Four Essential Practice Management Strategies To Fine Tune Your Practice
Our recent recession has been a game-changer for the likes of many a medical, dental and chiropractic practice! Endeavor Health Management research indicates that 42% of practices have suffered revenue declines over the last four years. And, even now as the economy improves, many practices are struggling to regain previous levels of practice production/revenue and doctor income.
It has become apparent that we have entered a new era of practice management. What worked in the past may not work now. While it remains possible for providers to grow their practices, they need effective business skills and systems to reach the highest levels of success.
Prior to the recession, the majority of practices could be relatively successful without either excellent business systems or strong leadership. This was largely due to supply and demand. Patients were abundant. Most of them kept their appointments and accepted recommended treatment, especially for need-based care.
Now, however, there are fewer patients, more canceled appointments and no-shows, and most disturbing...decreased case acceptance for most all services. To navigate this changing landscape, providers need to manage their practices based on core business principles.
Growing your practice in today's economy requires some level of business acumen. Understanding and properly implementing a successful profit-making strategy is key to a well-functioning practice! Here are four requisite overarching strategies for creating your conceptual framework:
1. Manage overhead
Endeavor Health Management recommends an overhead target of 59% for general practices. Every percentage point over 59% costs practices thousands of dollars. For example, if a medical practice is producing $700,000 per month with 65% overhead, that's $42,000 in excess overhead per month. For a practice with a 75% overhead, that would be $112,000 in excess overhead per month...that's over $1.3m per year! Even if a practice is just a few points above 59%, it still has opportunities to increase income by thousands of dollars. Optimizing overhead requires a comprehensive approach, including these action steps:
• Follow the money - Keep track of collections, purchases, and expenses - from staff salaries to supplies. Record how much the practice spends in each category every month. Measure expenditures against past costs to see if they are increasing, decreasing, or staying the same.
• Track inventory - Practices should take inventory semiannually. This will help offices maintain a steady stream of supplies, avoid overages and shortages, and have greater control over expenses. Automated inventory management software is an optimal solution for managing practice inventory!
• Examine insurance participation - Practices should analyze patient insurance participation each year. Providers should be aware of important data such as what percentage of total practice collections is generated by insurance, which insurance plans pay the highest reimbursement rates, which ones pay the lowest, what plans are provided by local employers, etc. This information will help doctors make the best decisions regarding insurance participation.
2. Control collections
Practices should get paid for the services they provide. In many dental offices for example, teams are uncomfortable asking for payment. And, while their medical counterparts rarely have issue collecting copays and deductibles over-the-counter, dental practices continue to struggle to this end. Like a medical office, a dental office is obviously a place where dental care is provided, and it is also a business that requires payment for services rendered, so dentists can continue to provide high-quality care to patients.
To this end, failing to collection "over-the-counter" responsibilities creates overdue accounts receivable, which have become more prevalent for many practices in the post-recession economy. These receivables cost the practice in several ways. First, there is the issue of not being paid for services already performed. Second, the office must use team members to track down this revenue when they could be performing more productive tasks. Third, it may never be collected. The best way to reduce collections is to have patients pay at the time of service!
Endeavor Health Management closely works with clients to realize a collections target of 99%. In a sluggish economy, patients may be slower to pay their bills. Practices need clear financial policies that the team communicates to patients using a method such as a scripted "Value Creation" treatment plan. Utilizing a script as an essential communications tool, information about financial policies can be properly conveyed to patients, and copay and deductible expectations can be presented with better clarity.
Creating a strategic treatment planning model will increase practice revenue(s) by offering patients' options for treatment, if there are any, and options for payment, which there always are...cash, check, credit cards, and outside financing. Giving patients choices makes treatment more affordable and full payment easier!
3. Replace outdated management and marketing systems
Outdated processes create bottlenecks in a practice's systems. Left unchecked, outdated and inefficient processes will hinder productivity and ratchet up stress on the doctor and team. During a good economy, practices will often put up with outdated systems because the schedule is filled with patients. However, a weak economy exposes vulnerabilities in old systems. Without strong management and internal marketing systems in place, practices will find it nearly impossible to grow in today's economy.
Effective systems have the power to transform an underperforming practice into a high-performance business. Management and internal marketing systems are the foundations upon which the provider builds practice success year after year. If that foundation is poorly constructed, practice success will be short-lived, difficult to achieve, or nonexistent.
To avoid lost productivity and production plateaus, practices should replace their management and internal marketing systems every five years. The following steps will help practices redesign their systems:
• Collect all necessary data to understand each practice system.
• Use all collected data to develop ideal models based on the unique needs of your practice.
• Customize all ideal models to fit the goals of the doctor and team.
• Implement new systems to increase production.
• Measure results to ensure that the new customized model is on track to achieve all practice goals.
Depending on how old (and inefficient) the systems are, it can require up to a year to completely replace all systems without disrupting daily operations or causing excessive stress on the team. Likewise, receiving expert guidance from trusted advisors can shorten the amount of time needed to develop and implement high-performance systems. To build a highly successful practice, all major systems must be addressed and inefficiencies that slow down systems removed.
4. Attract and retain patients
Current patients are the backbone of the practice and often serve as a source for new patients. In today's economy, patients are more likely to cancel or not show up unless value is built for the treatment and appointment. Endeavor Health Manaagement recommends a variety of patient-retention strategies to keep patients coming to the practice:
• Schedule the next appointment in advance. For dental practices, the hygiene department provides a steady stream of patients and production - 82% of hygiene patients should move to treatment. Patients should visit the practice every six months for recare. The best way to achieve that objective is to schedule the next appointment before they leave your office.
• Confirm all appointments 48 hours in advance. Practices should not rely on home phone numbers. Use modern communication vehicles, including email, text messages, and especially cell phone numbers.
• Provide superior customer service. The goal should be to exceed expectations during every patient interaction. Don't give patients a reason to not come to your office.
Quality customer service also encourages patients to talk about the practice to friends and family members. Remember, current patients are the best source for new patients. When patients are "wowed" by high quality care and great customer service, they will gladly refer their friends, family members, and neighbors if a scientific internal marketing program is in place. Team members should be trained to ask for referrals and testimonials from satisfied patients. Any patient who refers someone should receive a handwritten thank you note and phone call from the doctor.
Engineer your own comeback
Even in the current economy, providers can still grow their practices exponentially. These four core business principles can help you effectively manage your practice, reduce costs, and increase production. Providers can no longer wait for an economic turnaround - they have to engineer their own comeback.
How's your practice performing? #weshouldtalk