Trimming Practice Expenses

Being a physical therapist practice owner isn’t easy. On a daily basis, you must deal with treating patients, ensuring referrals are consistent, taking care of employees, paying the rent and dealing with cash flow just to name a few things. When the “bottom line” gets tight the first thing we think about is cutting costs, but is that the only way to think? A strong practice will be able to improve cash flow without cutting the key components of care.

The first place to naturally start looking at a healthier practice is to look at the cost of care. In a manufacturing business, this would be to look at the Cost of Goods Sold (or COGS) which means how much does it cost to produce that widget. In a medical practice this is the cost to provide care, what is your cost to provide one treatment of physical therapy care? A good business owner will start at the top line and work their way down to ensure a financially strong practice.

A more financial way to look at this picture is to look at the overall top line, what are you being paid to provide a treatment of care. All physical therapy practices, that take insurance, are bound to a contracted fee schedule. When was the last time you reviewed your fee schedule? I guarantee the insurance companies regularly review, and modify, those fee schedules.  Have you recently received notice from an insurance company that your fee schedule is being reduced? Insurances companies are looking every way possible to cut their cost and cutting physical therapy fee schedules is a quick, and massive, way to save money.

Have you reached out to the insurance company and asked for an increase in fee schedule? If not, why not? Very few people will EVER approach you to say “we are paying you too low, we want to give you a raise.” As part of your financial plan you should, at the very least annually, reach out to your major insurance payers and ask for an increase in the fee schedule. If you find these private payers do not want to reimburse you a fair rate for the care you provide it might be time to opt out of those plans and become an out of network provider.

The second way to improve the bottom line is to ensure you are billing, and collecting correctly for the care you provided. You, and your therapists should be billing the appropriate codes for the care provided. When the billing is complete and you receive EOB’s for that date of service, you AND your billing department must review the EOB’s to ensure payment was per the fee schedule. More often than you think, there are coding or computer errors on the insurance end which reduce the paid amount for that care. When treating cash patients, are you charging enough to cover the cost of care and including a profit margin?

Another way you can improve your practice financially is have the processes and systems in place to be more efficient. Do you have systems in place to ensure your referrals are becoming patients? Do you have systems in place to prevent patients from dropping out of their plan of care? Is your documentation efficient or are you bogged down with a cumbersome system that also withholds billing until the entire treatment is documented?

When the bank account level starts to drop the typical business owner focuses on cutting hard costs to improve the bottom line. Will this help? Yes, for the short term but for the long haul the smart owner will look from the top down looking at all aspects of the financial ladder to ensure true financial health.

Do you struggle with your top or bottom line? The first place to start is to know your metrics. Do you need helping finding out your metrics?

Click Here to Schedule Your FREE Consultation to Find Out More »

 

Andrew Vertson, PT, DPT, ATC
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