Andrew Maller and Christen Price
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Re-establishing Post-COVID Financial Health
Despite the COVID-19 crisis commencing a remarkably stressful year, the arrival of 2021 has shown that practices are surely on the road to recovery. For our clients, this glimmer of hope has manifested as upticks in patient volume and revenue approaching pre-COVID levels. While these are promising signs, this rebuilding period must be navigated cautiously and conscientiously. This means avoiding the belief that recovery equals going back to pre-COVID levels. Instead, we must use the pandemic’s lessons to strengthen our practice’s financial health now and into the future.
A Thoughtful Approach
Establishing our practices as better than before will require combining proven processes with the tough lessons we learned in 2020. To be successful, we must take a strategic — yet disciplined — approach.
- Assess the sustainability of COVID-related changes. Every medical practice was forced to make significant business decisions to survive the pandemic. While some of those changes were likely short term, others may have been permanent. As we look back at these choices, we must assess their impact on current operations and future businesses growth. A good place to start is by asking some key questions:
- Have any changes to staffing or provider levels impacted operational flow and efficiency or patient satisfaction?
- Have any cuts to “discretionary” expenses, such as marketing, resulted in less patient demand?
- Are our practices more financially prepared to survive a crisis today than one year ago?
While most of us want to move on from 2020 completely, answering these questions will help us reflect on past choices and create a stronger path toward recovery. This reflection is necessary to structure a solid plan for the coming year(s).
Continue to diligently monitor cash flow. It is probably fair to say that prior to the pandemic, monitoring and maintaining positive cash flow — while certainly a priority — may have been taken for granted. Given the previous steady flow of patients and ability to meet expense obligations, that is understandable. Of course, this quickly changed in March 2020, when we were all forced to go into crisis mode.
While practice cash flow has likely improved since then, we are not out of the woods yet. The ebb and flow of COVID case volumes has resulted in inconsistent patient volumes and increased appointment cancellations. Because of this, it is critical to monitor cash flow with the same level of discipline used in 2020. This involves closely tracking expected cash inflows and outflows, such as loan payments, payroll, and rent expenses. Doing so will provide a sense of control and confidence during this critical time in our practices. To assist in this process, BSM has created a complimentary 13-week cash flow forecasting tool.
Build a financial forecast. During 2020, many practices adopted the art of forecasting out of necessity. By forecasting fluctuating month-to-month revenue and expenses — as well as their potential impact — these organizations gained a better understanding of how COVID-driven changes might impact results. This knowledge also provided valuable leverage for crucial decision-making.
While forecasting is similar to budgeting in many respects, one of the main differences is that budgeting is often seen as a “one-and-done” static exercise. Conversely, an operating forecast is monitored and updated regularly, making it more accurate. This type of accurate business planning can decrease lost strategic opportunities, mitigate unnecessary spending, and reduce risk/uncertainty. While there are many ways to build out an operating forecast, we suggest getting started with our complimentary downloadable template.
Create a provider business plan. Unfortunately, ongoing social distancing guidelines and safety protocols mean reduced patient capacity will likely continue for the foreseeable future. So, while creating an operating forecast is a good starting point, meeting or beating those projections will not happen by accident.
To ensure success, we recommend proactively creating individual provider business plans. When creating them, the goal should be to find tangible opportunities that will increase efficiency, patient volume, and ultimately, revenue. Many of our clients have achieved this by expanding hours, utilizing support staff more thoughtfully, and creating additional service offerings. Ideally, these types of creative solutions will maximize current resources in such way that businesses will thrive in good and bad times, all while securing a prosperous future.
Measure recovery. Another post-pandemic challenge businesses face is gauging the potential impact of performance and operational changes on real-time results. Fortunately, closely monitoring business recovery and comparing this data to pre-COVID levels can ensure a positive trajectory. This degree of scrutiny will provide the data necessary for making actionable adjustments. Key tracking metrics may include monthly charges, patient visits, surgical volume, and revenue.
It is also important to create metrics that can be shared with staff, as this facilitates their buy-in. At BSM Consulting, we have accomplished this by measuring certain performance metrics, including the number of client inquiries, consultant project volume, and monthly revenue. Our entire company meets regularly to assess our progress, resulting in a common language. This transparency creates the mindset that we are all accountable for the company’s success. We encourage practices to follow a similar model when measuring and tracking recovery to ensure staff is informed and onboard. Doing so will help organizations recover more quickly and efficiently.
The Journey to Financial Stability
While we are seeing progress since COVID reached our shores one year ago, now is not the time to take our eyes off the prize. By reflecting on the pandemic’s lessons, assessing current operations, tracking progress, and making necessary adjustments, practices can deliberately craft a path to financial success. More than anything, we must remember that true recovery does not happen accidentally — it takes disciplined and strategic financial management that involves every team member.
NEED HELP STRENGTHING YOUR FINANCIAL HEALTH POST-PANDEMIC? Visit our COVID resources page to access valuable tools, webinars, and templates created by industry experts for clients like you.