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Category : Management
Breakeven analysis for medical practices
For those starting a new medical practice, program or medical service, knowing at what point your investment will “break even” is important to determining whether or not the venture will be economically feasible. The breakeven analysis provides medical practice owners with valuable information with regard to the production and time factors involved with starting a new medical practice, program or service.
Here is a link to a free breakeven analysis calculator tool which will help you determine when your medical practice, program, or service will break even based on the entry of a few key data inputs.
If you have any questions about the breakeven analysis tool, or you’d like more help determining the feasibility of your new medical practice, program, or service, don’t hesitate to contact us directly for a hand.
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Tannus Quatre is a private practice consultant and principal with Vantage Clinical Solutions, Inc., a nationwide healthcare consulting and management firm located in Bend, OR and Denver, CO. Tannus specializes in the areas of healthcare marketing, strategy, and finance, and can be reached through the Vantage Clinical Solutions website.
Medical practice management 101: Budgeting
Creating a medical practice budget is one of the most important elements of running a profitable physician practice, doctor’s office, or physical therapy clinic. The medical practice budget provides physicians, office managers and administrators with a gauge from which financial performance can be measured and operational issues identified.
There are many ways to create a medical practice budget, however our firm often recommends use of a budgeting format which clearly distinguishes those revenues and expenses that are variable in nature (change from month to month) from those that are fixed (relatively consistent from month to month).
To create a medical practice budget which outlines revenues and expenses in this way is quite easy to perform, and the reporting that comes from this type of budget is of the most easily understood.
Starting with revenues, create a list of all sources of revenue for your medical practice. Use large categories to capture the largest sources of revenue, then gradually break down the large categories into smaller subsets of revenue.
For example, if your physical therapy clinic provides two main types of services – physical therapy and fitness classes – then these might make up your two main revenue categories for your medical practice budget.
You may wish to further break down the “physical therapy” category into subcategories such as “orthopedics,” “pediatrics,” and “women’s health.” Your fitness classes may also be broken down into subcategories such as “weight management,” “strength training,” and “flexibility.”
It is a good idea to capture your “adjustments to revenue” within your revenue section as it is normal to collect much less than is charged to insurance companies. These adjustments are captured in the revenue section of the medical practice budget, along with any refunds that are credited back to clients through the course of business.
Moving to the expenses category, start by breaking all of your expenses down into “variable” and “fixed” expense categories. A rule of thumb that is often used to determine which expenses are variable versus fixed is to consider all expenses that would diminish or cease upon closure of your medical practice for a period of a month or so. Expenses such as clinical staff (often paid based on production or hours worked), hourly office and administrative staff, most utilities, office supplies, and repairs/maintenance would likely diminish or cease, and are therefore examples of variable expenses in some medical practices.
Expenses that would remain unchanged if your medical office closed for a month or so are considered “fixed” and would likely include your fixed management salaries, lease payments, loan repayments, dues/subscriptions, and contractual advertising expenses.
The rules for breaking medical practice expenses into variable and fixed categories are not hard and fast, but are rather dependent upon the operations of the medical practice, as well as the reporting that is desired of those that will be managing the medical practice budget.
After all revenues and expenses are accounted for within the medical practice budget, all expenses are subtracted from all revenues to come up with a number known as “net income.” Net income reflects the profitability of the time period examined by the medical practice budget, accounting for all recorded revenues and expenses.
You can likely see that without a medical practice budget, the ability to truly understand where, why and how revenues and expenses are generated is nearly impossible. By creating a medical practice budget, sticking to it, and revising it annually, your medical practice will have much more chance of success and profitability, and is therefore highly recommended.
If you’re interested in starting or improving your own medical practice budget, please visit the Vantage Clinical Solutions website to download a free medical practice budgeting tool that can be used within your medical practice, doctor’s office, or physical therapy clinic.
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Tannus Quatre is a private practice consultant and principal with Vantage Clinical Solutions, Inc., a nationwide healthcare consulting and management firm located in Bend, OR and Denver, CO. Tannus specializes in the areas of healthcare marketing, strategy, and finance, and can be reached through the Vantage Clinical Solutions website.
Medical practice management 101: Scalability
In this new series on The Healthcare Entrepreneur Blog, we’ll be taking a look at a number of medical practice management concepts that medical practice managers, administrators, and clinic owners should consider as part of their planning and day-to-day management. The principles we’ll be outlining as part of the Medical Practice 101 series are applicable to all types of medical practices including general medicine, the surgical specialties, and rehabilitation services such as physical and occupational therapy.
Here, we’ll discuss the concept of scalability as relevant to medical practice management. Scalability is the ability for a medical practice to expand its current systems, infrastructure, operations, and staff alongside the growth of the practice over a number of months or years. Scalability is an area of medical practice management that is not always fully considered when planning for the implementation of electronic medical records and business systems used to run and administer the medical practice, and can end up costing a medical practice severely in terms of time and money in order to meet the changing demands of a practice over time.
When planning for the use of electronic medical records (EMR) and practice management software (PMS), one of the scalable solutions that we like around here is the the use of web-based software or software-as-a-service (SAAS). The use of web-based or SAAS solutions allows a practice to operate one medical facility just as easily as operating two or more sites because the infrastructure used to link each user with the medical practice database exists via the internet. The need for a robust hardware infrastructure, including servers and virtual private networks (VPN’s) is minimized, and with it – the upfront cost of implementation.
Web-based software is typically provided on a per-user license basis, meaning that as additional providers or staff join the practice, additional licenses (or ’seats’) are purchased which allow the medical practice to easily grow, or ’scale’ their investment alongside the growth of the medical practice. Web-based software is a very scalable solution when it comes to medical practice management, which is why our medical practice consultants often recommend web-based solutions to our clients when determining solutions that will allow them to continue with their medical practice management infrastructure over the long haul.
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Tannus Quatre is a private practice consultant and principal with Vantage Clinical Solutions, Inc., a nationwide healthcare consulting and management firm located in Bend, OR and Denver, CO. Tannus specializes in the areas of healthcare marketing, strategy, and finance, and can be reached through the Vantage Clinical Solutions website.
Physician office sends patient data to wrong fax number…for 3 years
A Tennessee physician practice apparently sent out hundreds of faxes to a wrong fax number, breaching the privacy of likely hundreds of patients over the course of 3 years. Lots of questions about this one, like the obvious one: why wasn’t this remedied after the first error?
This is a huge HIPAA violation, and should serve as a reminder to make sure procedures are in place to verify and cross-check fax numbers and all other addressed material for all patient-related communications.
“This is a total breach of privacy,” Keith said. “This is supposed to be confidential, and it just so happens we have some scruples here and wouldn’t do anything with that information. We’ve shredded them, but you can have a file an inch thick in no time.”
via Doctors mistakenly fax patients’ data to Indiana company | The Tennessean.
Healthcare in the future…a scenario worth striving for?
What would the future of healthcare look like if we could connect provider and patient using technology on an even greater level than we currently do? What if patients were more engaged in their own care through increased access to their personal records? What if providers allowed for greater collaboration between themselves and their patients when making decisions? What if patient ‘consumerism’ was the norm? What if patients actually started taking care of themselves? These are all ideas posed in the recent issue of HealthLeaders under the title The Patient of the Future.
A patient enters the waiting room and is greeted warmly by her personal navigator, who hands her a tablet-sized computer preloaded with her personal demographic information and health records. She answers a series of questions and the computer compiles a list of possible diagnoses for her physician.
In his office, the physician is reading an e-mail from a patient who has forwarded an interesting study about his particular medical condition. The physician forwards the study to the rest of the patient’s care team, including the patient’s acupuncturist.
In the exam room, a specialist and patient sit together in front of a computer—the physician is showing the patient which sites have the most reliable medical information that she can use to learn more about her recent diagnosis. Next door, a physician is talking to a patient who has unusual symptoms; the doctor consults her PDA, which is loaded with a decision-support application.
Down the hall, an employee e-mails to a prospective patient a detailed, itemized list comparing the costs of hip replacement surgery at a number of area hospitals.
And, by the way, everyone in the waiting room is fit and trim. Nobody smokes anymore. People with diabetes check their blood sugar regularly. Everyone shows up for their colonoscopy appointments. People are knowledgeable about their health, empowered to participate as partners in their care, and engaged enough to comply with their physicians’ directives.
Clinical decisions vs. business decisions
Ever heard, ”He’s a great physician, but doesn’t get the business side of it?”
Some physicians have a reputation for being great at patient care, but poor at managing the “business side” of their practice. This could be for a variety of reasons… not enough formal business education, not enough experience in managing people, not enough passion for “the business side”, etc.
What about the way decisions are made in the practice? Do the decision making processes used to diagnosis and treat patients – which are second nature to physicians – not result in success when the same processes are used to make decisions about the “business side” of the practice?
One of the best articles I have read from Harvard Business Review, The Seasoned Executive’s Decision – Making Style (Feb 2006), highlights a study looking at the decision-making styles of more than 200,000 executives. The researchers identified 4 distinct ways in which successful business leaders make decisions. With predictability, the more successful executives evolved their decision-making process as they assumed roles of greater responsibility and influence. The four styles were identified to be…
1. Decisive. People using the decisive style value action, speed, efficiency, and consistency. Once a plan is in place, they stick to it and move on to the next decision. In dealing with other people, they value honesty, clarity, loyalty, and, especially, brevity. Time is precious in this mode. This type of process was most often used by first level managers and directors.
2. Flexible. Like the decisive style, the flexible style focuses on speed, but here the emphasis is on adaptability. Faced with a problem, a person working in the flexible mode will get just enough data to choose a line of attack– and quickly change course if need be.
3. Hierarchic. People in the hierarchic mode do not rush to judgment. Instead, they analyze a great deal of information and expect others to contribute – and will readily challenge others’ views, analyses, and decisions. From the hierarchic perspective, decisions should stand the test of time. This type of process has been identified when long term management decisions are made within a business by upper levels of management.
4. Integrative. People using the integrative style don’t necessarily look for a single best solution. Their tendency is to frame any situation very broadly, taking into account multiple elements that may overlap with other, related situations. Consequently, they make decisions that are broadly defined and consist of multiple courses of action. When working with others, integrative decision makers like lots of input and are happy to explore a wide range of viewpoints, including those that conflict with their own, before arriving at any conclusion. Decision making for the integrative is not an event, but a process. This type of process is most often used by CEO’s and leaders in higher positions within an organization.
Applying these four distinctive processes to physicians and clinicians, it could be argued that patient care is often managed using the “Decisive” level of decision making. Clinicians may have difficulty shifting out of this mode to the other modes when making decisions about their practice, especially considering that the research supports successful business decisions being made through “Integrative” and “Hierarchic” processes. These processes may not be as intuitive, and therefore business decisions for the practice are made using the same process used to make decisions about patient care. Most physicians are probably unaware that there is a difference in decision-making processes, despite the evidence provided in the research. Does difference in business decisions vs. clinical decisions matter? I think it might.
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“Red Flag” rules – you still have some time
If you don’t know about the “Red Flag” rules yet, you may want to do some homework. The Federal Trade Commission (FTC) will begin enforcing law stating that practices need to have an identity theft prevention program in place. This program includes written policies and procedures as well as demonstration of true implementation of the program (i.e. it can’t just be written down and stuffed away in a binder somewhere in your clinic). The deadline was seven days ago, however, they have given more time for businesses to comply by pushing the deadline out to August 1, 2009. Read more by Peter Lucash here.
SEO – Your practice needs it!
As this article from KevinMD.com states, “it’s not good enough simply to have a web presence” anymore. Search engine optimization (SEO) is just as important nowadays. If your not familiar with SEO, it includes all kinds of techniques to earn your web site top spots for those searching you out.
Patients are searching for doctors, medical practices and hospitals via search engines, like Google, so whether or not you’re found on the first page can make a significant impact on the number of patients you see.
Furthermore, it’s in your best interest to have some control on how your name or practice comes up on search queries. Because if you don’t, it’s likely that negative news items or other unsavory information will be associated with your name instead.
There are many good sources to learn SEO to apply to your practice’s web site, however, we believe that it is worth the money and time to have an SEO specialist work their magic for you. SEO has gotten more complex and more competitive over the last several years. Let someone else handle this complexity so that you can focus on patient care and running your business!
Managing phone calls: An important component to office efficiency
Phone calls that come into a medical or health care practice are important. The telephone, because it is not typically a revenue-generating element of the private practice, must be managed well in order for a doctor or health care provider to take care of her patients effectively while still maintaining efficient, profitable operations.
Here are some hints on how to do just this from The Independent Urologist.
In a medical practice, phone calls are money pits, essential though they are. Doctors don’t get paid for phone calls and the more calls a practice gets, the higher the costs. However, missing calls is even more costly, so the key is call management. Practices that manage phone calls well can benefit. Here are some you can do:
Cash flow considerations
There is a trend of “slowing payments” over the past several months and we are noticing clinics have higher percentages of aged account balances, particularly from patient responsibility, sitting out in the greater than 90 or 120 day columns. With individuals continuing to struggle in this economy, they are more quickly and frequently making the decision that their medical bills can be put on hold. Clinic owners need to recognize that this may be happening in their practice, and they should develop tactics to handle higher days sales outstanding, slowing cash flow, and patients who are creating their own payment plans (or deciding not to pay at all).
Realizing that some compassion needs to come in to play with those that are financially struggling, we are reminded by Peter Lucash that we should be collecting us much up front (co-pays and deductibles) from patients as possible; we definately should have the ability to receive credit card payments; and we should have policies and procedures in place for cash pay patients, financial hardship, and payment plans.
Implementing a collection at time of service policy will take some time. When making appointments, tell patients that you will be asking for payment. At first, if the patient balks (such as saying they don’t have their checkbook) let it pass, but tell them that you are asking for payment from now on. Over several months, you should see your collections rising and A/R dropping. At some point, of course, collections will flatten, the timing of collections stabilizes.
Collections are always a challenge within a practice, as you balance the desire to help patients with the business side. You want your staff your staff to remain compassionate and caring, and they are often the best people to work with your patients to collect with compassion.
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