Opening your first private practice and being your own boss is cause for both excitement and knee-knocking jitters. You're doing something, frankly, that you know nothing about. You are filled with hope and a desire to succeed. But you know the factors that put the majority of start-ups on the rocks, and what things you must know to navigate to success? In Part 1 & 2 of this series I discussed two of the myths that occur in private practice. This article continues with another common myth that encumbers owners.



A client wrote me a thank-you note echoing sentiments I had heard for decades - he ?wished he'd known back then what he knows now.?

?PT school was more like a course designed to help me pass the license exam. We never really learned anything about Private Practice at all. In fact, we were encouraged to ?get a job at a hospital?. ?Administrative Training? was a one-hour lecture titled, ?Writing an Equipment Budget?. Since I am not a very good employee, I sort of had to work for myself until I met the professionals who helped me. From marketing, management and organization to billings and collections'I learned pretty much everything I really needed to know to run my business after I left school.? NC, PT, Seattle

Despite many years of clinical or professional training, most clinicians receive virtually nothing in the way of starting or running a practice, let alone the level of education or practical experience needed to ensure success. This ?other half of your education? in private practice involves specific marketing, management and financial control skills indispensable to your ultimate success.

Some of your peers will never reach for the help they need. The sad fact is they are trapped by fixed ideas, myths, speculations or have accepted well-meaning advice that occurs from colleague-to-colleague or even during formal training. These are assumptions of how something should work or be, but not how they actually are. Such ideas are deceptive and need to be looked at head-on. You need to be able to spot these as traps or they will surely undermine your understanding of this subject.

If you want to maintain profits, peace of mind and see your practice succeed, pay heed to some common fixed ideas as they relate to the Keys to Practice Success?Patient Referral Development, PR and Marketing, Organization, and Cash Flow. In this article we will take up a ?myth? of Cash Flow followed by the truth of the matter, and then immediate ?first aid? advice.

MYTH #3: CASH FLOW:

?Profitability is all insurance-driven and they dictate everything. All we can do is file our claims and hope for the best. There's really not much you can do about it. To get by, we'll just cut corners on care or cut back staff or overhead when things get bad.?

The Hard Facts: If you listen close enough, punctuating every one of the statements above you will hear the sound of another nail being driven into that practice's coffin. Unlike other, largely cash-based healthcare professionals, therapists in particular have built a dependency on insurance companies over the years. With the advent of managed care and reimbursement problems a different operating basis is needed.

To avoid rationalizing the situation and thus continuing to decline, a practice owner should have a mix of pro-active solutions. This would include financial planning for profitability, methods of attracting cash-paying patients, tight control over billings and collections, and ensuring that staff are accountable for productivity. You will love the overall strategies you will learn, but here are four things you can do now to get started:

Cash Control Strategies to Improve Profitability:

1. There are four benchmarks every healthcare practice must know, monitor and control in order to be profitable and provide for the future. You will be covering these four factors later, but you will gain a great head start by starting to track these now. Do this with regard to your overall practice and as they relate to specific insurance contracts, cash-based programs, etc. These benchmarks are:

a) Revenues per Patient Visit

b) Cost per Patient Visit

c) Write-Offs

d) Overhead

You will want to track the volume or average of each benchmark on a weekly basis.

2. Seek out and develop cash-paying niche markets. Look around?Americans spend billions of dollars annually with, frankly, your competitors in dealing with things like wellness and nutrition, obesity, golf performance enhancement, fitness and anti-aging. Look at your own abilities and skills and survey for needed and wanted niche markets in your area. Explore the services mentioned above or similar and develop your own specialty programs along those lines.

I'm sorry to be the one to have to tell you this, but you will need to develop some sales skills. That's the downside. But who out there hasn't had some professional look us in the eye at some point and say, ?You need ________. It's going to be $_____. How would you like to pay for that??

The upside is when you have a health and wellness niche market you're dealing with highly motivated people. And the upside of that is getting to the end of the month, looking at your bank balance and seeing thousands of cash dollars you didn't have to fight insurance companies for. The best part? You are now in control of your financial destiny.

3. Staff need to have a pay system emphasizing rewards for productivity rather than high fixed-base salaries. With therapists, for example, set an expected base line of patient visits justifying their base pay. Then add bonus rewards for treatments given above this base-line (but only up to the number of treatments you know can be done without sacrificing quality.)

4. Lay out and follow a tight Financial Plan. At least quarterly, you should review your basic expenses and income and adjust the budget accordingly so that you do not overspend. A relationship with a CPA that understands your profession is a big help here.

Keeping that in mind, if you're being forced to make cutbacks, DO NOT sacrifice promotional activity! Each promotional activity sows the seeds for future growth. First and foremost, emphasize promotion and thoughtful planning on generating more income. If you need to cut expenses, cut things that aren't contributing to your growth. If cutting staff is inevitable, do it based solely on productivity and what is or isn't going to ?keep things going and make more money.?

5. Speed and control are the key elements in billings and collections. You should bill and file weekly. Do not allow these to accumulate for longer periods. Collect co-pays and deductibles on the spot. Approach Accounts Receivable with a vengeance. Quota and demand relentless phone calls and follow-up with those who owe you money. Put agreements with insurance and private pay clients in writing. Staticize billings and collections data to keep the information visible so that you as the owner or manager, on a weekly basis, can review and intervene when necessary to ensure things don't get out of hand.

CONCLUSION

In the past, there was little alternative other than to learn things ?the hard way?. Today practice owners, and even some of the brighter new graduates, understand that they can obtain the other half of their education by seeking help.