5 Ways to Look at ROI in Your Business

image_print
magnifying glass on a table in a wooded area

Assess your returns in different ways

By Joe Mayernik

Return on investment (ROI) is defined as a ratio between net profit over a period of time and cost of an investment at a point in time. Calculating your ROI can help guide your decision making so that you are able to earn a profit while providing your patients with excellent care. There are several areas of outpatient physical therapy practices that can benefit from an ROI review.

1. PAYMENT

A good rule of thumb is to earn 2.5 times the annual salary of each of your physical therapists, but with declining reimbursement and demand for higher salaries for therapists who have more experience or have a doctoral-level degree can make this challenging. What are some ways you can make more from your investment in your team?

  • a. For those clinics taking insurance reimbursement for payment, keep an eye on your insurance contracts and make sure you are getting an amount that allows you to make the money on each unit to achieve that multiple. If you are not making enough on each unit, then it may be necessary to renegotiate your contracts. You will need to build a case that you are more efficient and have better outcomes than the industry standards to have proof to show the insurance company(s) that you deserve the rate that you are asking for. You may also opt to drop a specific insurance carrier and be an out-of-network provider for that insurance. A review of your insurance contracts is an important annual process that ensures you are staying current with this aspect of your income stream.
  • b. Look for creative ways to supplement your insurance collections with non-insurance- based procedures, services, or classes to reduce reliance on insurance and diversify into more cash paying programming. This can be a positive way to reduce the burnout in your staff by allowing them to introduce variety into their schedules by taking on something like teaching a CEU class, running a boot camp, or offering strength training for older adults or a biomechanical analysis program for golfers. Having a cash pay service can help boost your bottom line while increasing utilization of staff, space, and other resources that you already have in your clinic, thereby increasing your ROI even further.

2. COMMUNICATION

We know that in all businesses, and especially in the service industry, communication is key. Consistent and easy communication goes a long way toward keeping customers engaged in their rehabilitation and recovery. It increases the likelihood that your patients will attend their scheduled appointments while improving the flow of information coming from the patient throughout the clinic.

  • a. As technology continues to advance, business texting becomes more popular. That’s because it often makes communication easier for both businesses and their customers. Physical therapy clinics should be using text outreach to handle things like missed calls, scheduling, and last-minute cancellations.
  • b. Your front desk can’t answer every single call, so it’s best to set up automatic missed-call texts that let clients know you’ll get back to them. With the right system, appointment reminders can also be automated so you can make sure your patients are aware of their upcoming visits. If a customer cancels, mass texts can be sent out to patients on a cancellation list who are likely to accept an appointment on short notice, ensuring that you don’t miss out on profit-making opportunities.

Some resources that can be useful in this area are Spruce Health, TimeTap, and Updox, and several others are likely already built in to your EMR.

3. CAPITAL INVESTMENT

When thinking about adding a new “widget” or service to your business, you would like it to be a market interrupter. It is good practice to do some market research to determine what your competition will be when offering the new product or service. This is an important factor in estimating the ROI before the purchase is made. As a result, when looking at new services or technology, it is important to see if there are any other physical therapy practices that offer the service or technology you are thinking of adding, as they may be a competitor to you. This research should include a review of population density and the demographics of that population, as well as a sample survey designed to determine whether there is any interest in the service or technology that you are proposing.

Using a formula that allows you to see what profit will be gained from the addition of equipment or a program will be helpful in determining your ROI. First, estimate the amount of money the company will earn from the project. Include all the cash inflows over the life of the project. For example, if you buy a new machine for $15,000 to provide a service to your patients, you may increase your productivity and drive up your profit by $5,000 each year for five years. After five years, you expect the machine to have deteriorated to a point where you need to buy a new one. This means that the project earns you $25,000 over its useful life (from 5 x $5,000). Deduct the cost of the project from its benefits to get the profit. In the example, you have a profit of $10,000 from the new machine (from $25,000 – $15,000). However, don’t forget to factor in the costs associated with upkeep, training, and any clinic modifications necessary to accommodate your new equipment or service.

4. MARKETING

Typical marketing efforts should provide a return of 5:1 on your marketing dollars spent.1 It can be higher in some extraordinary circumstances, but that would be exceptional, rather than the norm.

  • a. Traditional marketing still has its place, but most marketing now happens online. In particular, developing an online review strategy is key for getting optimal results when prospective customers look up physical therapists on sites like Google. Asking patients to share online reviews and having the ability to easily check on your online ratings will go a long way toward boosting your clinic’s ROI.
  • b. Planning ahead for content and online presence is important, but a shotgun approach makes it difficult for your audience to determine why they should come to you. People will be looking for consistency and a pattern of services that you provide to help identify that you are indeed the practice that will help them with their issues. Setting up your social media posts to highlight your service areas and specialties will help ensure that the process will run smoothly. Set the posts to automatically release to the various platforms at times that have been identified as the best times and days to be on social media to capture your targeted audience. There are several options out there to assist in making this process more efficient and allow you to plan out your calendar of social media releases through a single website or app. One service that can help you accomplish this is Hootsuite, which allows you to manage all your social media from one platform. You can respond to all requests or questions from one inbox and track your results, which will give you the data needed for your ROI on your marketing efforts.

5. STAFF RETENTION

The market in physical therapy is competitive, and we know as employers that it costs much less to keep a current staff member than to hire a new one and train them to the point where they are beginning to be productive at the level that we need and expect. Incentives can take on many forms and being creative in this area is important to maximized dollars. Purpose has replaced the paycheck to some degree, and more emphasis has been placed on what difference we are each making in our community, city, state, and so on. There is also a large amount of desire to develop and improve both professionally and personally. This learning and growth opportunity has new importance, and the boss is now more of a mentor or coach than ever before. It is crucial to have mentorship or coaching sessions regularly with your staff as a whole and individually to meet these needs. Additional emphasis is being placed on consistent and frequent feedback in lieu of annual reviews. While annual reviews can be valuable, it is important to follow this advice and communicate with your staff on an ongoing basis. This allows for an exchange between staff and management, keeping lines of communication open while both giving and receiving valuable insight into what areas your staff are excelling in and what areas they may feel as though they are struggling with. High value is placed on being praised for a job well done or for doing something above what was expected. Working alongside others who are doing a good job as well helps to raise each individual’s level of performance and allows everyone to have pride in ensuring that quality and high-level work is not only what is expected but what is done.

Focusing on one another’s strengths and using those strengths opens avenues in your practice for individual development and a natural progression toward specific practice specialties or niches within the practice. This can also lead to additional cash pay programming, such as myofascial release, personal training, sports performance training, trigger point dry needling, and running and golf analysis programs, to name a few. Having engaged employees can have a positive impact on important factors like decreased absenteeism, fewer safety incidents, decreased turnover, higher customer ratings, and higher productivity.

As you can see, there are many areas in your practice where your ROI comes into play, and it is important to take a high-level view first to identify some areas where you can improve your bottom line. As these areas become clearer, your focus can shift to implementing the processes that will give you the returns you need to run a thriving practice.  For more information on ROI, visit ppsimpact.org/minding-the-gap-measuring-the-roi-of-traditional-marketing/

action item
References:

1Marketing Evolution. “What is Marketing ROI and How Do You Calculate It?” https://bit.ly/3QBU3Yt


Joe Mayernik

Joe Mayernik is the chairman/president/CEO of Prodigo Solutions Inc. He has been recently inducted into the Greater Cincinnati Business Hall of Fame. He can be reached at joe@prodigosolutions.com.

Copyright © 2018, Private Practice Section of the American Physical Therapy Association. All Rights Reserved.

PPS Impact Logo

Are you a PPS Member?
Please sign in to access site.
THANK YOU
Enter Site!