By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
March 18, 2020
Coronavirus is impacting the financial markets. It may also financially impact your practice.
Here is what you can do to financially protect yourself and your business during this unpredictable time.
We have probably all seen the graphic below. It shows the number of infected people in this pandemic with and without intervention. We need to think about how this will impact our practices.
First, and most importantly, the interventions we are all practicing will both decrease the peak of the graph below and delay the peak. Decreasing the peak will help achieve two goals: ((1) not overwhelm our health-care system and (2) decrease the overall number of people who will become infected. Delaying the peak of the curve means we will be dealing with this pandemic for a longer period of time.
A good question to ask when looking at the above graphic is where are we? We are on the upward swing of the curve. We have not yet hit the peak. In simple terms, that means it is going to get worse before it gets better. Most practices have experienced some change since the pandemic hit. Some practices have experienced a lot of patients cancelling or refusing to schedule appointments. Some practices are continuing along with minimal impact.
One of the major issues that all practices have to consider is cash flow. For most practices, 70 percent or more of the gross revenue collected comes from third parties. The reality of that, from a cash flow perspective, is that the practice receives income from third parties somewhere between two weeks and eight weeks from today for services and materials provided today. Said another way, there is a delay between providing services and materials for patients and receiving reimbursement from third parties.
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That delay can be misleading. If you had a good flow of third-party patients two months ago and it has tapered off a bit currently, but your cash flow does not seem to be in trouble now, realize your cash flow today is a result of the patient flow two months ago. You can predict that with a decrease in patients today you will feel that in cash flow in the next two months.
The key is to plan accordingly. Since we’ve not hit the peak yet, look at what your practice is doing today and plan for how the pandemic is going to get worse for your cash flow before it gets better. What changes do you want to make for your practice?
Here are a few actions you should consider.
We will get through all of this. This next graphic helps us keep things in perspective. Yes, the stock market is going to go down for a while, but then it is going to go back up. Even the worst drop in the chart below shows a recovery higher than the decline. The overall trend of the stock market in the graphic below is up. So, hang in there. In the long run, we are going to be OK if we plan appropriately.