Ten Considerations for Medical and Dental Practices During COVID-19

Many medical and dental practices, particularly those offering elective procedures, are experiencing an unprecedented disruption in operations. This will soon, or in some cases already has, become evident on practice financial statements. While there are opportunities for new revenue streams, practices are likely to see a decrease in revenue, a need for access to cash and reduction in provider compensation.

It is also possible that practices do not have extensive cash reserves on hand. We have provided some considerations below based on current conversations we have had with our clients during this unprecedented time. These topics present potential key items to discuss with your providers and administrative teams. We suggest you consider urgent planning to develop strategies to withstand the impending business fluctuations.

Cash Flow and Other Considerations:
  1. Short Term Cash Flow: Consider available access to short-term cash. If you do not have a line of credit available, consider reaching out to your bank and discussing available options. Possibly request an increase to existing lines and an extension to borrowing limits. Also, discuss if interest-only payments are available, at least on a temporary basis, for debt service payments. Expedite getting claims out the door. Make sure your billing staff continue to diligently work your accounts receivable to bring cash in as quickly as possible. Explore alternative sources of revenue, either new services or an increase in some existing services, such as telemedicine or product sales.
  2. Tax Filing Delay: With the newly-established delay in filing and payment requirements for 2019 taxes, ascertain an expectation of tax due for 2019 while delaying payment of that tax and holding onto the cash as long as possible.
  3. Financial Modeling: Know your numbers by running dynamic financial models that allow you to appropriately assess impact of revenue changes and the opportunity costs of various decisions – if you modify X, then that allows you to keep Y. Be prepared to adjust model assumptions as new data emerges or as circumstances change.
  4. Explore New Revenue Streams: If you explore new revenue streams such as telemedicine or product sales, seek to understand reimbursement implications and seek guidance where needed.
  5. Retirement Plans and Funding: You may be able to delay funding of your 2019 retirement plan if you extend the practice tax return. This delay can provide access to cash while still preserving 2019 tax return deductions. For those practices that pay their employer contributions throughout the year, consider delaying funding of 2020 contributions as well. Reach out to your retirement plan financial advisor and find ways to connect plan participants, including physicians, with the advisor. Assistance with assessment of investment opportunities may impact perspective.
  6. Inventory Management: Review supply levels, and consider alternative sources of critical supplies to maintain business activity. In order to conserve cash, reduce/revise existing orders to match anticipated activity. Leverage existing inventory to support operations, working down any overstock.
  7. Human Capital Assessment: Objectively assess where capacity can be reduced to match demand for service. For each position, determine how many hours are required to service expected activity and reduce essential staff hours to match required support. Assess the value of continued employment for staff that are not considered mission critical in the coming months, as some staff members may volunteer to be furloughed until productivity increases.
  8. Payroll Assessment: Plan to alert provider owners to the possibility of a capital call. Begin discussions regarding the possibility of reduced or delayed bonuses as well as the potential to reduce provider base payroll.
  9. Legislation Impact for Workers: Understand and discuss impacts of recent tax legislation. Your employees may be eligible for sick pay for varied circumstances while allowing you as the employer to receive a tax credit.
  10. To-Do Task Management: Determine if there are important special projects or activities that the practice has been unable to dedicate sufficient time to when busy. Conducting training, tracking inventory and general organization may be valuable uses of staff time.

These suggestions should be carefully considered as they all may not be appropriate for your specific business and/or circumstances. We encourage you to contact your DHG advisor to discuss options or reach out to one of the authors listed above.

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