MIPS: Loan Acquisition and Maintenance
We have reflected in earlier posts the critical importance of achieving a high MIPS score. Reimbursment, practice value, and professional reputation are all directly impacted by a MIPS score. Here is yet another collateral impact of a MIPS score: the ability to obtain and maintain a loan. A tip of the hat to my friends in the healthcare finance business over at Grice, Pope and Associates who alerted me to this pearl of wisdom.
First, a little financial loan lesson from Wikipedia on the infamous debt service coverage ratio:
“The debt service coverage ratio (DSCR), also known as “debt coverage ratio” (DCR), is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan. The phrase is also used in commercial banking and may be expressed as a minimum ratio that is acceptable to a lender; it may be a loan condition. Breaching a DSCR covenant can, in some circumstances, be an act of default.”
So there you have it. The DSCR is based on the documented ability to have enough cash flow to repay a loan. Although there is variation among lenders, a DSCR greater than 1.2 is good enough to obtain a loan. Many providers and practices will find if they are below 1.2 they will have difficulty getting a loan. If your cash available to service a loan should drop, as might occur when a low MIPS score suddenly triggers a reduction in Part B reimbursement, you might be in trouble. You could face difficulty in obtaining a new loan. Even worse, if you have an existing loan with DSCR covenant, you could immediately be in default. In 2019 potential Part B negative adjustments can be up to 4% and will increase 9% in 2022. Forewarned is forearmed.
The reasons to make a priority of achieving a high MIPS score continue to mount. Next week I’ll have another one for you.