How to Manage When Patient Services Revenue Declines
Behavioral and mental health services are designed to help people in crisis. Yet we cannot ignore the business side of things. Services cost money. Those offering the services need to make enough money to keep things going. And, when patient services decline, so does revenue. That could make it difficult for an organization to keep going.
Several years of runaway inflation combined with labor shortages have made life difficult for behavioral and mental health providers. As a behavioral health consulting company, we have worked with clients facing significant struggles over the last year or so. Patient service revenues are down. Meanwhile, the costs associated with providing those services are up. It is not a particularly good recipe for success.
As experts in behavioral and mental health management, we would be reluctant to offer a single solution or strategy for every organization facing lower patient service revenues. But, we do have some suggestions worth considering:
1. Avoid New Debt
Cash flow is critically important during economic downturns. Every type of business, whether it is in the healthcare field or not, needs steady cash flow to pay its own bills. Cash flow tightens up when patient service revenues are down. One of the best ways to get a handle on cash flow is to avoid taking on new debt.
Debt comes with interest payments. It also comes with a commitment to make regular payments toward reducing the debt irrespective of an organization’s income. Simply put, every new debt a facility takes on represents more cash committed every month. It is not a good situation to be in when revenues are down.
2. Focus on Liquidity
As facilities restructure their finances to account for lower revenues, it is important to focus on liquidity. Liquidity is an organization’s ability to quickly convert assets into cash as needed. The greater an organization’s liquidity, the more access it has to fast cash. Needless to say that such access is critical when revenues are in decline.
3. Work on Improving Efficiency
A more efficient facility tends to be a more financially lean facility as well. So, when revenues are down, it only makes sense that facilities find ways to be more efficient. Just understand that increasing efficiency and cutting costs are two different things. Greater efficiency does reduce costs, but far too many organizations seek to cut costs without improving efficiency.
One of the hottest trends right now is automation. Combining automation technologies with telehealth services can both increase efficiency and save money. A good example is offering patients self-service options they can access both in the office and at home.
4. Embrace Growth Opportunities
During economic downturns, there is a temptation to avoid growth opportunities. As the thinking goes, an organization cannot afford to invest in growth when revenues are down. That is not necessarily incorrect. But it is also not correct all the time.
Economic downturns often present opportunities to grow without spending as much money. Where other organizations are pulling back and avoiding growth, another organization ready and willing to seize the day can take advantage of the most promising opportunities.
Where it’s possible to embrace growth without seriously jeopardizing cash flow, there may be an opportunity to get in on something that will ultimately prove very profitable. Caution certainly is warranted, but such opportunities should still be considered.
Behavioral and mental health management companies, like Horizon Health, exist to help providers do better. If your organization is struggling due to current economic conditions, we may be able to help. Reach out and let us talk about how we might help make your organization better.
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Contact us to learn more about how Horizon Health can help you start a behavioral health program or take an existing program to new heights.