Where Am I Losing Money In My Practice?

In the past 11 years since I started consulting private practice physical therapists, I have heard it all. Everything from competition to managed care as reasons why it's hard to create the practice of your dreams. New patients are needed to keep any practice going but it is how you and your staff manage these patients that determines your success in private practice.

Every practice that I have gone into over the years I have been able to increase the bottom line, improve the delivery of care and markedly reduce the confusion in the workplace, but what amazes me most is the amount of lost income from poor handling of the 5 major income generating areas of any practice. I will cover 4 of them.

The actual amount of lost income can be calculated. I will describe where you are very likely losing large amounts of money and why. These areas if handled will help you lose less money in your practice or in other words, make more money.

We are always looking for ways to increase revenue but we seldom address the areas where buckets of money may be slipping from your fingers. It is common to look at the cost of handling a situation in your office but little attention is paid to the fact that not handling a weak area of your practice is costing you way more than what it may cost to solve the problem.

You need to be able to measure the 5 areas and the way to do it is with a statistics. How can you evaluate how close you are getting toward handling any weak area of your practice or enhance an area already doing well if you are not using statistics? We operate off of statistics.

On the following page I will go over 4 of the 5 key areas of lost income within the organization.

We commonly fail to look at what we are currently losing from weak practice management and training of staff.

1. YOU CAN LOSE MONEY WITH POOR SCHEDULE BOOK CONTROL

Ideally, with proper patient control at the front desk and certain procedural actions in place you can achieve a percentage of kept appointments at 95%. To the degree that the control at the front desk is missing or the patients are dictating when they will come in or not, you will be losing money. This is quite honestly an easy fix and can improve your bottom line quite markedly.

2. YOU CAN LOSE MONEY FROM HAVING A POOR COLLECTIONS RATIO

Once you make the adjustment in your production for managed care and other plans you should be collecting 95% of the remainder. Ideally, when calculating your true collection ratio you would use the last six weeks of collections divided by the previous six weeks of production. For a quick assessment, we calculate your collections ratio based upon the data you provide from your last month's production and collections. There are 8 areas if fully handled will put your collections ratio in a whole new range.

3. YOU CAN LOSE MONEY FROM HAVING AN UNTRAINED OR POORLY TRAINED STAFF

Take your average weekly collections divided by the number of full time equivalents (FTE). Don't forget to include the owner's hours and if he or she works 60 hours that is a 1.5 FTE. Every staff member has value to the organization but some are clearly more valuable than others. When you have a staff member that knows what to do, is very efficient in his or her ability to get the job done and somehow motivates others, you know they are worth their weight in gold. What is sometimes difficult to understand is that getting employees to actually do their job with a high degree of productivity is attainable. Every time you hire someone within your organization you should have a certainty as to how much income per week they should bring to the table through their efforts. The average should be somewhere around $3,500 a week for each FTE.

4. YOU CAN LOSE MONEY FROM LACK OF EFFECTIVE MARKETING

This is the number of potential new patients in a month multiplied by the case average minus last month's gross income. This may be hard to accept but a practice that has a very large referral base sending maybe one patient a month is unkillable. Any successful business attempts to capture territory. The more people who buy some goods or services from them the better. The most risky PT practices are the one where 50% of the referral base comes from less than 10 doctors. Upsetting just one of them can be devastating on your business.

If you were able to acquire a base of say 100+ doctors referring only 1-2 patients a month with 35-40 doctors representing 50% of your business you would be much more stable in business and can waste a doctor if he or she is trying to tie your hands or treat you with disrespect and your business will not suffer. There is a way to get this without having to drop doughnuts off at the doctor's door.

It is always surprising to private practice owners when they evaluate just how much money is lost in their organizations. Try determining just how much money you are losing from having the patients controlling your schedule book versus you controlling it at a 95% Kept Appointment rate.

To find out what the 5th key area of lost income is – email me.