Don’t fall into a debt spiral

Financial stress can hit all consultants’ private practices at some stage. Garry Chapman outlines the three key problem areas and the questions you should address

One of the most frequent questions
I’ve been asked in our 22 years of working with consultants is: ‘How do I compare with my colleagues in terms of size?’
They are, of course, referring to their turnover.
My answer is always the same. It is extremely difficult to compare, as it depends upon so many factors.
These would include:

  • How much time you devote to private practice;
  • How long you have been in private practice;
  • Where you are located;
  • How you charge for your work.

All consultants are individuals – which is why we tailor our services to the needs of each consultant.
And as most consultants who come to us are in various levels of distress, the second most common question I get asked is: ‘Am I worse than my colleagues or am I in the worst state that you have seen?’
Again, my response would, of course, be one of politeness, pointing out that while they are experts in their own medical sphere, no one expects them to be experts in all the other challenges of running a private practice.
While pondering these consultants’ questions, I thought it would be valuable for them if I were to explore the three most common causes why most doctors who seek our help are in some form of distress with their financial affairs.
The following are in no particular order, but the challenges are, in fact, probably true for most consultants at some stage during the life cycle of their private practice.

One of the first challenges that a consultant will have is to ensure that they set up the running of their private practice on a sound basis with the correct infrastructure.
This means having a robust auditable system in place to facilitate the financial elements of the practice and would include the ability to raise invoices and reconcile payments.
And, naturally, this should be combined with the facility to chase the outstanding invoices by phone and letter.
This also means having a system in place to collect payments from self-pay patients.
That would involve having the ability to collect money from a debit or credit card, which means that the practice would have to operate a credit card ‘pin and chip’ system.
But what I often see is a practice being run on a mixture of spreadsheets and word processing documents combined with folders stuffed with paper copies of clinic and theatre lists.
To make matters worse, these software programmes are being run on laptops/notebooks/and PCs which are never backed up.
So if the device is either lost or the software becomes corrupt, then the entire practice and finances are put at risk.
It does not matter about the size of the private practice. If the consultant does not have the correct infrastructure in place to support the financial aspects of private practice, then there is a need to make changes very quickly because every day that passes they are placing their income at greater risk.

Once the practice becomes established, the next key challenge is to appoint the right secretary to assist them in growing the practice. The medical secretary is the bedrock of any successful practice and is often the busiest person in the practice.
Medical secretaries are expected to wear many hats, including receptionist, personal assistant, sales ledger clerk, insurance guru as well as a debt collector.
There are not many individuals with the combined skill set required to complete all of these tasks perfectly as well as fit them all into a working week.
It is an almost impossible task for one person to cope with, especially as the practice grows. In our experience, once the practice reaches a certain size, the secretary is so busy dealing with the patients and the medical side of the practice that the billing and collection is the area that can get neglected.
When a good secretary has been with the practice for some time they can appear to have everything under control. But when they leave or retire, the impact on the practice can be devastating; particularly on the financial side of the practice.
Unfortunately, this tends to become apparent only after a period of time when the money stops going into the bank account due to poor cash flow because the billing and collection are not up to date.
The consultant thinks that the new secretary will be able to cope in the same way as the previous one.
In our experience, this is rarely the case.
In general business, it is not a good idea to be reliant upon one key individual. In medical practice, this is mostly unavoidable in respect of the consultant, as the majority operate as sole practitioners.
But this does not have to apply to the rest of the practice. It is not uncommon to outsource key components such as having the letters produced using a transcription service or outsourcing the medical billing and collection.
This achieves a more robust practice as well allowing the secretary more time to look after the other elements of running a practice, including spending more time on the patient.
This, in turn, means that should the secretary leave, then replacing this key individual, while never easy, will be less stressful and from a financial perspective will have minimal impact on the practice.

Assuming you have the above challenges under control, then probably the biggest challenge that any consultant faces in private practice is to bill correctly and keep the outstanding debt under control. From our experience, this is one area where very few achieve this feat on a regular basis.
The majority of consultants undercharge because they do not fully understand the billing principles imposed by the various private medical insurers (see my article in the April 2014 edition of Independent Practitioner Today)
On top of this, a lot of consultants I speak to when I meet them at various events do not even know how much they are owed or how old that debt is.
If you think about that fact, it is quite astounding. The majority of consultants are working extremely hard in their private practice, juggling their time with their other commitments such as stressful NHS work and trying to find time to spend with their families, but they are not aware that they are not being paid for the work that they are doing.
At Medical Billing and Collection we achieve bad debts of less than half of one per cent, but we regularly see examples in private practice of bad debt between 5%-10% which is ten to 20 times higher than we achieve.
This element of a private practice would be kept under control if the medical billing collection was outsourced, as it would form part of the service.
That would mean the cash flow of the practice remains strong and consistent on a regular basis.
And that alleviates a lot of stress when it comes to paying the bills and tax demands when required.
The above points are the most common challenges that we see within a private practice which result in financial stress, and while we understand how they occur, we also think that they can be avoided, providing steps are taken in a timely manner.
Even if they are not avoided, most of the problems can be resolved if decisive action is taken once the financial problems become apparent.
The biggest challenges can occur when the consultant is unaware of the issues that are taking place within the practice, because if they do not know they have a problem, they cannot fix it.

Garry Chapman is managing director
at Medical Billing and Collection


  • Ensure your financial infrastructure is robust, auditable, secure and is backed up. The financial consequences of not doing this do not bear thinking about and if you are ever investigated by the HMRC, it could get even worse
  • See that your practice is not too dependent upon one person. No matter what business you are in, it is not good practice to follow that path
  • Understand your billing and know what your debt is at any given time. Establish how much you are owed, how old the debt is and make plans to resolve it – do not bury your head in the sand
  • Alternatively, outsource your medical billing and collection through a professional organisation which will take care of each of the above challenges in one stroke
  • Whatever the size of your private practice, I would recommend that you review it based on the challenges outlined and take action promptly or it may be something you regret not doing

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