“Be prepared.” It’s not just a scouting motto, or a jam from The Lion King soundtrack; it’s a mantra that businesses of all sizes should be adopting this year, and frankly every year. If you read my 2023 predictions, you know that we’re looking at an economic slowdown this year, and potentially next year as well. And while healthcare is traditionally listed as a “recession-proof” industry, when you compound the aftereffects of COVID, supply chain issues, increasing payrolls, and rising interest rates, rehab therapy won’t be as insulated from the effects of economic downturns as some might think—especially with most businesses being small or mid-sized ones. That’s why I’m offering some important recommendations to make sure your business comes out stronger on the other side of this recession.
Focus on your budget.
The first place to start preparing for a potential economic downturn is—you guessed it!—your budget. It can be difficult to forecast for something that hasn’t happened yet, but let historical data and facts assist you in creating a baseline to work from. Cash is king during a recession and focusing on building your flexible working capital reserves is arguably the most important thing you can do to prepare. Some austerity measures must be considered as well and prioritizing the expense line is crucial. It’s also a good opportunity to examine processes that can be streamlined as well as your current revenue streams and areas of low-cost expansion. (More on that in a mo’.)
Build an emergency fund and pay down debt.
You have heard me talk about it before, but a rainy-day fund for emergencies is critical for any business. Typically, it's recommended that you have enough cash on hand to cover as much as four to six months’ worth of expenses. With any luck you won’t need it, but you’d rather have those savings than not. If you’re still struggling to collect the cash reserves you need, having access to a line of credit without a variable rate is optimal if you were able to lock it in before rates skyrocketed. You’d rather not have to rely upon a loan to get you through a downturn, particularly as interest rates continue to climb higher, but a fixed rate loan is better than nothing. And any excess cash you have should be used to pay down debt liabilities, especially those with a variable interest rate.
Uncertainty around your expenses can be difficult to manage—which is why this is a good time to discuss options with your vendors as well. If possible, secure an annual rate (with the potential for a discount) rather than a potentially fluctuating monthly rate early in the year on mission-critical business solutions.
Collect on what you’re owed.
Collections can be a difficult topic to navigate, particularly when money is tight for patients. Improving upon your collection processes at the front desk is a particularly important task at the beginning of the year, as deductibles reset, and clinics must look to avoid starting 2023 with a deficit in cash collection.
Ultimately, you’re running a business, and for that business to continue serving all your patients, you need to collect on every dollar you're owed. That means tracking your A/R and devoting staff time to collecting on those accounts as well as reducing your day sales outstanding (DSO), which is the number of days it takes for your business to get paid following the services rendered. If you want to get ahead of your A/R problems, tightening up your collection process to emphasize payment at the time of service is a best practice to avoid outstanding copays in the first place.
The keys to an optimized collection process are no different during a recession than at any other time: be upfront, clear, and firm about your expectations when it comes to payment, and diligent in collecting for your services.
Adopt different approaches for saving money.
When you’re thinking about where to cut clinic spending, you might have to look beyond the basics of budgeting—and take a more creative approach. Now is a perfect time to review all your current in-network insurance contracts to try and renegotiate the terms of your existing agreement. Renegotiating might sound like a tall task, especially as insurance companies are themselves trying to save money and build up cash reserves. That’s why you need the right data showing which payers you’re most valuable to, as well as how valuable your excellent patient outcomes and high patient satisfaction are to those payers. With that information in hand, you can make your case for better reimbursement rates.
If you’re not sure about going the renegotiation route, you can at least make sure that you are getting paid the rates that you have in the contract. Our RCM team is always astonished that many of our Member clinic owners don’t know what they have signed up for when going in-network with a payer, especially when it comes to rates. Much like collecting on every dollar of copays that you’re owed, you must be vigilant in making sure that payers are giving you what you’re due.
If those rates are lower than what you’re willing to accept at present, you might have to make the tough decision to go out of network with that provider—and possibly others. If you’re worried about the potential loss of revenue, introducing cash-pay services and adding a cash discount to your fee schedule are great additions for any clinic—especially because more patients are looking to opt-in to cash pay to avoid high deductibles and copays. Whatever you choose, you have options beyond just accepting your current rates and terms from insurers if they’re less than what you should be earning—including looking at different reimbursement models.
Capitation models are also gaining in popularity as we see more payers move to value-based care (VBC). Under these models, insurance companies pay rehab therapists a set amount per patient and per diagnosis, rather than reimbursing them for the specific services provided. For those who may have nightmares from hearing the word “capitation” when these models were introduced years ago (before they fell out of favor in recent years), that might sound like yet another cut to therapist pay. However, the VBC models could actually work to our advantage: VBC capitation benefits providers that are able to offer efficient and cost-effective care while achieving the best outcomes, and rehab therapy fits squarely into that box.
Find new ways to increase your cash flow.
You’re also going to need some creativity if you want to try to keep your revenue at or near your current level. Increasing your patient volume is one option, but with the current staffing shortage we’re experiencing throughout the entire rehab therapy industry, there’s an obvious challenge to making that increased volume work in your clinic. So how can providers see more patients with the same workforce?
Use technology to get more efficient and fill in the gaps.
The answer to increasing efficiency without being able to add staff is introducing more automation into your practice. It might not seem like it, but a recession is an opportunity to examine all of your processes to see where you can increase efficiency. It’s not about replacing clinicians with technology, but you can implement software to handle work that doesn’t require the human touch and use tools to help you interact with more patients on a daily basis. Automating scheduling and intake frees up your front office staff, and with the addition of telehealth and remote therapeutic monitoring, you can move toward a hybrid model of care that allows for increased patient adherence and access to care as well as increased therapist patient volume.
Beyond easing your administrative burden, technology will also improve the overall patient experience. Convenience and ease are important qualities to have in your favor at a time when many patients have to make spending choices, particularly when it comes to choosing their healthcare provider.
Meet patients where they are.
If you’re looking to improve the patient experience and boost your patient retention, it’ll help to make it as easy as possible for them to access your services. In addition to RTM or telehealth, home-based outpatient PT should be a consideration as an offering to further the convenience factor for patients. And don’t wait for patients to find you—get involved with the local community, particularly with groups where your services are most needed. I love the approach that Dr. Josh Funk, founder and CEO of Rehab 2 Perform has taken in building marketing relationships with sports leagues, fitness centers, and other local businesses to not only grow their business but to build awareness of PT as a first option for treatment.
Speaking of the PT-first trend, I’d be remiss if I didn’t mention direct-to-employer contracting as another way of expanding your reach and your pool of potential patients. As of 2021, 64% of all workers covered by insurance are on plans that are self-funded by employers. And those employers are undoubtedly looking to reduce their healthcare costs—so it makes sense for clinics to work or contract with self-insured employers to offer rehab therapy services for their employees. On a larger scale, you can look at what CVS is doing with MinuteClinic (or more specifically in PT, what Confluent is doing with Walmart) to see how partnering with other companies to meet patients where they are helps expand the access footprint.
Know your data to understand where you are.
We all want to hold onto our initial vision and goals for our businesses as long as possible, but as circumstances change, so must the plan to achieve success. Those plans must be based on accurate data and a review of the patterns and trends you’re seeing with your business. Look at your current data and metrics in comparison to previous years; are you trending in the right direction? Are your visits, revenue per visit, and other key performance indicators (KPIs) down from previous levels?
It’s never a good idea to have a knee-jerk reaction to small, short-term changes in your KPIs, but when multiple months start to show a trend, diligence and quick action is warranted. So many people are hesitant to slow down in pursuit of their goals that they can end up making mistakes or doing more harm than good. Instead, you have to be willing to slow down to go fast, and that goes for these first few months of 2023. Data is invaluable in determining your current trajectory—whatever our perceptions, numbers never lie, and if your revenue numbers aren’t where they should be, you must be willing to adjust accordingly.
Keep the lines of communication open.
Uncertainty creates stress and anxiety for most people, and those reactions are only exacerbated when we’re talking about the possibility of recession. Employees hear the dire financial predictions and begin to worry about the security of their jobs. And while we might not be able to turn the economic tides back in our favor, we can offer our employees clear and honest communication about what’s going on and what your company’s strategic plan is for 2023 and beyond.
As important as honest and empathetic communication is in the best of times, it’s even more critical when we are dealing with significant headwinds. Talking regularly with your team and keeping them involved in the goal and plan development to meet clinic needs will help to develop a sense of ownership and buy-in. With everyone aligned, their combined strengths can get everyone pulling in the right direction.
Clinic leaders must be prepared for some potentially tough times in the next few quarters, and while it’s going to be challenging, it’s nothing we can’t handle. Take the time to examine your business practices and efficiencies to see where you can improve. Most importantly, prepare as best you can, focus on the things that you can control, and trust that we’ll navigate this turbulent period together.