By Weston Manley
March 23, 2020

As hospitals ramp up for worst case scenarios and individuals lock themselves indoors, elective and non-essential procedures are falling to zero, putting some medical professionals in a tough spot….no work and no income. The good news is given the lag in reimbursements, there is still time to plan.

The two big questions are:

• Where can I access funds?
• How can I reduce cash burn?

Accessible Funds:

Outside of cash on hand and non-retirement investment accounts, there a few options to consider.

If you have equity in your home, you can apply for a home equity line of credit (HELOC) or consider a cash-out refinance if are looking to reduce your interest rate anyway.  A HELOC is a line of credit on your home and you are only charged interest on the amount borrowed.  A cash-out refinance typically takes a loan-to-value of 80% so you’ll need a fair amount of equity to consider that option.

If you have an existing banking relationship, you can potentially take out a line of credit on the business as well.

Finally, a margin loan against your non-retirement investment portfolio is an option.  Rates typically range from 3% – 9% depending on how much is borrowed.

Reducing Cash Burn:

If you contribute monthly to your 401k, consider pausing and picking up later in the year.  You can also delay 2019 profit share and matching contributions to your company retirement plans until September 15 — just be sure not to file your business tax return until those are made.

Most practices biggest expense is payroll.  Every business owner is in a different position, but here are a few options if you can’t pay your employees through the entire period.

• Provide PTO and sick days up front for the year.
• Instead of paying full for, say, two weeks—pay partially for four.  Note that depending on the employee’s salary, they may be better off applying for unemployment benefits than being paid partially for a longer period of time.

Here is a story from one of my clients, Richie Gallant, DDS, from Gallant Dental Group. 

I am the owner of a dental practice and, like many of you, could never have foreseen something like this happening.  The last few days have been quite a scramble sorting out financial questions for not only myself, but my team members as well.

I think the most important thing to remember is there is no “magic bullet” answer out there. I have seen so many different responses from friends and colleagues and there is no way to say that one of us is doing it better than the next person.

Here are some ways that I have worked to help alleviate the financial burden in the short term:

Reassure your team members

• While most of us have the financial security to survive a shutdown, many of our auxiliary staff do not have the same luxury.  It is important to reassure your co-workers and be a leader during this difficult time.
• “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”  -Martin Luther King Jr.
• It’s easy to be a leader is good times, but the true measure of a man comes during the darkest hours.Be good to your people today and, when things return to normal, that loyalty will be repaid 10x over.

 

Contact banks who do your practice loans, student loan companies, credit card companies, and mortgage lenders

• In the last 48 hours I have spoken with my loan officers and gotten confirmation of the following:
  • 8-month deferment of my practice loan
  • 2-month deferment of my student loan payments
• I have not contacted Chase Bank or American Express (where I do most of practice credit card spending) or my mortgage company but have heard stories from colleagues where these payments have also been deferred or, with credit cards, where they have waived any interest as long as you are making minimum payments.

 

Evaluate the need to continue to take your own member draw

• Go through your personal finances and evaluate how important it is for you to continue to draw an income from the practice.
• I live in a two-income household and can reduce our monthly spending/savings for the short term to keep more money in our dental practice.

 

Evaluate any non-essential expenses

• Do you do have monthly service fees for marketing support? Gym memberships running through your practice? Think about your monthly expenses in your practice and evaluate if you need to be spending in these areas at this time.
• This is a good time to really comb through your balance sheets and see where you may be doing frivolous spending that you can cut — even when things return to normal.

 

Focus on contacting insurance companies to collect on A/R

• Like most of you, I currently find myself with a significant amount of free time.  Also, like most of you, I find myself constantly frustrated by insurance companies’ refusal to pay claims in a timely manner.
• Use this free time to follow up on lost claims and dig through your A/R to find ways to continue to keep money coming in even without seeing patients.

 

My most prevailing thought is that this, like all challenges, will certainly pass.  We are uniquely positioned as health care providers in that the need for our services is not going away when the country and world do return to normal.  While the short-term ramifications are not fun to think about—you can delete that bookmark for the new BMW or set of golf clubs you’ve been staring at— but we will rebuild our businesses.

Keep clients and patients top-of-mind during this time. Think creatively on how you may be able to provide interim services to support their immediate needs. Offer your cell phone so patients can contact you with any questions. Consider a candid newsletters keeping patients informed and engaged. Use this time to think about ways you can improve your practice or enhance the patient experience.

Strength in numbers is always a good thing, so know that every healthcare provider is fighting the same battle you are, and we are here to support each other any way that we can. Stay strong and stay safe!

We’d like to thank Richie for sharing these tips with out dental and physician community. Contact or learn more about the Gallant Dental Group here.

If there is anything we at IFG Advisors can do to help, please send us a note. contact@ifgadvisors.com

WM

Weston is a Certified Public Accountant, Certified Financial Planner^TM, and holds the Chartered Financial Analyst designation. In addition, Weston earned his master’s degree in accountancy from the University of Missouri – Columbia. Weston is active in the St. Louis community and board member of the Anti-Defamation League.