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Training Tips

6 Vital tips for enhancing your medical practice’s profitability

Tip 1: Know your financials

Just as you first check a patient’s vital signs to understand their health status, it is important to keep a close eye on your financials when it comes to enhancing your profitability. The reality, however, is that you likely never had a class in medical school on understanding financial statements. Rather, you’ve had to figure it out by yourself. It’s therefore no wonder that many doctors either ignore or under-manage this critical part of their practice.

However, you can develop financial literacy. This is done through having consistent exposure to your numbers. You have to make it a habit to sit down each month with your bookkeeper, accountant or business coach and go through your practice’s financial statements. It’s also important to ask a lot of questions. Sure, this will initially feel uncomfortable as you’re unfamiliar with the material. But, once you have the hang of it, you’ll be a lot more comfortable and, eventually, going over the last month’s numbers will take no more than thirty minutes.

You should also commit to reviewing each month’s numbers no later than the end of the next month. Don’t wait until the next quarter or - even worse - until they’re too old to bother looking at, at all! You will notice that, as you grow more confident with your numbers, you will begin to spot the easy ways in which you can enhance your profitability. For example, consider your marketing expenses. Do you know for instance, how well your main lead-generation activities perform? Or do you know what your cost per lead is?

When you have good numerical data, you will be able to stop wasting your money on below-average efforts, and instead invest only in what really works.

Tip 2: Feed your winners and starve your losers

You will see that, once you’re on top of your numbers, you can get strategic about the activities you invest in and the activities you stop altogether. For example, one dentist cut all the costly, ineffective marketing tactics and rather invested in a low-cost, but high-impact, reactivation strategy.

You’re most likely busy with marketing and promotions that work exceptionally well. These are your “winners”. Then there are those marketing tactics that create little value for you and fail to justify your cost. These are your “losers”. It’s time that you starve the losers by taking the bottom 30% or 40% and stop doing them. Then, reinvest that time and money into your winners - these are the top 10% or 20% of marketing activities.

However, this strategy doesn’t only apply to marketing - it applies to staff, patient types and your service lines. For example, which of the service areas of your practice are highly profitable? And which of them are either only marginally profitable or are losing money? Once you’ve answered these questions, you need to, again, feed the winners and starve the losers.

Tip 3: Increase patient volume

You need to increase the number of patients of the practice to enhance its profitability. Here are a few ideas on how you can achieve that:
  • Pay attention to your conversion rate or the percentage of potential new patients who do make appointments and show up. Should patients phone your practice and they can’t get through immediately - should they get put on hold or have to wait for service - chances are that you may be losing potential patients. You can start by counting how many calls are live-answered and how many placed on hold. Then work out what percentage of these calls result in a new patient showing up at the practice. You may then consider hiring another person just for the phones based on those numbers.
  • Focus on how well you retain patients. Retaining an existing patient is a lot better and more cost-effective than attracting a new one. You should keep in mind the lifetime value of each patient (if you are unsure of this number, sit down with your accountant or business coach to help you calculate it) and act according to that. Design your customer service with the goal of retaining patients at your practice. Of course, your front-office phone service plays a critical part in retaining patients.
  • Initiate a reactivation strategy to reconnect with lapsed patients. You should consider an approach that specifically relates to your area of medicine. For example, let’s take one doctor’s weight-loss practice where it’s common for patients to see huge improvements within a few months, but then backslide over the next 12 to 24 months after they have left treatment. This doctor’s reactivation strategy included calling patients a few weeks after they left the program to check on their progress. If the patient is once again struggling, they are invited to come back for another appointment as well as ongoing support to maintain their ideal weight and healthy lifestyle.
  • Launch a referral program. You can consider tailoring your approach to your particular area of medicine. For example, a chiropractor who serves runners and other athletes may start to encourage his patients to refer other athletes from their running clubs and road races. Eventually, he becomes the go-to provider for runners in his area.
  • Consider a cross-promotion strategy. For example, one Gastroenterologist had the powerful realisation that every one of his patients arrived at his office accompanied by someone who would drive them home after their procedure. The doctor realised that this fact could serve as a major recruitment opportunity. He, therefore, instructed his staff to ask the accompanying friends or family if they were aware of how important screening colonoscopies are for people over the age of 50. They were then invited to come in for an appointment. Just after one month after starting this strategy, the practice had recruited ten new patients.
Tip 4: Leverage your lower-cost providers

By adding a mid-level provider, you will create additional direct revenue as that individual starts to see their own patients. This also creates indirect revenue by giving you back 10% of your time. This time you can then reinvest in your highest-value work.

There are also other advantages of increasing your use of mid-level providers, for instance, one doctor who specialises in weight loss had developed an effective approach. He had tried to employ staff physicians to handle some of the patient load but had a great deal of trouble to get these physicians to follow his proven protocol and treatment philosophy. Eventually he switched from hiring physicians to hiring nurse practitioners - and his patients received better results!

You see, unlike the staff physicians, the nurse practitioners were open to learning his approach. He also, at the same time, reduced his payroll cost by 50% for each position and saw improvements in his culture.

Tip 5: Renegotiate your costs

Your negotiating leverage is increased as your practice grows, so don’t be afraid to renegotiate expenses. When in doubt, bid it out. While prices may seem fixed and inflexible, they often turn out not to be. An effective negotiator can often get a better deal in this way.

For example, in one doctor’s practice, a staff member struck a new and better deal with the sanitation company that took away the practice’s biowaste. She also negotiated a better arrangement with the company who they had hired to handle their medical records. This is a skill set that is worth investing in, so you should consider letting a member of your staff attend a seminar or two on negotiation. The cost of the seminar will pay for itself several times over.

However, you may also be suffering from the “postal code problem”. This is when some contractors will look at the address - or the letters after your name - and add a premium to their price. Let them know that other companies are bidding for the same contract. You might just be surprised - this action alone may knock 10% or 15% right off the top!

Tip 6: Optimise your space

Because space is money, your physical space is important both for increasing revenue and controlling expenses. Therefore, make sure that every inch of your office is put to use - even if it takes some creativity to figure out how to do this. In some cases only a tweak here and there is needed to create two additional exam rooms out of what was a storage area. Your premium space should, ideally, be reserved for producing medical services.

For example, one doctor’s clinic started as a tiny 1,600-square-foot office. However, thanks to hiring a great staff physician, the clinic grew quickly. Before very long it had expanded into the unit next door, adding another 1,600 square feet. Then another unit was added. At that point, however, the office was basically three separate spaces connected by small doorways. Every time the physician came out of an exam room, she would have to spend 45 seconds walking the hallway looking for a Medical Assistant to finish with the patient. That means that 45 seconds were wasted at the end of each appointment.

Their solution? They dedicated a junior staff member exclusively to that physician - and the arrangement ended up saving enough time for the physician to see two more patients every day! Not only did it increase the clinic’s profits, but it also helped to retain that physician in their role.

So what vital tips will enhance your practice’s profitability?

- Paul Saunders, Product Manager, Altron HealthTech
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