Question

You are the new administrator of the Miami Medical Group, a 50 physician multi-specialty group practice. You have 10 years of industry experience and an MHA from FAU. The physicians in the group have always been very conservative in dealing with the group’s finances. In the past, the group has never kept extra money in the bank but has distributed it to the doctors. As the group has grown over the past few years, younger physicians have decided to make changes and update their business practices. The younger physicians now control the Board of Directors. You have asked by the board chairman to design a cash management program that will benefit the practice but keep the older doctors pacified.

The Miami Medical Group occupies a 15,000 square foot building, which houses the majority of the physicians and all of the ancillary services. The group also operates 35,000 square foot practices geographically dispersed throughout Miami’s various ethnic communities. The group generates $20,000,000 per year in revenue with 69% operating expenses.

Issues

As you begin to design the cash management system, you realize the scope of the assignment is much greater. Cash management only looks at immediate needs, while looming changes on the forefront will dictate the need for a more sophisticated planning process that accounts for the sustainability and viability of the organization for the future.

Many factors complicate the financial planning process, including:

• COVID-19 pandemic disruption to clinical and business operations of healthcare.
• The Affordable Care Act will be fully implemented in 2014.
• The reimbursement model is changing from fee for service to value-based payment

Assignment

This assignment includes Presentation and Outline:

• Prepare 4-5 slides PowerPoint Presentation summarizing your plan to use at the board meeting.

• Prepare a two-page memo explaining all of the critical issues facing the group on the financial landscape, and explain how the doctors will ultimately benefit from the plan. You must read 4 – 6 peer-reviewed journal articles, and use the information from them to support your outline, presentation, and memo. Your goal is to demonstrate to the doctors your plan is sound and meets the anticipated changes facing them.   
• I need help creating a cash flow statement for the above Case Study. I was going to use the implications surrounding the financial burden of COVID-19 pandemic
• No further information given, we have to use our imaginations

Answer 1

A medical practice is one of the most challenging types of businesses to manage cash flow. When a patient books an appointment, it’s very difficult to predict with certainty how much revenue that booking will generate, when the practice will get paid and what percentage of the amount owed will eventually be written off as uncollectable. Few industries could survive for long operating with such a lack of visibility into cash flow. That's why it's important to know how to calculate cash flow for a medical practice. Dedicated medical practitioners who want to stay independent have to find ways to improve cash flow management so they can spend more time with patients and less time on the phone or in front of the computer.

Understand What Drives Cash Flow for a Medical Practice

How to calculate cash flow for a medical practice requires knowing that your practice’s cash flow is driven by several factors:

• what percentage of your physicians’ or dentists’ time is booked
• the procedures they perform
• what patients pay at the time of the appointment
• what insurance companies will pay and when they pay
• how non-payment from patients and insurance companies is managed

Each one of these factors can be improved to have an overall positive effect on the amount of cash available to a practice. By improving cash flow your reliance on outside financing is reduced, which lowers interest costs and you have additional cash for investment available. It also provides a cash cushion for months when you have unexpected expenses or reduced revenues.

In the above case we have to consider revenue of $20000000 per year with operating expenses of 69% that is

$20000000*69% = $13800000 and also consider some investing operations value of foot spaces given in the case with appropriate space value.

Physician practices managing patients during the COVID-19 pandemic are confronting new and unique operational and business challenges. This checklist provides high level guidance for practice owners and administrators.

1. Implement a process for rapid decision-making and planning

It is imperative to establish a clear chain of command and rapid response process to ensure swift, decisive action. Communicate to your employees that your response team is in place and evaluating the situation on a daily basis and that the highest priority is that practice patients, clinicians, and staff remain safe. And, as much as possible, think ahead so your response team does not have to navigate issues in real time; for example, what to do if a clinician or patient tests positive for COVID-19, what notifications must be made and to whom, given applicable privacy laws, and how that occurrence may impact your daily operations.

2. Understand your insurance coverage

Your practice may or may not be protected by its business insurance policy for COVID-19 related liabilities, and ascertaining your risk is a key element to making other business and operational decisions. Practices should contact their broker for a complete copy of all of insurance policies, refer to actual government emergency orders or decrees (to the extent that they impact your practice operations), and track your losses and expenses as you will need a record to make a claim.

Consult legal counsel on how to exercise your options under your existing policies, and in light of government orders, which may restrict or govern your business operations. You may need to notify professional liability carriers in the event practice providers are called upon to assist with emergency care, including outside of their normal clinical service arrangements.

3. Evaluate ongoing financial obligations

Revise financial plans to ensure ongoing liquidity of your practice in the event of less clinical revenue (e.g., due to cancelled elective surgery; fewer outpatient visits) and whole or partial closure of practice locations. Develop a contingency plan based on estimates of minimum cash flow to stay afloat. Review existing loan documents and financial covenants to determine if a slow-down of business or collections could trigger a default situation.

Proactively communicate with these third-parties, such as vendors, landlords and creditors, to discuss reasonable accommodations for cash flow disruptions. Seek legal counsel as appropriate.

4. Make a financial contingency plan

Manage cash to the best extent possible and consider delaying payment of discretionary bonuses or other discretionary payments. Consider asking lenders and other creditors for forbearance, forgiveness, or a standstill and agree to a process of keeping them informed over time. Also, monitor resources available through newly emerging economic relief packages to try to help businesses and workers affected by the outbreak.

The U.S. Small Business Administration (SBA) has begun to administer low-interest loans funded by numerous states, counties and municipalities. Other organizations, like the United Way, have also created COVID-19 relief funds which may provide additional funding.

5. Assess current and future supply needs

The pandemic has created worldwide shortages of essential medical supplies including personal protective equipment (PPE) and respirators. Take stock of what supplies your practice has now and what cash flow should be devoted toward trying to stock up for the months ahead. A reduction in in-person care will reduce the number of encounters requiring PPE.

While your business may be interrupted, you may also be called upon to triage patients outside of your normal workflow, so contact your supply vendors and, if necessary, your state and local health authorities to ensure that you are in the queue to receive necessary supplies.

6. Understand how to continue business operations

Many states and localities are issuing emergency and “shelter in place” orders which may impact your business operations. Many of these orders designate medical practice as “essential operations” or within “critical infrastructure industries,” but there can be a rush to understand the underlying policy and how impactful it will be to your practice and other businesses which are tangential to yours (for example, your office building).

If publicly available guidance is unclear, and especially if an essential employee refuses to work, consult with local counsel early so that you can quickly ascertain the reach of such orders and how to apply them to your practice. You may need to provide a form letter to the employee explaining the essential service that the employee provides in jurisdictions where a “shelter in place” order is in effect.

7. Consolidate administrative resources, including coding tools

Although operations may be interrupted or delayed, many businesses, include payors, will be operating remotely. If not already in place, office administrators should compile a “quick guide” of essential resources for meeting immediate needs while working remotely. It is likely that clinical and non-clinical personnel will still be required to adhere to practices (record keeping etc.) consistent with the standard of care, absent waivers.

8. Manage workflow

Certain governmental agencies or health care payers have issued guidance, for example the Centers for Medicare & Medicaid Services (CMS) issued recommendations that adult elective surgeries and non-essential medical services be delayed during the COVID-19 outbreak. Refer to these recommendations when reviewing your practice’s calendar and deciding whether to reschedule, cancel or proceed with visits and procedures.

This will protect clinical staff and patients requiring essential services, conserve PPE and other supplies, reduce variation in responses to patient queries, and reduce the safety and liability risk to your practice.

9. Utilize digital health tools

Digital tools such as telehealth and remote patient monitoring can enable your practice to function outside the confines of a physical office in a potentially safer environment than the in-office setting during outbreak.

The Federation of State Medical Boards has a resource which tracks state emergency declarations and licensing orders. Prepare clear communication to your employees and patients regarding the use and availability of digital health tools.

10. Communicate guidelines for employees

Many employees are concerned about their own health and workplace safety; institute interim guidelines to assist employees with making the best health decisions for themselves and their families and to provide a safe workplace. For example, advise employees concerning circumstances under which they should not report to work, identify whom they should contact if they need to be absent for a COVID-19 related reason, and specify any leave available to them in the event of a COVID-19 related absense.

11. Plan ahead for employee furloughs

Depending on cash flow challenges or external factors beyond your control, your practice may need to furlough or terminate non-essential employees. Consult qualified legal counsel to understand your practice’s obligations in this regard, understand legal requirements regarding communication of employment status, and identify workflow changes in advance which may be required to keep the practice functioning properly.

Health care staff and clinicians will be sorely needed during the COVID-19 pandemic, so communicate with your local health care systems and authorities to identify external opportunities for furloughed or terminated staff.

12. Stay abreast of new care delivery flexibilities

Federal government and states are waiving regulatory hurdles to patient care during the COVID-19 emergency on a daily basis. In this swiftly moving environment, real time knowledge of what is being done external to the practice will help you manage and protect the business of the practice. To avoid non-essential email traffic, task one administrative staff member with signing up for and disseminating alerts from your Governor’s office, state and local departments of health, and payors.

Your legal and financial obligations may change as the status of your locality changes (e.g. those practices in states who have declared a state of emergency may have unique rights to not satisfy contractual obligations), and other government or payor notices may provide needed flexibilities to enable patient care.

13. Prepare for exposure incidents

Physicians and other clinical staff are on the front lines of caring for patients with confirmed or possible infection with COVID-19 and have an increased risk of exposure to the virus. Health care professionals may minimize their risk of exposure when caring for confirmed or possible COVID-19 patients by following the CDC’s Interim Infection Prevention and Control recommendations for: Patients with Suspected or Confirmed COVID-19 in Healthcare Settings.

Review whether any engineering or administrative controls, safe work practices, and/or personal protective equipment may limit potential exposure.

14. Identify and implement COVID-19 specific clinical protocols

As the COVID-19 crisis evolves, many practices are being tasked with developing clinical protocols in the absence of guidance. Issues such as how to clinically evaluate symptomatic persons, triage and surveillance, infection control and isolation practices, communication with and reporting to public health authorities, and facility access and security should be top of mind and will help arm your practice against business and legal risks.

By considering all the factors above MIAMI MEDICAL GROUP has to prepare its cashflow and other development programs to survive in this covid-19 crisis.