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The 5 Biggest Financial Challenges Facing Doctors in 2018 and Beyond

Doctors have these five financial concerns on their minds in 2018. Keep reading for suggestions for meeting each challenge.

Running a successful healthcare practice requires more than just being a great practitioner. You also need to understand how to run a business, especially the financial side of business management.

 

With this in mind, we’ve identified five of the biggest financial challenges facing doctors in 2018, along with some suggestions for meeting each challenge. Keep this list handy so you can refer back to it as needed throughout the year.

 

1. Getting paid

 

There are two main issues doctors are currently dealing with that affect their ability to get paid in a timely manner, says Lisette Galindo, Cadence Bank Vice President, Private Banking.

 

The first is recent changes to ICD-10 codes. In October 2016, 3,651 new codes were implemented, and that was followed by another 1,900 code changes this past October, according to the American Academy of Professional Coders.

 

“These new codes have significantly affected the ability of many healthcare practices to get reimbursed by insurance companies,” says Galindo. “Among some practices I work with, reimbursements have slowed from between 30 and 60 days to as long as six months. This is having a big impact on cash flow for these practices.”

 

Healthcare reform is the other main issue affecting the timeliness of payments. An increased number of Americans must pay high insurance deductibles and co-pays due to changes wrought by healthcare reform. As a result, some practices must now focus attention on accounts receivable collection techniquesjust like many non-healthcare businesses do.

 

Ideally, you should require patients to pay deductibles and co-pays at the time of service to avoid having to collect them later. If this isn’t possible, be diligent about collecting receivables before they become past due in order to strengthen your cash flow.

 

2. Rising costs

 

Technological advances in healthcare are enabling doctors to deliver a higher quality of care, which is helping many patients live longer and better lives. But these advances come with a price, as rising technology and equipment costs are putting the financial squeeze on many practices. Consider that:

 

  • Up to half of the annual cost increases in healthcare are attributed to new medical technology, according to this Forbes report

“In addition, healthcare practices are having to invest heavily in new equipment and processes to deal with the new coding requirements,” Galindo notes. She recommends that practices perform a careful cost-benefit analysis before buying new equipment to make sure that the return on investment will be worthwhile.

 

If you’d like to learn more about the business side of running a healthcare practice, including securing medical practice financing, download our free ebook, “The 5 Biggest Mistakes to Avoid When Opening a Healthcare Practice.”

 

3. Saving for retirement

 

Doctors aren’t immune from the retirement savings crisis in America. According the 2016 Report on U.S. Physicians’ Financial Preparedness conducted by AMA Insurance, nearly one out of four (39 percent) physicians say they’re behind where they’d like to be when it comes to saving for retirement.

 

One reason for this, says Galindo, is that many doctors graduate medical school with heavy student loan debt. “And due to education and residency requirements, many doctors don’t start making large salaries until they’re in their mid-30s or later. As a result, doctors often get a late start on saving for retirement, which can put them behind financially for the rest of their lives.”

 

The best way to get caught up on retirement savings is to take advantage of retirement plans that feature relatively large annual contribution limits. With a Simplified Employee Pension (SEP) plan, for example, you can contribute up to the lesser of $54,000 a year or 25 percent of your compensation for tax year 2017.

 

And if you’re 50 years of age or over, take advantage of special “catch-up” contribution amounts of $3,000 with SIMPLE IRAs (or $15,500 total) and $6,000 with SIMPLE 401(k)s (or $24,000 total) for tax year 2017.

 

Learn more about the investment and retirement services from Cadence Bank

 

4. Estate planning

 

The report referenced above also notes that about a third (35 percent) of physicians say they do not have any elements of an estate plan in place.

 

“Many doctors don’t think about estate planning until they have started a family and are earning a high salary,” says Galindo. “But you shouldn’t put off estate planning because if you die unexpectedly, you want to ensure that your assets are transferred to your heirs according to your wishes and in the most tax-efficient manner possible.”

 

If you don’t have an estate plan, Galindo recommends that you make an appointment soon with an attorney and begin the process of drafting a formal estate plan. “This will help give you greater peace of mind in knowing that if anything unexpected were to happen to you, your family will be provided for.”

 

Learn more about the trust and estate planning services from Cadence Bank

 

5. Financial planning

 

Given the fact that most doctors spend so much time working, it’s not surprising that many of them neglect personal financial planning. The report referenced above notes that nearly half (45 percent) of physicians say they only feel somewhat or not very knowledgeable about their personal finances.

 

“Personal financial planning is especially important as doctors start increasing their earning power,” says Galindo. She advises physicians to talk with their banker or financial advisor to learn more about what kind of financial planning options are available to them.

 

Start planning now

 

You can't control all of the challenges on this list, but you can begin to meet some of them. Make 2018 the year you plan for a secure financial future.

 

Contact Cadence Bank to learn how to take control of your personal and business financial planning. 

 

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.



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