From the January 2017 issue of HealthCare Business News magazine
By Owen Dahl
Is your medical practice a business? A service? A supplier of products? Or exactly what is it? These questions are critical to address as you consider the ever-changing health care world. Why? Do you want to remain as you are? Will you be “forced” to join a group, network, or sell to a hospital? Let’s define what it means to be a business. You are a legal entity. You pay taxes. You require resources, including equipment, supplies, staff, space, etc. You are a professional, well-educated, experienced and capable of providing a service to your “customers.” To succeed as a business means to have a positive bottom line. You must make money.
This raises the big question. What is the most important aspect of your business? Is it making money or something else? When you have your monthly “board” meetings what is addressed first? Is it the financial statement? Or is it something else? To be a business you must generate revenue. Easy, since all you have to do is see patients and submit a bill (the good old days under fee-for-service). Then you must understand and control expenses — easy, just don’t allow overtime. Life is good! Big question: How much does it cost to provide a basic service, such as 99213 routine office visit for an established patient?
The pressures are to focus on information technology (time and expense), meet regulations, capture information (whether appropriate and valid for care or not), share that information with the patient and other providers and address different payment models, no longer fee-for-service. Staff turnover and other costs continue to increase. So why are you still in business? Because you enjoy what you do and you’re good at it! To survive there are some key steps and a renewed focus that will help you in the future:
• Review what you do. What is your purpose? Should you expand or change your focus by purchasing new equipment or shifting to a direct-pay model of care?
• What is the appropriate staffing level given current turnover, expense, etc.? What have you done for training? It is cheaper (the cost to replace an employee is 70 percent of an annual salary) to hire right and retain than to hire the first applicant, throw them into the job and hope they do well without any formal training plan.
• Are you happy with your location (occupancy costs are No. 2 or 3 in expense ranking)?
• Do you take advantage of training from your malpractice carrier (No. 2 or 3 in expense ranking)?
• Where do you buy your supplies (send staff to Costco, taking time away to save a few cents?) and how do you control inventory?
• How do you finance any option? Do you go to the bank (interest rates are low)? Do you have adequate reserves internally or do you ask all “partners” to give up a portion of their income stream?
