How can you manage cash flow and revenue cycles in healthcare?

1 Understand your cash flow and revenue cycle metrics

Measuring and monitoring cash flow and revenue cycles is the first step in managing them effectively. You should know how much cash you have on hand, how much revenue you generate, how long it takes to collect payments, how much you spend on expenses, and how much you owe to others. Additionally, it is important to compare your metrics with industry benchmarks and best practices, and identify any gaps or issues that need to be addressed. Some of the key metrics to measure include days in accounts receivable (A/R), days cash on hand (DCOH), net patient revenue (NPR), operating margin, and the cash conversion cycle (CCC). A/R measures the average number of days it takes to collect payments from patients or insurers, DCOH measures the number of days you can operate with your current cash balance, NPR measures the amount of revenue you receive after deducting contractual allowances, discounts, and bad debts, operating margin measures the percentage of NPR that remains after paying for operating expenses, and CCC measures the number of days it takes to convert your A/R into cash.

3 Manage your expenses and liabilities

The third step to managing cash flow and revenue cycles is to control and reduce your expenses and liabilities. You should analyze your spending patterns, identify any areas of waste or inefficiency, and implement cost-saving measures without compromising the quality of your services or the satisfaction of your patients. Additionally, you should plan and budget for short-term and long-term financial obligations, such as payroll, rent, utilities, supplies, equipment, taxes, loans, and leases. To manage your expenses and liabilities, you could negotiate with suppliers, vendors, and creditors for better prices, terms, and discounts. You could also leverage economies of scale and bulk purchasing to lower unit costs. Additionally, you could implement lean and green practices to reduce energy, water, and material consumption. Furthermore, outsourcing or delegating non-core or low-value tasks to external or internal partners is an option. Lastly, refinancing or consolidating debt to lower interest rates and monthly payments is a possibility.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?