Managing the Healthcare Cash Flow Crisis

BDO just issued its outlook on the stability of the healthcare industry. The economic downturn is real, and if your organization did not build the infrastructure to get 100% visibility into its cash flows, it is in for a rude awakening in the next few months. This is especially important as the government claws back all its pandemic advances and subsidies on payroll.
As the cost of providing healthcare has increased to meteoric heights, I have compiled a few (very) tough questions your organization needs to answer to survive the downturn:

1. Do you have a marketable cash plan?
2. 1. If you make zero operational changes, what will the cash position be 13 weeks from now? A year from now? 
   2. If you’re forecasting a significant deterioration in cash position, what’s your plan of action? Does this plan make your management, lenders and investors comfortable? What are the risks, and what’s the mitigation plan for those risks?
3. Revenue Plan: 
4. 1. Does your organization have revenue forecast by region, entity (for multi-entity conglomerates), service line and payor? 
   2. How does your revenue forecast align with your AR?
   3. How did AR aging by payor shift over time?
   4. Do you have a process in place to value your AR at patient claim-level?
   5. What levers can you pull to make sure there’s predictable cash flow coming in each week? Do you have a good relationship with your payors that you can leverage?
   6. Do you have an AR monetization strategy to help you cover unexpected troughs in your cash plan? Have you shopped and lined up buyers?
   7. Can you start assuming risk on certain patient populations, and undertake capitation and other value-based care arrangements that will accelerate cash flow?
   8. Hospitals: Is your CDI team thinking critically in capturing the necessary documentation to maximize your revenue per patient?
   9. Health plans and other risk bearing entities: Do you have a daily workflow in place to improve your RAF scores?
5. Expense Plan: 
6. 1. Is your payroll sustainable? Do you need a plan to reduce your workforce? How can you execute a plan that will minimize your liability and impact on operations? What’s the impact of Overtime and Double Overtime? 
   2. What’s your attrition rate? Do you have a people plan that will minimize attrition rate and also spend? A.K.A International direct hires – academic medical centers have a distinct competitive advantage here. Can they crowd-source international direct hires and provide an elegant solution for the ongoing healthcare staffing crisis?
   3. How are you managing registry and contract vendors? Do you need to make some tough operational decisions and choose not to staff certain areas of your business that require expensive labor? How will you justify this with the authorities?
   4. Do you have visibility into spend at the vendor and item level? Do you have a bucketing methodology to organize spend so you can manage it better?
   5. Are you paying your vendors more than you should within each spend bucket? What’s the most effective strategy to renegotiate your contracts? How can you shop for replacement products and services in weeks rather than months?
   6. What’s your Accounts Payable right now? What should it be per industry standards? Are you paying certain vendors too early? Does your cash plan dictate that you start stretching your vendors?
   7. Did you bucket your capex spend into meaningful categories? Do you have granular understanding on patient safety and mission-critical capital expenditures?
   8. For hospitals: how are you doing on the delta between ALOS vs. GMLOS? Do you have a daily operational workflow in place to minimize the delta?
   9. For health plans, IPAs and risk-bearing entities – do you have a daily workflow to manage Admissions / 1000 and domestic utilization within your provider network?
7. Big Picture: 
8. 1. Is your cash plan sustainable? Do you need to reimagine your business plan?
   2. Do you understand your profitability by your service lines? Can you survive without your loss leaders?
   3. Is there an ROI in putting your organization through an active restructuring?
      I have certainly posed more questions than answers here. Turnarounds need to be project-managed around these critical questions, and it all starts with a comprehensive CASH PLAN. 
      
      

At Clarity Healthcare, we have developed the platform to drive answers to these questions in days – not months, irrespective of the size and the number of healthcare businesses in your organization. Please drop us a note at info@clarityh.com, and we will get back to you soon. Happy survival!