Five Key Strategies for Managing Inflation in Medical Practices

Despite recent reductions in inflation, medical practices are still feeling the financial pinch. From rising supply costs to stagnant reimbursement rates, the pressure on physician practices can seem overwhelming, even insurmountable. 

The good news is that there are at least five strategic steps practices can take to mitigate the impact of inflation and to maintain their financial health. 

Let’s take a look. 

Optimizing revenue cycle management

Effective revenue cycle management (RCM) is critical to the financial health of any medical practice. RCM encompasses the entire process of tracking patient service revenue, from the creation of an account to the final payment. Given the complexity and importance of this process, it is vital that practice leaders continually seek improvements that can enhance cash flow and reduce the time it takes to receive payments.

Several key front-end functions play a crucial role in the speed and accuracy of reimbursement, including scheduling initial appointments, registering patients, verifying payment eligibility, and obtaining necessary authorizations or referrals. Ensuring these functions are performed accurately and efficiently can prevent costly delays down the line.

The claims submission process is another area where optimization is essential. All claims must be submitted with complete and accurate information to avoid denials, which can result in uncollected accounts receivable. Practices should regularly evaluate their RCM performance using data analytics and key performance indicators (KPIs). These metrics provide valuable insights into the clinical, financial, and operational health of the practice, enabling informed decisions that drive continuous improvement.

The complexity of RCM brings us to another key strategy…

Outsourcing back-office functions

One of the most effective ways to manage costs during inflationary periods is to outsource non-clinical functions. By outsourcing tasks like credentialing processes, RCM, and billing, practices can streamline their operations and reduce overhead, especially since specialized service providers have developed efficient systems and protocols for handling commercial insurance, Medicare, and Medicaid reimbursements.

One prime spot to consider outsourcing is medical credentialing, which is a time-consuming and complex process. By allowing experts to manage the intricate details of credentialing, practices can ensure they meet all necessary compliance standards while freeing up valuable time and resources to focus on patient care.

Outsourcing revenue cycle management is another key area where practices can save both time and money. These services ensure billing, coding, and claims submission are handled efficiently, reducing the likelihood of errors that can lead to costly denials and delays in payment. 

Regularly reviewing and audit payor contracts

Another critical strategy for managing inflation is to regularly review and audit all payor contracts and reimbursement rates. 

Physicians need to examine their major payor contracts at least annually and in some cases, even semiannually. This review process ensures practices receive the correct payments and that any agreed-upon cost-of-living adjustments (COLA) or fee schedule updates have been implemented. Sometimes, payors miss or overlook adjustments, leading to lower reimbursement rates than agreed upon. By conducting regular audits, practices can identify these discrepancies and take action to ensure they are being compensated fairly. 

Regular audits also allow practices to understand the specifics of each contract, helping them to understand where there may be openings to renegotiate terms or secure better rates to improve overall financial stability.

Assessing and optimizing business services

When inflation is high, cutting costs is a priority for maintaining profitability. It is time to take a page from every household playbook: trim the fat, and look for vendors that offer better deals.

Practice leaders should review the business services they rely on and identify opportunities for cost reduction. By conducting a thorough review of expenses related to clinical and administrative supply vendors, internet service providers, email hosting providers, and other essential services, practices can identify areas to save.

Additionally, a monthly financial report can provide a clear snapshot of how these business services impact overall revenue. By comparing costs against benchmarks and industry standards, practices can determine whether they are overpaying for certain services and explore more cost-effective alternatives. In some cases, renegotiating contracts or switching providers can result in significant savings without compromising service quality.

Strengthening data management and security

While making strategic cuts can enhance profitability, one place to make investments is data management and security. As medical practices increase their reliance on digital solutions for operations, managing and securing data are more critical than ever. Indeed, ensuring the accuracy, accessibility, and security of patient and financial data is essential for both regulatory compliance and operational efficiency.

Practices should implement robust data management systems that enable real-time access to critical information such as patient records, billing data, and financial performance metrics. They also should conduct regular data audits to maintain the accuracy and integrity of data, minimizing the risk of errors that could lead to financial losses or compliance violations.

Data security is especially important in an environment where cyber threats are on the rise. Practices must invest in strong cybersecurity measures, including encryption, secure access controls, and regular updates to security protocols. By safeguarding patient and practice data, clinics can protect themselves from the potentially devastating consequences of data breaches.

Navigating the financial pressures of inflation requires a proactive and strategic approach. For medical practices, these steps include continually improving revenue cycle management, optimizing back-office functions through outsourcing, regularly reviewing and auditing payer contracts, assessing and optimizing business services, and strengthening data management and security.

At Meroka, we understand the complexities of managing a busy medical practice. Implementing these solutions is challenging, but our team can help you identify gaps in your practice, determine your specific needs, and develop solutions that allow you to focus on what matters most: providing excellent patient care while maintaining a successful business.

‍