, or other types of growth where leases cannot satisfy the need.

Many business owners don't like the idea of paying a premium rate in order to both own and use equipment. If obsolescence is an issue, such as in the hi-tech sector, most companies find it more desirable to be able to walk away from outdated equipment having completed a short term lease. The average term runs anywhere from 2 to 5 years, after which the business can begin another lease and acquire more, up-to-date equipment. This progression can give your company a vital edge over it's competitors. Other leasing benefits could be expounded upon, such as the tax advantages, lower monthly payments, fixed expenses and the off-setting of inflation, but you can see the point.

Now, simply realizing that leasing is beneficial for your business and then pursuing it as a course of action is only the start. Like bank loans, there are elements of a lease request that increase the chances of funding. That may seem like a no-brainer, but many business owners expect more leniency from lessors than any lending institution is able to provide. Leasing companies, like your business, are in the process to make money. Therefore, some consideration on your part is in order. You should try to give the lessor at least a 70 percent chance of funding your request. Below are the most crucial points of review:

Your Time in Business - Since about 90 percent of all businesses fail in the first three years, most lessors will require of the lessee a minimum of two years in business. In addition, there is generally a maximum transaction amount of $10,000 to $15,000 for businesses under three years old. However, some lessors, in order to compete in their market, have relaxed those requirements or developed special programs for startups and young companies. These types of programs will obviously demand higher lease rates, but the ability for a new business to obtain necessary equipment fairly quickly and with a minimum of paperwork still makes the process very worthwhile.

Credit History of Guarantor(s) - Lessors will make decisions based on a lessee's credit history after reviewing their consumer and/or business credit report. The leasing company looks for numerous late or delinquent credit commitments, lawsuits or judgments, bankruptcy, unverified residence, short credit history, and debt larger than what is stated on the application. Keep in mind, however, that some of the above problems can still be overcome during the approval process.

Bank Relationship - Your business should have a checking account that has been established for at least two years and has had an adequate average daily balance for that period of time. If there have been any NSF's, they must not be recent.

Trade Relationships - It's a strong indicator that your business has good cash flow if discounts are offered (i.e., 2% 10 days: net 30 days). The leasing company looks for trade accounts that are paid on time and within the terms of agreement.

Financial Statements - Generally, if the lease amount is more than $50,000 to $75,000, a full financial package is mandatory. This includes, but is not necessarily limited to, the last two year end financial statements, with a complete balance sheet and profit and loss statement. An interim statement for the current and last year's comparative period is often required as well if the year-end financials are over six months old.

Other considerations include: the type and cost comparisons of the equipment (collateral), the extent of the lessee's trade credit and bank borrowing lines, and leasing history of the business.

Though it isn't crucial to have every one of the afore mentioned points strong, an above average ranking in the majority of them greatly increases the probability of funding. It also increases your likelihood of receiving a better rate. If your business demonstrates strength in only one or two of these areas, it is still possible to secure the financing, though the choice of lessors becomes a bit more limited and the elevated risk is reflected by a higher lease rate.

It's always in a company's best interest for the decision-makers to consider leasing as a means of capital conservation. And as you can see, it's also important to prepare for the transaction should the decision be made to pursue it. The majority of businesses that utilize equipment leasing each year in the United States and Canada continue to do so with at least some of their equipment thereafter. Contacting a leasing company representative or a broker can help you determine if leasing can create an environment of improved cash flow and an opportunity for growth in your business.

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Both James Casey & Mark Uptain are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

James Casey has sinced written about articles on various topics from Gadgets, Phones and Gadgets. James Casey is a certified six sigma black belt and project management professional (PMP). He has 15 years experience as a leader in the healthcare and technology industries implementing. James Casey's top article generates over 1300 views. to your Favourites.

Mark Uptain has sinced written about articles on various topics from Gadgets. . Mark Uptain's top article generates over 9900 views. to your Favourites.