Six Vital Tips for Enhancing Your Practice’s Profitability

Your practice is your business, but it won’t continue unless it makes money. Don’t overlook these proven ways to boost your profit.

How can you make your medical practice more profitable? These six vital tips will get you started.

1. Know your financials.

When you’re trying to understand a patient’s health status, you first check the person’s vital signs. When it comes to enhancing your profitability, keeping a close eye on your practice’s financials is just as important.

Of course, the reality is that you likely never took a class in medical school on understanding financial statements; instead, you’ve had to learn it on your own. It’s no wonder many doctors simply ignore–or at least undermanage–this critical part of their practice.

But you can develop financial fluency by having consistent exposure to your numbers. Make it a habit of sitting down each month with your controller, CPA, or business coach to look at your practice’s financial statements. Ask a lot of questions.

Initially, this will feel uncomfortable–precisely because you’re probably unfamiliar with the material. Once you get the hang of it, though, you’ll feel a lot more comfortable, and, eventually, going over last month’s numbers will take no more than thirty minutes.

From now on, commit to reviewing each month’s numbers by no later than the end of the next month. Don’t let them linger until next quarter (or worse, until they’re too old to bother looking at all!).

As you grow more confident with your numbers, you’ll begin to spot easy ways to enhance your profitability. As an example, consider your marketing expenses. Do you know how well your main lead-generation activities perform? Do you know your cost per lead?

With good numerical data, you can stop wasting money on below-average efforts. Instead, you’ll invest in what really work.

2. Feed your winners; starve your losers.

Once you’re on top of your numbers, you can get strategic about which activities you invest in and which you stop doing altogether. For example, one dentist cut the marketing tactics that were the most costly and ineffective. Instead, she invested in a low-cost, high-impact reactivation strategy.

You’re probably doing marketing and promotional activities that work exceptionally well. These are your winners. At the same time, some of your marketing tactics likely create little value and fail to justify their cost. These are your losers.

It’s time to “starve” those losers. Take the bottom 30 or 40 percent, stop doing them, and reinvest that time and money into your winners–the top 10 or 20 percent of marketing activities that perform. That is, feed your winners and starve your losers.

This strategy doesn’t apply only to your marketing efforts, of course. It applies to your staff, your patient types, and your service lines. For example, which service areas of your practice are highly profitable? And which are marginally profitable or even losing money? Once you’ve answered those questions, it’s time to feed your winners and starve your losers.

3. Increase patient volume.

Increasing the number of patients is a critical part of enhancing your practice’s profitability. Here are just a few ideas:

• Pay attention to your conversion rate, the percentage of potential new patients who actually make appointments and show up. If people are calling your office to make an appointment and can’t get through immediately–if they get put on hold or have to wait for service–you may be losing potential patients. Start counting how many calls are live-answered and how many are placed on hold. What percentage of these calls result in a new patient showing up in your office? Based on the numbers, you might consider hiring another person just for the phones.
• Focus on how well you retain patients. It’s far better and more cost effective to retain an existing patient than attract a new one. Keep in mind the lifetime value of each patient (and if you don’t know this number, then sit down with your CFO, CPA, or business coach to help you calculate it), and act accordingly. Design your customer-service efforts with the goal of keeping patients at your practice. Your front-office phone service is critical for retaining patients.
• Initiate a reactivation strategy to reconnect with lapsed patients. Consider devising an approach that relates specifically to your area of medicine. For example, in one doctor’s weight-loss practice, it’s common for patients to see huge improvements within a few months and then backslide over the next twelve to twenty-four months after leaving treatment. The doctor’s reactivation strategy is to call patients and check on their progress within a few weeks of their leaving the program. If patients are once again struggling with their weight, they’re invited to come back for another appointment and ongoing support to maintain their ideal weight and a healthy lifestyle.
• Launch a referral program. Consider tailoring your approach to your particular practice area. As an example, consider a chiropractor who serves runners and other athletes. A lot of runners belong to local running clubs and compete regularly in road races, so this doctor began encouraging his patients to refer other athletes. Eventually, he became the go-to provider for runners in his area.
• Consider a cross-promotion strategy. One GI doctor, for instance, had the following powerful realization: every single patient arrived at his office accompanied by someone who would drive him or her home after the procedure–a fact that could serve as a major recruitment opportunity. So he instructed his staff to ask the accompanying friends or family members if they were aware of the importance of screening colonoscopies for people over age fifty. He then invited them to come in for an appointment. Just one month after putting this new strategy into effect, the practice had recruited ten new patients.

4. Leverage your lower-cost providers.

Adding a mid-level provider creates additional direct revenue as that individual starts seeing his or her own patients. It creates indirect revenue by giving you back 10 percent of your time to reinvest in your highest-value work.

There are additional advantages of increasing your use of mid-level providers. For example, over time, one doctor specializing in weight loss had developed quite an effective approach. He tried employing staff physicians to handle some of his patient load, yet he had a great deal of trouble convincing these physicians to follow his proven protocol and treatment philosophy. Eventually, he switched from physicians to nurse practitioners–and, lo and behold, his patients received better results. Unlike the staff physicians, the nurse practitioners were open to learning this doctor’s approach. At the same time, he reduced his payroll cost by 50 percent for each position and saw improvements in his culture.

5. Renegotiate your costs.

As your practice grows, you increase your negotiating leverage. Don’t be afraid to renegotiate expenses. When in doubt, bid it out. Prices that may seem fixed and inflexible often turn out to be the opposite. An effective negotiator can often end up scoring a better deal.

In one doctor’s practice, for example, a staff member struck a new and better deal with the sanitation company that hauled away the biowaste. She also negotiated a better arrangement with the company that handled their medical records. This is a skill set worth investing in, so consider letting a member of your staff attend a seminar or two on negotiation. That’s a cost that will pay for itself several times over.

You may also be suffering from what we call the “ZIP code problem.” Some contractors will look at your address–or the letters after your name–and add a premium to their price. So let them know you have other companies bidding for the same contract. You might be surprised to find that action alone knocks 10 or 15 percent right off the top.

6. Optimize your space.

Your physical space matters both for increasing revenue and controlling expenses–because space is money. Every inch of your office can be put to use, though it may take a bit of creativity to figure out how to do so. Sometimes a tweak here and there is enough to create two additional exam rooms from what was previously a storage area. Ideally, your premium space is reserved for producing medical services.

One doctor’s clinics started out as a tiny 1,600-square-foot office. Thanks to hiring a great staff physician, however, that clinic grew quickly. Before long, it expanded into the unit next door, adding another 1,600 square feet. Then another unit was added. At that point, the office was basically three separate spaces connected by small doorways. Every time the physician came out of an exam room, she spent forty-five seconds walking the hallway looking for an MA to finish with the patient. That means she wasted these forty-five seconds at the end of every appointment.

So what did they do? Eventually, they dedicated a low-level staff person exclusively to that physician, an arrangement that ended up saving the doc enough time that she could see two more patients every day. Not only did this increase the clinic’s profits, but it also helped retain that employed physician.

What vital tips will enhance your practice’s profitability?

Find more tips on how to grow your medical practice inside our complimentary book Grow Your Medical Practice and Get Your Life Back. Click here to download it FREE.