Defining Value in a Physical Therapy Practice
6 key areas to focus on to grow your practice and increase its net profit and overall value.
By Shaun Kirk, PT, MHS, MTC
Effective Promotion Leading To New Patients
From our own survey, over 90 percent of private practice owners say that they suffer from less than an ideal volume of new patients yet spend less than 5 hours a week actively trying to solve this problem, either by their own actions or via a staff member’s actions.
If you do not have someone who has the full-time job of driving new patients to your door, then you are, in fact, decreasing your practice value. If this full-time marketer was only effective enough to increase your new patients by just one per week, you would be able to pay for this staff member. Getting a real pro in this area could make you millions.
You can increase your practice value through effective promotion via direct mail, visiting physicians, delivering workshops, and much more. If you do not have a full-time staff member who eats, sleeps, and breathes new patients, you may be decreasing your practice value. Your full-time marketer should be your third or fourth hire in your practice if you want to maximize value.
I call effective promotion and marketing the “insurance policy” for your practice. An insurance policy is there to protect you against loss. Effective marketing actions that actually get more new patients can protect you against the loss associated with the other 5 key areas. That increased new patient volume can protect your practice while you work to get a fast handle on the other 5 areas of lost income.
Excellent Schedule Book Control
This area is the first to address as it is the easiest to get control over and it makes money quickly. My clients arrive to their appointment as scheduled, 95 percent of the time on average. The industry average is 82 percent. How much of a difference does that make? I’ll show you.
Here is an example for a practice that sees 500 patient visits a week, has an 82 percent arrivals rate, and collects $90 per visit:
At an 82 percent arrivals rate, 610 patient visits would need to be scheduled to end up with 500 patients who actually show up. If we took the 610 patient visits and were able to improve the percent of arrivals by just 10 percent, we would see 561 patients instead of just 500 patient visits a week. At a reimbursement of $90 each visit and an additional 61 patient visits, the practice would make $5,490 more per week or $285,480 more annually, and you wouldn’t have to hire additional clinicians as there is still plenty of room on the schedule.
Achieving a higher percentage of arrivals requires training the staff receptionist and physical therapists on how to manage this “Percentage of Arrivals” statistic, and showing them that it is a key performance indicator (KPI) for quality both in the practice and among clinicians. You just have to know what to say to each patient to drive into the patient’s mind the importance of keeping appointments, and the practice will inevitably expand.
A practice that averages under 92 percent arrivals may be decreasing its value. If you aren’t sure how to handle this area, I would recommend as a good start to begin keeping a daily and weekly Percentage of Arrivals graph for the practice as a whole and each clinician individually. It is odd, but true: When you measure the statistic daily and give attention to this area, it tends to improve.
Case management requires sales skills, but most practitioners hate sales, because they don’t know how to sell the value of their services. Truthfully, when a patient has more pain in their “wallet” than their back, they will discharge themselves—unless you know how to avoid self-discharging and the associated lost income.
Being able to adequately address the real issues that patients have when having to pay more and more out of pocket is a vital skill to acquire in this ever-changing health care environment. A clinician can see only so many patients in a day. When the clinician’s efficiency approaches 90 percent or more (meaning greater than 90 percent of their available schedule is full), the clinician may begin to self-regulate their own patient volume by reducing services. This can be accomplished by their discharging patients too early or by seeing the patient less often per week to keep their schedule manageable and also by providing fewer codes per visit. Each one of these adds up to lost income. When a clinician’s schedule is very full, that clinician will also stop asking for patient referrals, because they feel they are already too busy.
What looks like a busy practice could still be reducing its value if the quality of case management is poor. If the practice were to simply hire another clinician and encourage everyone to keep their case management metrics in an acceptable range, it would be maximizing value.
Billing And Collections Procedures
There are 8 areas in billing and collections where money can slip through the cracks: patient registration, insurance verification, collection of copays and deductibles, the proper coding of services, timely billing, accurate posting/handling of the Explanation of Benefits (EOBs), account follow-up, and the collection of patient balances.
By statistically managing these 8 areas to catch the dropped balls, any manager, at any distance, can know procedurally if the area is under control and precisely identify what area to direct one’s attention to in order to maximize reimbursement or to speed up the process.
Getting Referrals From Current and Past Patients
An average size practice will get just a few referrals per month from current or past patients. I know, that is terrible. It is such an untapped goldmine. There are practices that have 50 percent or more of their caseload represented by referrals from current or past patients.
The unfortunate thing is that most clinicians are real softies when it comes to sales and so shy away from asking for a referral from their patients. These people don’t realize that the word sales comes from the Old English word sellan, which means to give, offer, or lend a hand.
Helping as many people as possible should be the main purpose of any clinician. Happy patients want to refer to you. Any practice or clinician who fails to recognize this or capitalize on it is dramatically reducing their practice value.
Getting the patient into a positive frame of mind to refer, starts immediately during the initial evaluation. By working out a simple series of questions to ask during the initial evaluation, one can quickly guide a patient toward better overall compliance with their treatment plan. Your well patient, who is happy with their outcome, can simply be asked to refer someone else into the practice and with the trusted relationship that you built with them, they usually will.
If the value of a new patient is $1,000 and you are not asking for referrals from happy patients, then you are losing up to $1,000 for every happy patient you have failed to ask. If you are a successful clinician, that can be a lot of money left on the table.
Managing A Productive And Efficient Staff
Ideally, there should be one administrative staff member for every clinician. When you have 7 physical therapists and 3 admin staff, there are holes in the organization with bucket-loads of money pouring through. With a 1:1 ratio, you would have the key administrative positions filled and less money falling through the cracks.
There are 3 main functions in a clinical practice: Get the patients, treat the patients, and get paid. You strengthen your practice with these 3 major functions.
Ideally, every staff member should operate with a statistic that accurately measures his or her production value. This statistic is determined by defining exactly what the position produces for the company for which the company exchanges a paycheck. For example, the staff receptionist would keep statistics on how to keep, graph, and plan around how to keep the company in a high range of Percentage of Arrivals and Percentage of Front Desk Collections. From there it is important to train that staff member on how to better that statistic, while maintaining or improving quality.
In conclusion, as an administrator, private practice owner, clinician, or staff member, you can best raise the value of your practice and prevent loss of income by focusing your attention and activities to improve on any or all of the 6 key areas, so: Promote your practice effectively, increase your percentage of arrivals, manage caseloads, keep an eye on billing and collections procedures, actively encourage referrals from current and past patients, and keep a productive and efficient staff.
Shaun Kirk, PT, MHS, MTC, is the chief executive officer and owner of Measurable Solutions, Inc., a management training and consulting practice for private practice physical therapists in Clearwater, Florida. He can be reached at firstname.lastname@example.org.