Private Practice Financial Tips for COVID-19 Pandemic Survival

By Robert Schultz, CEO, Vision One Credit Union

Mark Wright, OD, ROB Professional Editor & CEO, Practice Management Center

Sam Quintero, OD, Immediate Past Chair, Association of Practice Management Educators

March 19, 2020

The pandemic is here. It is impacting the practice now. These are the steps that you need to take today.

Begin by measuring your working capital. Working capital is the money the practice has on hand in its checking accounts and is easily accessible. The traditional minimum guidelines for working capital are 7.5-10 percent of the practice annual gross revenue collected. Cash in the bank totaling 10 percent of collected revenue would allow you to cover about two months of practice overhead.

Interactive Spreadsheet

Click HERE to download an interactive spreadsheet showing an example of the practice cash-flow impact with and without expense reduction.

Your next task is to calculate the impact the reduction of patient flow will have on collectible revenue. Keep in mind the revenue from third-party patients seen today will not be realized until 1-2 months from today. Therefore, whatever impact the pandemic has had on your practice to date is going to get worse over the next month.

Now that you have calculated how much money will possibly flow through the practice, it is time to calculate what expense reductions are necessary in order to keep the practice open and solvent.

In order to minimize the financial stress on the practice, identify the most critical functions of the practice related to the practice survival and the resumption of business operations. These would include business operations most sensitive to downtime, those that relate to maintaining cash flow, those play a key role in maintaining your business’ marketing share and reputation, as well as safeguarding any irreplaceable assets. Classify these critical functions as High (most severe), Medium, or Low (least severe). Create a plan from this to move forward.

Next, negotiate with outside payees to reduce cash flowing out of the practice for at least the next 90 days. Ask your lenders to reduce or abate payments. Contact your lab vendors and ask to defer payments. Request that your landlord reduce or abate rent – you can ask the landlord to add and/or prorate the non-paid amount over the remaining term of lease.

Your plan should include these immediate steps. Those obligations bound by contract should be negotiated and changed by mutual consent.
1. Terminate or defer all equipment purchases.
2. Terminate or defer all practice purchases including buy-ins.
3. Terminate or defer all planned remodels, relocations, expansions unless partially performed.

Your plan may also include asking your banker for a loan or a line of credit, however, remember that any funds advanced will have to be repaid. Take the steps above before asking for a loan or a line of credit because the steps will help mitigate or perhaps even eliminate the need for a loan.

If you are caring for patients not in your office, then one additional step is to listen to the AOA webinar on Tele-optometry to learn how to appropriately code for those examinations.

Some doctors have already had to close down their practice due to the pandemic. In this situation, take these two actions immediately with the goals of (1) bringing costs and cash outflows to $0 and (2) helping your doctors and staff continue their cash inflow which will help maintain your team intact pending reopening the practice.

1. Negotiate with all payees, lenders, utilities and landlords to defer payments for three months with a check-in at that point to determine next steps.

2. Layoff staff immediately to allow them to obtain unemployment compensation (check with your practice HR attorney to make sure you follow the rules for your state). Practice owners generally will qualify for unemployment benefits, however this varies from state to state so check with your state unemployment agency or HR attorney.

These are hard times. To get through them successfully we need to take action now and be proactive rather than waiting until other people are dictating what we have to do.

Robert Schultz is the CEO of Vision One Credit Union. To contact:

Mark Wright, OD, is ROB professional editor and CEO of Practice Management Center. To contact him: 

Sam Quintero, OD, is Immediate Past Chair, Association of Practice Management Educators. To contact him:

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