Practical Solutions
The Economic Train is About Ready to Derail-Get off the Train and Innovate
Originally published 9/1/09

By Victor Miller, Vital Signs
757-876-3208

So where are we now? Well, the government is the engineer of a gravy train that is hauling thousands of wasteful ear-marks; hundreds of smiling Washington politicians plus trillions of dollars around the country with the idea that throwing money out of the train will buy us out of this government caused recession.

All that is certain is that the train will inevitably be driven into a mountain of debt and derail. How to repay these trillions? Don’t worry about it. Somewhere in Washington the “pay-back”plan is being written. And it’s going to be really “special”.

As we continue to speed off the economic cliff you would think that enough is enough but no……next up is a complete reform of the healthcare delivery system with the government in charge. That means we will load up another train with trillions, blow up the government bureaucracy balloon to a size only Walt Disney could capture and increase the debt mountain to an incomprehensible amount.

The result of this “reform” will no doubt stifle the pharmaceutical industry, negatively impact the health insurance industry, ration patient care, and demonize the doctors and the hospitals all in the name of guaranteeing healthcare to every American. Look for a return of an old nemesis you thought you were rid of – Capitation. New name – Outcome Pooled Reimbursement.

While all of this upheaval is taking place, now is not the time to be complacent. I have painted a pretty grim picture but there are practice structural matters you can and should address that help mitigate some of the revenue short fall that most practices are presently experiencing.

Here are some of the most common actions I am currently recommending my clients institute to help maintain or attain a healthy profit margin. Hopefully one or more might serve you well.

Bonus Staff / No Raises – It is very important that the practice maintain its valued staff members. Historically, most practices I work with have given annual raises amounting to 2-5 percent. The problem with a raise is that the increase reoccurs every month and is compounded next year with another raise.

It’s a good bet that your staff has been conditioned to expect an annual raise. This policy was all well and good during “normal” time but not any longer. Too much revenue uncertainty. But you should not lose good people over money…

Instead of annual raises institute a policy of bonuses. You could issue them quarterly, semi-annually or annually. They should be generous (the bonus pool should be an amount equal to 2 ½ to 3% of salary) and award the bonus upon the attainment of a specific set of measurable criteria by either/or the entire office or the individual (i.e.. co-pay collection percentage, past due account reduction, collections, and reduced write-offs).

A bonus accomplishes two good things – one, the employee is rewarded for work well done and two unlike a raise, the amount of the bonus does not automatically reoccur next year.

Therefore, because of the bonus program the practice has not automatically increased its staffing/wage costs next year, but you have distributed additional income to your staff this year.

Render new services to your patients – When was the last time you instituted a new practice wide chargeable service? What services are you referring out that you could capture? Adding services that are in demand by your patients is a win-win for you. Your patients trust you and are pleased you can now provide the service and added revenue/profit flows to your practice and not elsewhere.

Remember many of these services are not covered by insurance and therefore are paid by the patient at 100% of the charge. Also, many of these services are administered by a “tech” and do not involve MD time. Win-win!

A partial list includes;
Botox, Holter Monitor Service, Hair Removal, Tattoo Removal, Spirometry, Lab Testing, Obesity Clinic, Diabetes Clinic, Stress Testing, and Dietary Supplements

Satellite Office – Open? Close? Over the years I have recommended the opening of a satellite office for a number of reasons. Sometimes it’s to relieve pressure on the home office whose patient base has outgrown the existing capacity of the central office; or to better serve a growing regional patient base or to discourage a competitor or to accommodate a referring practice/hospital.

Other times I have recommended a practice close a satellite office for reasons that include volume is not supporting coverage, covering the satellite strains the home office, loss of major referring base, building is inadequate, demand at the home office is sufficient, hospital support has been lost.

A practice is dynamic and should be growing at all times. Satellite offices serve a useful purpose to accommodate growth. But, sometimes the satellite office never reaches its potential or the market has changed for the worse, and so it becomes a profit drain. Closing a satellite office does not mean you stifle growth. Perhaps you should consider enlarging the home office or moving the home office to a bigger and better location.

Consider a Merger – Consolidation in this age of diminishing revenues may seem very attractive. Just know that a merger will be a very tough and long drawn out process.

It can be great; it can be dreadful. It can cement friendships; it can destroy them. There are one million details with each requiring a yes / no from both parties. DO NOT TRY TO PUT TOGETHER A MERGER ON YOUR OWN. No matter how straight forward it may appear.

I have worked on many merges. The fastest one took only 90 days. I worked on one for a year and at the last minute it fell apart. On average, my guess would be, it will take at least six months and dozens of early morning and late night meetings involving accountants, lawyers, insurance / pension advisors, consultant (s), vendors, perhaps an architect and a sufficient pot of front money.

If you are considering an offer by a hospital to integrate your practice into their ever growing network understand one thing – you will do this at a cost of your individual freedom to decide almost anything practice related.

I realize there are a multitude of other practice profit generating actions you could institute. At the very least, I hope I have stimulated you to “get off the train - ASAP” and to take action that causes you to develop a plan that best serves your personal needs, that of your staff and patient base?

Many of you have called me for advice and on-site consultation regarding topics I have written about. As always, should you have any questions or need help – call me.

Vic Miller
Vital Signs, LLC
757.876-3208