Weathering the Storm: Creating a Financial Contingency Plan for Your Private Practice
Weathering the Storm: Creating a Financial Contingency Plan for Your Private Practice
In the unpredictable world of business, problems can crop suddenly and without warning. External issues like a global pandemic, an economic downturn, or changes in the employment market are recent examples we can all relate to. A current and unexpected challenge for healthcare businesses is the cyberattack on a major insurance clearinghouse, Change Health, disrupting claim submission and threatening our ability to get paid. If these last years have taught us nothing else, we learned having a contingency plan is vital for any business owner.
Purpose of a contingency plan.
A financial contingency plan helps you expect and anticipate potential risks to your practice, such as extended illness, disability, change in funding sources (e.g. insurance rate cuts), or employee turnover. Those identified risks inform strategies to proactively avoid or reduce the impact. This can help us minimize disruptions to operations, protect our business’s financial health, and maintain consumer/employee confidence.
A contingency plan helps a practice be more resilient, and adapt quickly to change. At the onset of the COVID pandemic, I saw what was coming early, and quickly trained up my whole team on telehealth. We gathered resources, created guides, and pivoted our whole practice online within a week. This really minimized the impact on client care and the practice financials. It had a secondary benefit of increasing my employee’ trust and confidence in me as a leader. They had a bit more peace during a very stressful time.
Steps for a Contingency Plan
Risk Assessment: Begin by considering all the potential risks and vulnerabilities facing your business. This includes both internal factors (e.g., cash flow constraints, tech glitches or disruptions) and external factors (e.g., economic downturns, regulatory changes). Identify the likelihood and potential impact of each risk. Consider things like telehealth platforms being down, internet outages, payment challenges, changes to the services you can legally provide, etc.
Scenario Planning: Develop contingency plans based on different risk scenarios identified during the risk assessment phase. Consider various factors such as severity, duration, and likelihood of occurrence.For each scenario, outline specific actions and strategies to mitigate risks, sustain your operations, and protect your business assets. For example, what would you do in the event the internet is out throughout the day of scheduled telehealth sessions? Would you use phone data? A backup source for the internet? How will you contact your clients if you are unable to access your health record system?
Resource Allocation: Allocate resources to the execution of your contingency plan. This may include setting aside financial reserves, securing lines of credit or alternative financing options, and shifting job duties or roles temporarily. For example, having a buffer of savings and a line of credit has been essential to continue paying our employees during both COVID session reductions and during this attack on insurance payors. Both give us some runway and time to solve the issues without sacrificing our income. For sole owners, having a business credit card or line of credit would be a good back up option. You will want to prioritize the most critical functions of your business during times of crisis. Projects and growth may get put on hold temporarily.
Communication: Establish clear communication protocols to keep people informed and engaged. This includes employees, customers, vendors, payors and regulatory authorities. Provide updates as needed on your plans and strategies, which again builds trust and transparency. As a leader, transparent leadership is important to me so employees feel informed, yet supported. Consider how you might share your plans for risk, and your response if crises arise.
Testing and Training: Regularly test and refine your contingency plan. This allows teams to familiarize themselves with their roles and responsibilities, identify gaps or weaknesses in the plan, and make necessary adjustments before a crisis occurs. Provide training and resources for employees to respond effectively to emergencies. For example, we have developed an emergency plan for our practice, including alarms to alert authorities.
A contingency plan is not one and done, but a plan that requires ongoing review and updates to remain effective. Changes in the business environment, such as market trends, regulatory developments, or technological advancements, may mean adjustments to the plan. Additionally, lessons learned from past experiences or new insights gained inform improvements for you to make to the contingency plan. Consider scheduling regular time on your calendar to reflect on current and past risks, and make any needed additions or changes to your plan.
Creating a financial contingency plan is a critical aspect of prudent risk management and strategic planning for businesses of all sizes, even sole practice owners. By proactively preparing for potential risks and disruptions, you can protect your practice and your livelihood.
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