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COVID-19 Alerts - Volume 3 (Part I) - March 27, 2020 |
"Planning is bringing the future into the present so that you can do something about it now." - Alan Lakein, Author
We recognize your are in high demand to manage your team, clinical workflow changes, and support your providers. This is likely taking all of your focus. We want to encourage you to allow some time to remain focused on the financial management functions. It is unlikely your organization has gone unscathed in the changing economic environment. We are here to remind you that now is the time to focus on your business cash flow and renew your understanding of the details surrounding your revenues and expenses within your organization. Get reacquainted with the details of your financial footprint and practice your forecasting skills. Many organizations are still surviving off cash flow from 30-45 days ago now is the time to focus on a plan for the coming months.
Links to resources discussed in this update:
Disclaimer: V2V Management Solutions is a healthcare consulting firm. We are not licensed attorney’s or certified public accountants. This guide is not intended to replace legal or financial advice from your trusted resources. Before acting on any information provided check with the appropriate legal or financial team. This situation is a constantly evolving landscape be sure to research for most current information.The following content consists of key takeaways on information published in the above referenced articles, facts sheets, and our personal/professional experiences in financial management throughout a crisis.
In this edition of Covid-19 Alerts we are focusing our attention on things you need to be mindful of in managing through the financial impacts of disaster or crisis event. The economic impact of a national state of emergency is one all our businesses will feel. We hope the following tips and suggestions will help you to gather and prepare for managing your businesses cash flow needs during this time.
Preparation and identification for any immediate cash planning needs:
- Organize financial data in one place. If you plan to file for relief loans or grants you will need three to four years of financial statements and tax return information. If your organization is owned by a small group of individuals be prepared to request their personal financial statements and tax returns as well.
- Make a list of the areas of greatest concern and where you may have influence.
- Require accurate and timely reporting if using external sources for bookkeeping. Get involved – bookkeepers and accountants can’t do it all for you.
- Create and use financial statements for forecasting.
- Use account aging reports to project cash flow for next 90 days and identify potential reductions in revenue in the near future.
- Forecast short-term cash flow and craft a payment plan.
- Checks and balances are critical! Pay attention to how funds are handled. A disruption to routine of this magnitude creates opportunity.
- Check your available lines of credit.
- Check your business insurance policies for any business interruption coverage parameters.
Set priorities for managing accounts payable:
- Contact bank, vendors, and landlords to determine who has flexibility during this time.
- Look for payment deferral models, vendors offering credit card access or conversions, and supplier credit lines, etc.
- Decide who to pay first – e.g., lenders, past-due taxes, urgent vendors to ensure no further business interruption or lack of resources.
- Offer partial payments, if possible.
- Ask yourself, “If I didn’t have “X," would I hire/purchase it now?" If the answer is no, it should be trimmed.
- Limit supply ordering to key personnel to mitigate unnecessary spending during this time.
- Identify unusual expenses directly needed to manage the current situation: increased or new cleaning service costs; supply costs; temp staff costs, remote workforce costs; technology costs, any capital costs associated with changing facility use or remote access needs. Be sure to document and track these new expenditures for emergency relief funding access.
- Manage your credit score. Talk to credit decision-makers early and often. Above is a helpful blog discussing what is involved in understanding and monitoring your business's credit scores.
Set priorities for accounts receivable management:
- Collect everything now - call everyone – don’t wait! Focus collections on overdue accounts, require cash payment at time of service, offer discounts on payoff of old account balances. Focus on older AR follow-up, patient balances, make personal calls to patients.
- Ramp up focus on areas of the claims cycle that allow you to recoup cash quickly. Identify payers that have the quickest claims payment turnaround and ensure those claims are generated.
- Prioritize the AR by greatest cash flow opportunities. Now is not the time to work the AR by alphabet. Look for best opportunities to collect quickly and focus your attention there.
- Ensure claims are free of errors and ready for payment. This is no time for mistakes.
- Bill patients as soon as possible.
One thing that will become incredibly helpful is beginning to track the impacts of this event on your business operations immediately. Don't wait until you need to extract the data to support any lending requests or economic injury justifications to begin to calculate the significance of the impact on your business. Below are some tips on ways to set up some tracking features within your business systems to aid you in that process.
- Document any unusual expenditures relating to adopting new models of care or specific to unusual demands that are directly related to the emergency circumstances.
- Document lost revenue to support any information disclosures that will be required when requesting credit through various institutions. Within your practice management systems (PM), create a visit cancellation code specifically for Covid-19 cancellations.
- Within your PM create a visit “conversion” code for well visits or routine follow-up visits that are now occurring specifically as telephone visits or e-visits with associated reduced reimbursements. If your state does not have reimbursement parity laws around telehealth this will also be necessary for lost revenue on conversion to telehealth visits.
- Create a supply plan with your vendors to ensure access during anticipated shortages while considering alternative sourcing (neighboring clinics, local retailers, and watch local government announcements). Many non-essential businesses are closed except for emergencies, ask to purchase PPE or disinfectant supplies from a local office, perhaps a veterinarian office, or other industry that uses this gear.
- Monitor federal and state guidelines regarding emergency relief relating to payroll tax changes, sick leave, FMLA, and labor policies associated with Covid-19 to better understand your obligations as an employer. The Families First Coronavirus Response Act was passed on March 18, 2020. Seek legal guidance if you are conducting layoffs or furloughs.
- Within your payroll system create payroll codes for Covid-19 specific OT, Sick Time, Paid Time off, to track costs of workforce impacts. Keep very clear records for any furloughs or layoffs to provide for proof of impact in the event there is a requirement for documentation.
- If creating virtual/remote workplace options be sure to follow security and privacy restrictions.
V2V is here to help
Please keep in mind you should verify all information you are receiving from outside sources to ensure your interpretation on its implications for your business are accurate and appropriate.
Our V2V team stands by ready to assist you in navigating these turbulent times. We can quickly deploy resources to assist your team.
For Rapid Response Contact us at:
Irv Barnett, Founder: [email protected] 208-717-3941
Michelle Wier, Founder: [email protected] 208-717-3943
