Medical Businesses are Different. Your Banking Should be Different, Too.

The business side of medicine is dramatically different from the business side of other industries. On the medical side, receivables tend to play a much larger role in the revenue cycle, and dealing with Medicare and insurers adds yet another layer of complexity.

To see this in action, let’s consider cash management in the healthcare industry. In the first six months of the year, healthcare organizations deal with not only insurance and patients, but also secondaries. This means deductibles aren’t always met — and organizations must be more aggressive to secure them. From July to December, their cash flow could become even more erratic; some months, healthcare companies might pick up double what they took in the month before. On the other hand, specialists such as cardiologists, allergists, and oral and maxillofacial surgeons have it easier. They can charge specific fees for service, meaning they can also leave Medicare and insurance out of the equation.

In all areas, however, managing cash flow in healthcare requires a bank equipped to understand healthcare finance and management practices. Given the unique nature of medical businesses, experience in other industries won’t always translate well for banks that take on healthcare organizations’ financial management.

Understanding the Basics of Healthcare Finance

Again, though cash flow in healthcare can differ between general and specialty practices, treasury management is similar across all medical businesses. The volume of cash flow differs, but most healthcare organizations use the automated clearing house (ACH) to streamline payments or possible direct deposit for payroll. They may also use services such as lockbox banking and Remote Deposit Capture to collect payments faster.

However, calculating the cash flow for a specific medical practice means accounting for several unique factors, including which procedures doctors perform, how busy their schedules are, levels of insurance coverage (if applicable), and how the practice handles nonpayments and delayed or denied claims reimbursements.

Banks handling the financial management of healthcare organizations must also account for security. Health and medical sector breaches represented 22.6% of all data breaches in the first half of 2017 — and medical billing and health insurance fraud are ever-pressing issues — so it’s critical that financial institutions keep safety top of mind. Each incident comes with heavy fines and penalties, and the cost of managing a breach can dramatically impact cash flow. To avoid these security issues, banks should understand what it means to remain safe and compliant with privacy laws.

Overall, financial partners should act almost as assistants to healthcare organizations: The very best of them can guide healthcare clients without relying on them to explain cash flow in healthcare as a whole.

Identifying the Right Banking Partner

When it comes to financial management in healthcare, many doctors and healthcare organizations aren’t sure where to start. Even though they need a financial partner to keep their operations afloat, they aren’t familiar with banking logistics or technology. Why should they be? Their focus, of course, is on patient health and wellness. With their packed schedules, it’s difficult to research and single out the best possible banking partner.

Does this sound familiar? If you’re feeling lost, start by considering the two main benefits a skilled financial partner should offer: security and convenience. You need a bank that’s structured to offer not only the safety and security necessary for banking in healthcare, but also the ability to adapt to your busy schedule. If a potential partner reaches out to you requesting an hour-long cold call despite your busy schedule, it could be a red flag. Find a bank that makes an effort — one that asks about your business operations and brings additional knowledge and value to the conversation.

When it comes time for a conversation, inquire about healthcare-specific solutions the potential partner can offer. For example, dual-control systems or remote approval applications for traveling doctors could be incredibly useful depending on your workflow. To avoid pain points later, you’ll also need to understand how they handle payables and receivables. Lastly, gauge how much industry knowledge representatives have already. If you have to explain basic healthcare finance concepts, the bank might not be the best fit. For this reason, American Bank of Missouri ensures that each officer working directly with healthcare clients is well-versed in the industry.

It’s difficult enough to choose or switch your bank when you rely on Medicaid, Medicare, and insurance services, but a financial partner with the right understanding of healthcare finance can guide you through the process.

If you work with us, for instance, we’ll give you advice on how to delegate duties and reporting to keep your operations secure. A great partner will also offer you a suite of treasury management tools for healthcare organizations of all sizes and be flexible enough to tailor solutions to cash flow patterns.

At American Bank of Missouri, we have extensive experience with healthcare organizations’ financial management. Our experts will listen to your story before we offer solutions — we find that this is the best way to provide truly valuable service that benefits your practice. Want to learn more about our approaches to financial management in healthcare? Reach out to the American Bank of Missouri branch nearest you or call our treasury management department at 636-745-3174.