The “B” Word
How to use your budget as an opportunity to solidify your practice vision.
By Susan Nowell, PT, DPT
Budget. The “B” word for many private practice owners. Creating, reviewing, or changing your yearly budget may give you an unpleasant visceral reaction, or it may make your eyes glaze over. Either way, your budget is crucial to the success of your business and deserves a central role in clarifying your practice vision, especially in the midst of current political polarization and the potential swinging pendulum of health care reform.
We’ve been feeling the heat of the changing health care climate and the direct effect of declining payment and increasing administrative burdens under the traditional reimbursement-based paradigm. On the heels of the 2016 presidential election, private physical therapy practitioners are still faced with uncertainty. Whether a new mode of health care reform will lead to minor changes or a full overhaul of Obamacare remains to be seen. No matter your political beliefs or opinions on health care reform, I think it’s safe to say that we have more professional responsibility than ever before to get a better foothold as leaders in the health care industry. This means staying on top of the changes in payment reform while keeping an open mind to alternative revenue streams outside of traditional paradigms.
I believe the old adage will still prevail: “With adversity comes great opportunity.” I still believe that as a private practitioner, you have a choice in how to mold your own practice paradigm. Whether your practice is solely reimbursement based, 100 percent direct consumer–based (cash-based), or a mixed model, your budget can and should reinforce your overall practice vision. Staying true to your vision in your budgeting strategies should help direct your marketing approach and may lead to the development of alternative revenue streams to further feed your bottom line.
Here are 5 budgeting tips to help you stay true to your vision:
Start with “why”: Begin with the end in mind. What inspires you and those around you? Revisit your company mission, or if you don’t yet have one, draft one. If you can get clear on your “why,” your “what” will follow, and you will likely see the steps more clearly. Your why could be anything from starting an outpatient cardiac rehab program to fill a vacant niche to being the choice provider for local high school soccer teams to promote injury management/prevention. Or your why could be launching a program to treat patients in their homes under Medicare Part B to reach an underserved demographic that lacks consistent access to transportation. When your “what” feels overwhelming, go back to your “why” as a way to refocus and reenergize yourself and your team members.
Clearly define your goals: This is the strategic planning portion to achieving your “why.” Make a list of all your “why’s” in your overall company vision. Under each, outline strategic goals by making them as measurable and timely as possible. For instance, setting a goal such as “increase monthly new patient referrals this year” is too vague and will not drive accountability. In contrast, a goal such as “increase monthly new patient referrals for high school soccer players by X percent by X date” is direct and measurable. It’s much easier to envision potential steps to reaching that specific goal in the following way: (1) Contact all local high school soccer coaches and propose an introductory educational session on potential soccer injuries, injury management, and injury prevention; (2) invite coaches, players, and parents to a clinic open house; (3) conduct monthly strength conditioning clinics for players; and (4) offer and/or negotiate contracts for onsite services at local soccer tournaments. When you’ve clearly defined the steps to achieving the goals of your “why’s,” you can confirm whether or not your budget supports your overall vision.
Aim to revisit your budget on a quarterly basis: With your vision in mind, review all of the components of your budget. At the most basic, simplified level, your budget outlines all of your revenues and expenses. It’s wise to use a budgeting format that distinguishes revenue and expenses that are variable in nature (change from month to month) from those that are fixed (remain consistent from month to month). Make a list of all of the revenue sources of your business, breaking larger categories of revenue into smaller subsets. Remember to include “adjustments to revenue,” which include insurance reimbursement adjustments and any refunds to clients. Under expenses, separate your “variable” and “fixed” categories. One method of determining which expenses are fixed versus variable is to consider which expenses would decrease or go away entirely with temporary closure of your practice. Variable expenses in this case would likely be some hourly clinical and office staff, some utilities, office supplies, and/or repair/maintenance. Fixed expenses will likely be fixed employee salaries, lease or loan payments, subscriptions, contractual expenses with outside agencies. Once you have your comprehensive list of revenues and expenses, you’ll have your projected profitability for the year, your “net income.” This may be the best time to pull out your wish list for new capital equipment or rehab supplies and seriously consider how realistic larger expenditures will be in terms of return on investment (ROI).
Review your Profit and Loss (P&L) statement with opportunity for growth in mind: This is a good time to consider whether you could increase your focus on alternative revenue streams. Some ways you could consider harnessing additional revenue streams that could feed back into your bottom line, whether you are a direct consumer–based or reimbursement-based business, may include: partnering with nonphysical therapy professionals to share space (make sure you know the legalities in your state on leasing space before you go into lease agreements), running community clinics for specific subsets of athletes, buying non-DME (durable medical equipment) supplies (make sure you know which ones are not covered and supplied by Medicare so you are in compliance) in bulk and selling rehab tools in your clinic at above-market value, running educational clinics on the uses and benefits of some of the rehab tools you sell in your clinic. There are likely many more specific examples related to different niches, but it doesn’t hurt to brainstorm ways in which you can promote keeping clients in the loop of your practice ecosystem while you are looking at your budget.
Stay current on health care and payment reform and how it will directly affect your bottom line: Payment reform is upon us. Health care reform is moving from procedural-based, fee-for-service systems toward value-based payments. And it is happening now. January 2017 marks the start of significant changes to payment. Now is the time to get and stay up to speed. We should all be aware of the three new physical therapy evaluation codes released in the proposed 2017 Medicare physician fee schedule. For a resource link: www/apta.org/Payment/Medicare/Coding/Billing/. The Centers for Medicare & Medicaid Services (CMS) website also offers information on the components of various value-based programs and reform strategies. Stay up on it: www.CMS.gov.
Susan Nowell, PT, DPT, is a PPS member and founder of Endurellect PT in San Francisco, California. She is licensed as a physical therapist in Italy and works as an onsite physical therapist for international endurance running events. She can be reached at email@example.com.