The
general public may think that drug rehabs are cash cows but to those of us who
have run them or are currently running one, it’s more challenging that most
people think. Regarding the supply and
demand issue, alcoholics and drug addicts are never in short supply. However, finding ones that are receptive to
treatment can be. Strengthening
relationships with law enforcement agencies that most likely provide the lion
share of your referrals is crucial to keeping numbers up. However, what if referrals, admissions and
treatment sessions are steady but cash flow is a problem? We may need to pop the hood and take a look
inside to identify the problem and devise a solution.
The
first thing to determine is whether you have negotiated high enough rates with
the insurance companies you are contracted with. Managed care companies have tried to, and
have been successful at, driving the treatment fees down over the course of
time. Have they gone too far with your
contracts? Let’s find out. It’s very easy to determine your bottom
line. Go to your financial statements
and add up all of your operating expenses for a given period of time…let’s say
last year. Then divide that dollar
amount by the number of treatment sessions your facility has provided for the
same period of time. That number is your
breakeven point. Therefore, your fees
for service must be higher than that number.
If
your operating expenses exceed your revenue, you have a fundamental problem
that must be resolved immediately to ensure the fiscal stability of your
operation. One solution is to try to cut
expenses. You may need to bring your
bookkeeper and accountant into the room when doing this. Although you may not want to sacrifice
clinical care for financial profits, there may be plenty of other ways to trim
your company’s fat.
If
it’s been years since you first negotiated your contracts with insurance
providers, it may be appropriate to revisit the possibility of renegotiating
your rates. Don’t expect this to come
easy but if you push a little, you may get some of your payors to give in.
If
you’ve analyzed the margins between your expenses and fees for service and they
seem to check out, you could be experiencing an accounts receivables issue that
is causing your cash flow problems. In
other words, your fees are fine but you’re not getting paid on time. This can either be caused by the utilization
review process that is played by most managed care companies. If you don’t receive authorization for
treatment prior to actually providing the services, you won’t get paid. If preauthorization is not the issue, the
insurance or managed care companies may be participating in stalling tactics
and withholding your payments.
Many
insurance companies participate in these stalling tactics so that they can earn
interest on your money. Chances are, if
they are withholding your payments, they are also withholding the payments of
hundreds of other health care facilities across the country. In some states, stalling tactics are illegal
and punishable by late fees. However,
keep in mind that your relationship with HMOs can be compromised if you sick
the attorney general’s office against them for violating these
regulations. A more strategic and
diplomatic approach may need to be implemented.
Tread carefully when going up against the people who pay you.
One
of the hardest things about running a medical office is receiving payment on
time from historically the worst payors on the planet. Insurance companies know every trick in the
book to delay your payments or avoid making them entirely. Most insurance companies create policies intentionally
complicated to specifically confused health care providers, hoping that they
don’t have the staff that can decipher the convolution they’ve created.
One
solution to this problem is outsourcing this function to a company that
specializes in billing for behavior health services. Most of them work on a contingency basis and
their system may be more sophisticated than your internal billing department. They also may have more manpower than your office
does. Remember that your company’s area
of expertise is providing substance abuse treatment. Their area of expertise is billing.
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