Is Your Practice Ready to Be Cash Poor For the Next 30 Days? Here’s How to Change That!


January is a tough time for independent medical practices for several reasons:

  • In private practices, the physicians typically don’t carry over any cash from year to year, so the practice starts in January from a cash position of zero.
  • Most deductibles begin in January – if practices don’t collect deductibles at time of service, they find themselves hurting because their revenue goes way down.
  • The Medicare debacle every year creates improper (lower) reimbursement as Congress struggles to the last possible minute over physician payments. (Here’s a simple yet helpful exercise for Congress. Congress, close your eyes and think of your favorite Medicare-age person. Is it you, your wife, your mother, your father, your neighbor or best friend? Now think of that person not being able to see a doctor when they need to because all doctors have opted out of Medicare and the only place they can get care is the local Emergency Room. It is a very ugly picture. What other profession is MADE to accept payment that is less than it costs to provide? Who do you love, Congress, who won’t be able to get care?)
  • Many annual maintenance contracts come due in January
  •  Deals on large purchases are good (think EMRs) as vendors try to book revenue in the current year. Practices tend to make commitments to purchases now that will have to be paid for in the new year

What’s a practice to do?

  • Pay all bills for 2012 that you reasonably can before the end of 2011 – try to prepay anything you can to avoid having to pay it early in the year.
  • Review your tax position to see if you can leave some money in the kitty at the end of the year – most accountants will advise spending down bank accounts or distributing money if possible.
  • Secure a line of credit to draw upon  – this may be critical if you have a payroll due early in January before you’ve had a chance to build up your bank account.
  • COLLECT DEDUCTIBLES at time of service. Don’t wait for the EOB to tell you you have to collect from the patient! If you’ve always billed patients for deductibles, take these simple steps to start collecting:
    • Inform staff the practice will collecting deductibles beginning January 2.
    • Add a message to your on-hold messaging that says something like “The practice will be collecting deductibles beginning January 2, 2012. Please be prepared to pay your deductible, or ask to speak to our Administrator/Biller/Financial Counselor to make payment arrangements.”
    • When confirming appointments, have the script changed to include the fact that patients will be asked to pay co-pays, co-insurance and deductibles at time of service.
    • Hand patients a flyer at check-in to explain deductibles and why the practice has decided to collect them instead of billing for them.
    • Based on what your practice specialty and set-up is, offer patients an electronic payment plan where you automatically draft their credit or debit card for their deductible.
    • Decide how you will work with patients with high-deductible plans – will you require a certain payment at their first visit of the year, then put them on an electronic payment plan?
    • Other articles I’ve written  on collecting at time of service can be found here, here and here.
  • Change your maintenance contracts to space large payables throughout the year.
  • Negotiate payments for large end-of-year deals so the practice does not have to pay out any cash until March or April.
  • Change your fiscal year so it does not coincide with the calendar year.

What’s your advice for getting through these potentially difficult early months in the year?

Posted in: Collections, Billing & Coding, Finance, Medicare & Reimbursement

Leave a Comment (6) ↓


  1. Anthony Wunsh December 28, 2011

    Mary, while I agree with all you are stating in this article I see a flaw in the basic premise of only asking for the deductible. This is too common a challenge in our industry. Providers are no longer restricted to only collecting these dollars. The technology exists today to instantly identify the allowable amount insurance will pay in real time and create an EOB at the point of service. We can secure all dollars at the first encounter owed by the patient before they leave.
    It is puzzling to me why experts such as yourself are not in tune with these capabilities and promoting them to providers to offset the very problems you speak of.
    We continue as an industry to try and retro fit a broken patient billing system.
    Post adjudication billing and collection needs to be dead and buried, it is no longer a necessary evil we have to live with, yet I see advice given to continue down a path that generates 49.3% uncollected dollars on what is now over 30% of the gross revenue for our industry.
    What can I do to get you in this camp, I would be happy to show you all that is available to collect 90% of what the patient owes pre-adjudication which in effect saves many practices from severe financial harm

    • Mary Pat Whaley December 28, 2011

      Hi Anthony,

      Thanks for your enthusiastic comments!

      I focused this article on deductibles, particularly Medicare deductibles, because it is the category that most offices feel uncertain about. In many articles on my blog and in my book “The Smart Manager’s Guide to Collecting at Check-Out”, I recommend that every patient visit be completed with unpaid balances committed to a comfortable electronic payment plan. I also recommend that every practice consider a financial assistance plan to offer a sliding scale to patients in need. I don’t think you read anything in my article suggesting practices need not collect old balances, co-pays or co-insurance. Simply put, deductibles are the delta in the first quarter collections scene.

      Adjudication at check-out is an up and coming technology, however, it is not a panacea as you promote it. It does not offer 100% accuracy, it does not guarantee payment from the payer, and it does not address the delays in patients getting or losing coverage due to COBRA and plan changes. Adjudication estimation, as well as its brother eligibility verification, has an error rate that must be considered in the ROI.

      Anthony, I am sure that you did not mean for your comment to suggest that I am not knowledgeable about technology solutions, or that I do not offer my clients solutions that will solve their problems – I refuse to believe you would make that assertion about a colleague. Nor am anti your product, but I have read a lot of your posts on LI and think that in your enthusiasm for your own product, you do not always present a balanced perspective.

      Wishing you the best,

      Mary Pat

  2. Ellen January 6, 2012

    I appreciate your ideas, but as a banker have one word of caution when dealing with high-deductible plans and the related HSA accounts. If you choose to put a patient on a payment plan, be sure you are charging a REGULAR credit card or CHECKING account as opposed to the HSA card/account. I have seen too many people run out of HSA money before they run out of medical bills and you could be setting yourself up for more problems. I had one person sit in front of me and say that he had to overdraw his HSA – he had medical bills to pay!

    • Mary Pat Whaley January 10, 2012

      Hi Ellen,

      Thanks for that pertinent advice!

      Best wishes,

      Mary Pat

  3. BP Fulmer February 5, 2012

    Mary Pat

    Thank you for your balanced and knowledgeable comments regarding first of the year cash flow constraints. I applaud your measured response.


    BP Fulmer

    • Mary Pat Whaley February 5, 2012

      Thanks for stopping by, BP!

      Happy New Year,

      Mary Pat