Ask medical service providers about the biggest financial issues facing their practices, and you’re likely to hear two things: rising overhead and flat (or decreasing) revenues.
Widespread estimates point to medical office overhead rates hovering around 60 percent. And they’re on their way up, largely due to increased staffing expenses.
In response, providers often restrict overtime, cross-train employees, and take other cost-cutting measures. But it can only go so far before service delivery suffers.
When a provider has already cut costs as much as advisable, what’s the next move? For many, it’s keeping more revenue in house by offering lab tests and procedures they formerly referred to other providers. But this tactic to counterbalance rising overhead costs comes with costs of its own – and for the most part, they’re due upfront.
Investing Money to Make Money
When it comes to adding services, the initial cost can be substantial, with minimal offsetting income to start. And it’s not just the investment in equipment and software – there are also expenses like installation, calibration, training, and supplies to consider. Don’t forget marketing to make patients aware of your new capabilities. And depending on the service, you may even need to add staff or expand your facility.
Even when the long-term benefits are undeniable, the short-term financial impact can be unnerving. It’s a lot like a freight train: hard to stop once it’s moving, but first you have to get it going.
The key to making this work is better pacing between the immediate gush of outgoing cash and the initial trickle of incoming revenue. And for that, many providers will rightly turn to a lender. But is every lender right for the job?
Funding Isn’t Just About Funds
In the same way that good medical providers add services judiciously, with an eye toward what allows them to continue delivering outstanding care, so good lenders are thoughtful and measured about the business areas they focus on. Rather than financing anything and everything for anyone, these lenders concentrate where they can add real value, rather than simply dispensing funds and moving on to the next customer.
What does that added value look like? For medical providers looking to add services, it means a potential lender should understand the provider’s business, its needs, and the needs of its patients. Not in the superficial way that some lenders will say they know your business, but in a way that expertly takes into account the entire cost/benefit, investment/ROI analysis around a given medical equipment solution and a given use case, including:
- The full scope of a solution’s start-up investment
- The solution’s projected ramp up and payback periods
- What ownership/usage model is best for funding a solution for your business context
- The provider’s wider lending utilization picture and future needs as the practice grows
- The ancillary costs of realizing a solution’s revenue potential, including training, periodic updates/upgrades, and marketing
Equipped with a deep understanding of your situation, your lender will then need the capacity and expertise to fund your integrated solution in an integrated way, with flexible terms that help you manage cash flow over the solution lifespan and respond with agility to new challenges and opportunities as they arise.
What’s Next for Your Practice?
With the right plan and the right lender, capturing new revenue opportunities – instead of sending them out the door – can be an effective way not only to combat rising overhead costs but also drive even higher levels of patient satisfaction and care.