8 Ways to Improve Medical Practice Cash Flow

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Hitesh Shrawgi

Healthcare providers' revenue is affected by numerous factors, from denials to insurance verification. If a healthcare provider’s billing staff cannot keep up with the standards, it is often a sign to start making improvements in the medical billing process.

Improving cash flow for medical practice is simple. There are multiple ways to increase revenue for medical practice, but the first and most crucial step is to conduct internal audits. Audits help to detect the processes that need to be improved. In this blog, we will get a deep understanding of cash flow, the importance of cash flow, and ways to improve medical practice.

Define cash flow in medical practice

Money movement in and out of the healthcare practice within a particular time is called cash flow. It determines the amount of money that flows from different sources like insurance reimbursements, patient payments, and other revenue streams. It also includes the money that goes out of medical practice to cover expenses like rent, salaries, medical supplies, utilities, and additional operational costs.

What is the importance of healthcare practice cash flow

Cash flow is a vital financial metric for healthcare practices as it directly impacts the bottom line. It also affects the medical practice's ability to compensate staff, invest in technology and equipment, pay bills, and generate profits.

Positive cash flow implies that the healthcare practice receives more money than it spends, which can be used later for expansion and growth. Negative cash flow, on the other hand, implies healthcare practice is paying more than income, which impacts the medical practice's operations.

Healthcare practices must manage their cash flow effectively by:

  • Monitoring expenses and income
  • Maintaining proper reserves for unexpected costs
  • Optimizing collections and billing processes
  • Negotiating payment terms with vendors

Optimized cash flow management ensures the stability and success of the medical practice.

Eight ways to maximize healthcare practice cash flow

Cash flow constraints can lead to financial disaster for any medical practice. Here are the most effective ways to maximize healthcare practice cash flow.

Timely submission of claims

Faster and more frequent claim submissions improve your cash flow. Healthcare practices often struggle to submit claims on time for numerous reasons like hiring experienced billing staff and retaining them. Improper documentation and insufficient regulation knowledge also add to delays in claim submission. To combat this, physicians should leverage automation or outsource their RCM activities.

Well-managed accounts receivable

Medical practices can achieve revenue targets only with a straightforward collection process. Accounts receivable (A/R) plays a crucial role in optimizing RCM. Payments due from patients or payers are accounts receivable. According to AAFP, days in A/R should be below 50, and 30-40 days is what healthcare providers should aim for. Medical practices must manage A/R to ensure cash flow consistency. To maximize collections, they should define a payment collection mechanism for patients.

Automatic eligibility verification

Lack of coverage or eligibility is the most common reason for claim denials. Healthcare providers must have practice management software that directly integrates with billing software. This integration enables automatic eligibility verification and ensures patients are covered for the services rendered.

If the patients are not eligible for the services they want to opt for, healthcare providers can inform them about the same. Healthcare providers can also give alternate payment or treatment options to patients and remain transparent about the billing.

Optimized denial management

Claim denials significantly reduce cash flow and are the leading cause of revenue leakage. According to MGMA, approximately 20% of all claims get denied. Healthcare providers must identify denial trends to ensure claims get through on the first attempt.

Coding or documentation errors lead to the rejection of payments and should be strictly avoided. Healthcare practices can list and share the most common denials with the team. This will allow staff to be more cautious about these errors. Integrating automated claim scrubbers also helps in detecting mistakes and optimizing denials.

Collect patient payments promptly

Collecting patient payments once they leave a healthcare organization post-treatment is challenging. Healthcare providers must promptly collect copay and balance from the patients. Collecting payments at the start of a visit helps to streamline cash flow by ordering payments upfront. They must be billed in advance to improve transparency and minimize payment delays. Patients must also be informed about the non-coverage of the services beforehand. This helps to collect payments faster and improve cash flow.

Offer multiple payment plans or choices

Medical practices should offer multiple payment options to patients. Cash flow optimization becomes seamless with this. Sending payment reminders and taking follow-ups from the patients improves payment collection chances.

Keep track of old claims

There is a high chance healthcare providers might miss collecting payments from patients or payers after multiple denials or delays. Healthcare practices need to keep track of old claims and make follow up to collect every due penny.

Outsource RCM services

Outsourcing RCM services to a qualified vendor increases cash flow significantly. Medical practices get enormous help from outsourcing if their staff has a high turnaround rate or is constantly overwhelmed.

Outsourcing frees healthcare providers from handling large billing responsibilities as experts manage your process. This increases cash flow and, ultimately, revenue for healthcare providers.


Effectively managing cash flow is pivotal for medical practices' financial health and success. By implementing these strategies, healthcare providers can optimize revenue streams, enhance operational efficiency, and pave the way for sustainable growth.

PCH Health is your trusted partner for comprehensive RCM solutions. With over 30 years of experience, we specialize in streamlining cash flow processes, ensuring compliance, and delivering tangible results for our clients. Connect with RCM experts today to learn more about our tailored healthcare RCM services.