By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    improving patient experience
    6 Ways to Improve Patient Satisfaction Within Hospitals
    December 1, 2021
    degree for healthcare job
    What Are The Health Benefits Of Having A Degree?
    March 9, 2022
    custom software development is changing healthcare
    Digital Customer Journey Mapping and its Importance for Healthcare
    July 21, 2022
    Latest News
    Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
    May 16, 2025
    Learn how to Renew your Medical Card in West Virginia
    May 16, 2025
    Choosing the Right Supplement Manufacturer for Your Brand
    May 1, 2025
    Engineering Temporary Hospitals for Extreme Weather
    April 24, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    Can Thinking Younger Make You Live Longer?
    April 20, 2011
    Image
    Obesity’s Outlook Unchanged
    June 13, 2011
    When It’s An Emergency Elderly Not Treated As Well in Hospitals
    July 16, 2011
    Latest News
    Building Smarter Care Teams: Aligning Roles, Structure, and Clinical Expertise
    May 18, 2025
    The Critical Role of Healthcare in Personal Injury Recovery: A Comprehensive Guide for Victims
    May 14, 2025
    The Backbone of Successful Trials: Clinical Data Management
    April 28, 2025
    Advancing Your Healthcare Career through Education and Specialization
    April 16, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: A Simple Way to Improve the Profitability of a Medical Practice
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Business > Finance > A Simple Way to Improve the Profitability of a Medical Practice
BusinessFinance

A Simple Way to Improve the Profitability of a Medical Practice

marco_terry
Last updated: June 14, 2014 8:00 am
marco_terry
Share
5 Min Read
medical practice profitability
SHARE

medical practice profitabilityImproving the profitability of a medical practice or any healthcare business that bills third-party medical insurance plans can be difficult. In fact, the constant downward pricing pressures from insurance companies, Medicare, and Medicaid make it challenging to run a profitable practice.

medical practice profitabilityImproving the profitability of a medical practice or any healthcare business that bills third-party medical insurance plans can be difficult. In fact, the constant downward pricing pressures from insurance companies, Medicare, and Medicaid make it challenging to run a profitable practice.

There are only two ways to increase profits: increase your revenues (or prices) while keeping costs at bay, or keep revenues in line but cut costs. Obviously, you can do a combination of both.

In this article, we review a simple way to increase the profitability of your practice. This approach does not require that you increase prices or that you cut costs dramatically. Furthermore, it should benefit all involved.

More Read

patient advocacy
Forget Patient Advocacy: Be a Patron of Patients
When Was the Last Time You Gave Your Practice a “Checkup”
HIPAA Compliance Breaches Higher Than Ever: What Are You Doing About It?
What Specialty Pharmacies Can Teach the Healthcare Industry
5 Ways to Use Texting in Healthcare Marketing and Engagement

You cannot increase prices

First, let’s discuss prices. Increasing prices is out of the question for most medical practices. Most insurance companies negotiate aggressively and are constantly finding ways to pay you less money, while taking longer to send payments. The only exception to this rule is certain large or unique providers in specific geographic areas.

Cutting costs has drawbacks

The alternative is to cuts costs. Actually, you should review your supplier and overhead costs regularly. Keeping costs in line is crucial to the success of a medical practice. However, there is a limit to how much you can cut. Eventually, quality and morale will suffer, which can have negative repercussions for the practice.

Adding new services can be expensive and risky

One alternative for increasing revenue and, hopefully, profits, is to add new services, such as procedures, infusions, etc. However, this option is risky since you never know if the demand will materialize. Furthermore, adding services requires additional investment. Depending on the services you add, it may take some time before you recover your initial investment and start making money.

A simple solution: early payment discounts

Most medical practices pay invoices on standard commercial terms of net-30 to net-45 days terms. Paying in 45 days is good for your cash flow and can help if your practice is running low on funds. However, if your cash flow is good, you can leverage it and get a discount.

One simple way to increase profits by decreasing costs is to ask suppliers if they provide a 2% discount in exchange for early payment. Many suppliers are happy to provide the discount because they need the money.

Keep in mind that while this method is simple to implement and run, you need to do some homework before you get started. Otherwise, if you are not careful, you could experience cash flow problems yourself.

Can you afford early payments?

Before implementing this plan, you must determine if you can afford to make early payments. Determine if your practice has a cash reserve sufficient to cover your regular expenses for a couple of months. Additionally, review your cash flow statements to ensure the medical practice is cash-flow positive.

It’s best to have someone from the finance department, or a CPA, help you make this initial determination. This assessment helps you avoid problems later on.

Whom should you pay early?

Selecting whom to pay early depends on your specific objectives for this plan. If you solely want to improve profitability, prioritize your vendors based on who provides the largest discount. On the other hand, if you also want to improve your commercial credit, consider making early payments to vendors that report information to commercial credit bureaus.

Start slowly and monitor regularly

Implement this plan slowly. Start making early payments to a few vendors while monitoring your cash flow. Increase the number of vendors that get early payments once you are certain your cash flow remains positive.

If you do encounter financial problems, step back from making early payments until the problems are resolved. This approach often fixes things. However, if problems persist, they may have a different origin. For additional information on handling these issues, consider reading “Diagnosing Cash Flow Problems in a Medical Practice” and “How to Finance a Medical Practice with Cash Flow Problems”. Both articles are available at HealthWorks Collective.

medical practice profitability / shutterstock

Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

Clinical Expertise
Building Smarter Care Teams: Aligning Roles, Structure, and Clinical Expertise
Health care
May 18, 2025
Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
Grounded Healing: A Natural Ally for Sustainable Healthcare Systems
Health
May 15, 2025
Learn how to Renew your Medical Card in West Virginia
Learn how to Renew your Medical Card in West Virginia
Health
May 15, 2025
Dr. Klaus Rentrop Shares Acute Myocardial Infarction heart treatment
Dr. Klaus Rentrop Shares Acute Myocardial Infarction
Cardiology
May 13, 2025

You Might also Like

For Hospitals, More “Likes” = Lower Mortality?

March 16, 2013

The Doctor’s Not In. You’ll Have to See a Nurse.

April 4, 2011

New York Times Charges Web Readers: Whistleblower Wondering

May 8, 2011

Delivering High Quality Healthcare: Measure, Improve, Measure Again

April 28, 2014
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?