Medicare cuts are on the horizon… again…
What do reimbursement cuts mean for your clinic? Impending doom, or an opportunity to take your practice to a whole new level?
In this article, we will cover the 3 key actions you need to take in order to overcome reimbursement challenges and chart your way to making your practice way more profitable!
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There is a vicious game that has been played for the last 2 decades between HHS, Medicare, and providers.
This has led to reimbursement that has not kept pace with inflation and draconian cost-cutting measures that strain your ability to deliver the quality of care you want and have the profitable practice you deserve.
However, as a practice owner, you can’t let your practice goals be stopped by these outside factors.
Keep your eyes on the finish line, not the hurdle. You have options to overcome this challenge. If you know how to run a tight business, you will succeed. But if you have not invested in your business knowledge you may struggle.
When you opened up your practice, you became an entrepreneur and business owner, whether you knew this fully or not.
Therefore, the more skilled you become at business, including marketing, the more success you will be able to create.
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The 3 Key Areas You Can Control to Overcome Reimbursement Cuts & Make Your Practice More Profitable:
- Keep your pipeline full – attracting patients with the top reimbursements
- Maximize your practice’s efficiency – controlling your greatest expenses
- Control your finances – managing inflow and outflow, build profit centers, and revise contracts
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Step 1: Keep Your Pipeline Full of New Patients
You have to keep your practice space filled to the brim with patients!!! This is where the most money is lost in a practice, and profitability goes down the drain! You are a service business. That means the name of the game is servicing as many people as you can with the resources you have: space and therapists.
The most money you will ever lose is the money you never made because you did not have enough new patients to maximize your space. A good benchmark is > 100 patient visits per 1000sq ft of space. Therefore, in a 2000 sq. ft. practice, you should be seeing > 200 patient visits per week.
Marketing is Your Investment in Business Growth
Did you know that marketing is classified as an investment, not an expense? As our friends at PhysicalTherapyMarketing.com point out, marketing actually creates more dollars for every one you put into it.
A big mistake many practice owners make when concerned with their reimbursement rates is putting marketing activities on the chopping block. This hurts your ability to drive new business and revenue into the practice. Tight finances are fixed by patient volume. And marketing is what produces patient volume.
As a practice owner, you can’t let your goals be stopped by these outside factors.
Most practices don’t even get to the industry standard of 8% of gross revenue spent on marketing activities that the Small Businesses Association recommends spending on marketing.
Diversify Reimbursement Channels and Attract New Patients with Better Insurance
If you are a practice heavy on a population with Medicare, then you are putting all your eggs in one basket when Medicare decides to change reimbursement. However, if you work towards marketing to a diverse population, you can attract private insurance payers and cash-paying patients to offset losses. How well are you leveraging the internet to market directly to new patients with different types of insurance?
Call Out What Insurance You Want!
In addition, if you have key insurances that pay you the most– for example, Blue Cross Blue Shield– then put that first everywhere in your marketing. For example “We accept Blue Cross Blue Shield, Aetna, Medicare, and Most Insurances.” Always call out your top reimbursing insurance first on your website, marketing, and newsletters!
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Step 2: Maximize Your Efficiency
To make your practice more profitable, you have to keep your practice full of patients. All. The. Time. Your therapists should rarely have a hole in their schedule, and it should be easily filled with people waiting to get on it.
Your Greatest Cost
As you well know, labor costs are your greatest expense in a practice. You have to keep a tight line on this. If times are slow, work hours are the first area you should cut back on. The better you keep your staff full, the more profitable your practice will be.
There is also the time to hire, and many practice owners don’t hire soon enough, fearing they won’t be able to afford the jump in expenses. However, often this lack of hiring inhibits being able to make additional revenue and increases strain on the team.
If you are confident with your marketing, then you feel good about hiring. If you are unsure of when you can afford that next therapist, this means you are unsure you can create enough new patients for them.
Your Patient Care Coordinator is the Most Vital Person in the Practice
If you have a rockstar Patient Care Coordinator at the front desk who can control patient scheduling, then you have a very profitable practice. But if your front desk is not well trained, your practice will struggle with a high cancellation rate.
Hundreds of thousands of dollars are lost at the front desk if this is not tightly managed. I highly recommend Dee Bills with Front Office Guru (www.frontofficeguru.com) to help you train your front desk staff correctly and increase your patient arrival rate to 96% or higher.
Too Many Locations?
Are your locations as profitable as they should be? For many practice owners having multiple locations is a status of success, and rightly so, if done correctly. However, if you opened locations just to feel successful, without having a solid foundation in your main office location first, you are setting yourself up for financial hardship. Each location should be close to capacity before you venture into opening a new practice.
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Step 3: Manage Finances, Build Profit Centers, and Revise Contracts
Money is the lifeblood of your business. Sometimes practice owners get a little squeamish about making money on healthcare but listen to me: it is perfectly OK to make a great living as a physical therapist! In fact, I don’t think most PTs get paid nearly enough for all that we help people do. Plus… you can’t help more patients get better if you can’t be profitable and have a thriving practice.
Inflow and Outflow
What systems can you build and have in place to make sure money is always flowing in? First and foremost, marketing is the first step in financial planning, because IT GENERATES INCOME!
Next, you need to make sure that you have proper billing. Your billing systems need to be free from errors so claims are paid on time. In addition, you need someone to ruthlessly (but politely) follow up with insurers and patients to make sure reimbursements come due quickly.
Good financial control means you have a nice flow of money that is dependable and not prone to fluctuations in insurance carriers’ whims. Again, if you are heavy on Medicare patients, then you are putting a lot of financial risk on one type of payer.
Building Profit Centers
“Profit centers” aren’t about selling things patients don’t need like $7 soda at a movie. It simply means areas of your business that have higher profitability than other services but are still a good value for your patients.
To create a profit center, you may need to add additional services like massage, acupuncture, dry needling, diagnostic ultrasound, EMG, laser therapy, and so many others.
You have to look at areas in your practice where you can offer additional services to customers. Many patients want additional services and choices to help them get healthier. Are you able to offer that in your practice?
If you are heavy on Medicare patients, you are putting a lot of financial risk on one type of payer.
In fact, the most successful practices we see are ones that are multi-disciplinary with PT, OT, Speech, Chiropractic, Massage, and Acupuncture in them. Patients see all these service offerings, and think “this place has it all, they will be able to help me!”
I highly recommend adding diagnostic services such as diagnostic ultrasound and EMG to your practice and training key staff to do this. Hands-on Diagnostics is an excellent company that helps practices do just that (www.handsoncompanies.com).
In addition, I highly recommend light-force lasers who are excellent at putting cash-pay laser therapy services in a practice (www.lightforcemedical.com).
The goal is to add more services to your practice so you can offer more value to your customers. It will also give your practice more dynamic revenue and help you overcome reimbursement challenges from Medicare or any other source.
Revising Contracts
When was the last time that you went through all of your insurance contracts and asked for a raise? Hopefully, it was less than 6 months ago. It is a good practice to frequently renegotiate insurance contracts.
This is a game I always played in my practice and often won! In fact, at the time in 2008, I was the highest reimbursed outpatient PT practice for United Healthcare that I know of in two south Florida counties.
Key Steps To Renegotiating Your Insurance Reimbursement Contracts:
- Be persistent in finding out the right person to talk to. This takes some work in finding the right network manager. Sometimes they may not even be in your state.
- Build your arsenal. Take your top reimbursing insurers and get HCFA forms of patients with those insurances, with key reimbursements shown. Of course, black out names and patient identification.
- Create a compelling document on what makes your practice unique. Do you have lymphedema services, OT, multidisciplinary services, etc.?
- Call and fax the network representative repeatedly with the documentation and proof of what your other top insurers are paying you.
- The goal is to push the compelling argument of how your services save that insurance company money AND why your practice should be reimbursed at a higher rate.
It takes a bit of smooth-talking and standing up for your services, but this technique works and should be done on at least a yearly basis, if not more. You won’t always win. But if you can raise your reimbursement by 5% on multiple insurance contracts, then you win.
Know Your Worth and Ditch Poor-Paying Insurance Contracts
While it is admirable that we want to help everyone with the services we provide, unfortunately, we can’t survive as a business if we accept poor-paying HMOs or insurances that don’t meet our financial needs.
Put another way, if we accepted insurance that didn’t reimburse we’d shut down and nobody would get care regardless of their plan.
Calculate your operating costs for each patient. Understand your absolute minimum reimbursement per visit. This can help guide you in determining what insurances you should keep and who you should not renew contracts with.
Sometimes it can be painful to let a big network go, but if you have to see 4 patients an hour to break even, is it even worth it?
Figure out which insurances you can actually afford to take.
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Only YOU Can Lead Your Practice to Success
Reimbursement cuts you can’t control (like Medicare) are unfortunate. But ultimately, many things are in your control.
So, don’t base your clinic’s success on anyone else’s decisions, excuses, or opinions.
If you know how to apply these 3 key actions, you will be able to overcome many challenges from the insurance world. Keep your pipeline full with effective marketing, maximize your practice efficiency, and keep tight control of your finances especially labor costs.
Here’s to your success!
Tight finances are fixed by patient volume. And marketing is what produces that volume.