‘What’s the financial health of my practice?’ It’s a question that many business owners don’t ask often enough or at all. Assessing financial health is critical because it helps you identify areas for improvement, and can potentially prevent your practice from joining the 63% of businesses that fail within 10 years of launching.
Unfortunately, the daily grind of busy schedules and ongoing client demands makes it difficult to assess the financial health of your business. Doing so, however, can help ensure long-term sustainability and profitability. In particular, consider the following five questions:
- Am I earning my full potential?
- Am I reaching as many clients as possible?
- Am I taking deliberate steps to improve my cash flow?
- Can I say with confidence that my client volume at this time next year will be the same or higher?
- Do I know how many of my claims each month are denied, and why?
When it comes to answering these questions, there’s almost always room for improvement. The biggest challenge is identifying the process-related changes that have the biggest impact. “That’s why we launched our financial health survey,” says Paige Suth, Product Specialist at SimplePractice. “We wanted to raise customer awareness of all of the untapped opportunities for growth.”
“We wanted to educate our customers about all of the steps they can take to make sure they flourish financially,” says Laura Teichmiller, Product and Knowledge Center Specialist at SimplePractice.
We compiled several of the most salient survey findings along with best practice tips to improve the financial health of your practice. Below you’ll find the first five tips of this two-part series.
1. Weigh insurance options carefully
As shown in Figure 1, 38% of private practice clinicians responding to the survey indicated that they either don’t accept any insurance (30%) or accept out-of-network benefits as a courtesy if the client’s insurance provides this (8%). Of the 62% who do accept insurance, they do so by participating in insurance panels (30%) and accepting both insurance and out-of-network benefits (32%).
Although forgoing insurance may help you avoid pesky denials and appeals, not accepting it can also impact the number of potential clients who can afford to pay out-of-pocket for your services in short- and long-term. Becoming paneled with one or more payers is a decision that you must weigh carefully while evaluating all of the pros and cons.
2. Verify insurance prior to rendering services & collect payment at the time of service
“Don’t worry, you don’t need to pay anything today. After insurance pays, we’ll send you a bill.”
For decades, this was the method clinicians used to collect payments from insurance customers. But, as deductibles continue to skyrocket, so have client receivables. And the older they get, the harder they are to collect.
For these reasons, it’s usually best to confirm how a client will pay for your services before their first appointment. This requires allocating time to either call the insurer or log onto their website to confirm the patient’s eligibility.
Here are the questions to ask when calling a new client’s insurance provider:
- Is the client covered by the insurance?
- What are the insurance coverage dates?
- In-network or out-of-network coverage?
- Are service(s) that you are seeing the client for covered and do they need pre-authorization?
- What is the copay for services?
- Deductible amount – Has the deductible been met for the year?
Also, on the day of the appointment, you should call again to confirm that the information has not changed. This may seem excessive but taking these steps before you see a new client helps you avoid denials for lack of coverage, and it helps clients understand exactly what they’ll owe. It also prevents you from potentially having to discount services when clients eventually receive the bill and are unable or unwilling to pay.
Some clinicians who are strapped for time choose to work with a billing service to avoid having to verify each new client’s eligibility.
While the majority of respondents (63%) follow this advice by verifying insurance information prior to rendering services, many still wait until after the first session (23%) or when the EOB arrives (14%), as shown in Figure 2.
The majority of respondents (81%) require clients to pay at the time of service, which is good news considering once a client leaves your practice, your chances of getting paid in full decrease significantly.
For more tips on how to verify coverage check out our expert series, Ask a Biller Episode 3.
3. Focus on client retention
As shown in Figure 3, slightly more than half of respondents (53%) said retaining current clients is most important, compared to 46% who selected getting new clients and only 1% of respondents selected reactivation of past clients as most important.
If you’re like the 53% of respondents who said retaining clients is most important, consider yourself on the right track.
In most cases, practices that prioritize retaining current clients tend to have great financial success. Why? Well, according to Harvard Business Review “acquiring a new customer can cost anywhere from five to 25 times more expensive than retaining an existing one.”¹
According to research, one in five clients will drop out of therapy before completing treatment. This means coming up with innovative ways to keep your clients engaged should be one of the main priorities of your practice.²
To retain current clients, make it as easy as possible for them to schedule appointments, contact you with questions, and pay bills. Providing clients with homework at each session also helps retain them as does simply asking these two questions: ‘How do you think it’s going?’ and ‘How can I improve the experience for you?’
4. Track your denials, and appeal or re-submit claims when necessary
When asked about resubmitting denied insurance claims, almost three-quarters of respondents indicated that they do this either most of the time (25%) or always (47%), as shown in Figure 4. Some respondents, on the other hand, reported only doing this sometimes (19%), while 9% said they don’t re-submit any denied claims.
If you don’t have a handle on your daily denials, you also don’t have a clear picture of your actual income. That’s because the revenue you generate is likely much lower than what you actually receive. In some cases, payers may continually deny claims due to an error you can easily fix.
Eleven percent of respondents don’t know what percentage of their claims are denied on a monthly basis. In addition, 9% have never re-submitted any claims. To improve the financial health of your practice, consider these strategies:
- Look at the remark code for every denial.
- Correct the error, and resubmit each claim as soon as possible.
- Implement process improvement efforts to correct the root cause of each type of denial. For example, verify insurance before rendering services to prevent denials due to lack of coverage, or vow to submit claims within 30 days to avoid timely filing denials.
- Track recurring denials so you can determine if it’s a pattern specific to that payer or an issue with your credentials (NPI, tax id, office location, name, etc.)
Implementing these strategies can prevent you from leaving money on the table—money that you’ve worked hard to earn and that’s rightfully yours.
If you have more questions about how to tackle denials and rejections, check out Ask A Biller Episode 9 with insurance guru, Barbara Griswold, LMFT.
5. Negotiate higher rates with payers
As shown in Figure 5, most respondents (69%) were not even aware they could negotiate with their contracted rate with a payer. Of the 31% who were aware and had attempted to negotiate their rate, less than half (45%, N=135) were successful, while the remaining 55% were not.
Although less than half of respondents were successful, it doesn’t mean you shouldn’t at least try to increase your rates. We recommend reaching out to payers every 2 years to negotiate a higher rate.
It’s perfectly within your rights to ask for more money. However, be prepared to present your payer with a solid argument for why it should increase your rate. Consider the following questions as you create your value proposition:
- How does your payer’s payment rate compare with your average rate for that specific CPT code across all payers?
- Do your clients continue to experience positive outcomes after treatment that reduces long-term costs for the payer?
- Has your rate remained the same over time even despite increases in the Medicare fee schedule?
- Have overhead expenses (e.g., rent, malpractice insurance) increased over time?
With some payers, you can send your rate request via email while others have a more formal process (i.e., sending your request on your letterhead via fax). Regardless of the process, as with any business negotiation, it can be a lengthy process to get a payer to agree to a rate increase. It’s important to be persistent and take copious notes detailing every call, email, and letter so that next time you contact the company; you’ll know precisely what to do.
For more tips on how to navigate negotiating a higher rate, check out Ask A Biller Episode 8.
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The Setting Your Practice Up for Success study is based on 1,201 SimplePractice customers in the U.S. and Canada. The data were collected between July 5, 2018 and July 9, 2018, via an online survey that customers were invited to participate using an in-app message. The survey contained 18 items, and, on average, took 2 minutes to complete. The number of years in private practice varied among respondents from those with relatively little experience (1 year) to those with 25 years’ experience, with an average of 7.2 years in private practice.
¹ Gallo, A. 2014. The value of keeping the right customers. Harvard Business Review. Accessed August 16, 2018 at https://hbr.org/2014/10/the-value-of-keeping-the-right-customers/
² Swift, J. & Greenberg, R., et al. (2012). Practice recommendations for reducing premature termination in therapy. Professional Psychology: Research and Practice. 43, 379-387.