Is your practice suffering from “revenue leaks”?
Revenue leaks can quickly erode your bottom line
If you are running a direct pay style of medical practice, it is crucial that you effectively monetize your time. In more than 90% of all situations when I have been asked to execute a practice review of some sort, I find revenue leaks.
What exactly do I mean by revenue leaks?
Revenue leaks occur when material effort is being expended but that effort is not effectively monetized. On the other hand, If you have managed to create sufficient revenue such that your bottom-line profit is at least 15% of revenue and the costs covered in the 85% includes a salary and retirement package of at least $500,000 for you, then you probably don’t have any revenue leaks. Also, if you view your practice as hobby or it serves more of a non-profit objective, then this may not apply to you. But if those numbers or exception scenarios are not your reality, then keep reading.
Revenue Leak Source #1: Underpricing.
Revenue leaks can occur due to under-pricing of your services. The floor for services pricing should be set using the following metrics as a minimum guide. Never be afraid to make more where possible because there will be situations where you will not be able to achieve these metrics due to competitive situations.
- Direct physician services: Minimum $400 per hour. If you have heard me speak on a webinar or at a conference, you have heard me walk though how I get to this number. For now, trust me that if you want to earn a physician-professional level of income and retirement and generate a profit (what’s left after everything is paid including you), then this is the floor. Note that If you are in an extremely high cost of living area (i.e. NY, San Francisco, etc.), consider $500 the floor.
- Direct services rendered by other staff members. Minimum 3X hourly salary. For example, if you have a nurse making $60,000 then the approximately hourly cost is $30/hour so any service using this resource directly should be billed at $90. Note this does not apply to other office staff that provide indirect support. That is covered in your $400 per hour billing.
- Products that you resell. Target 2X cost for any product sales. If it costs you $20, then sell it for $40. Note that this may not always be possible due to market conditions so for that reason take a bigger markup on products that are not significant impacted by market conditions to make up for products where you can’t get that martin.
Revenue Leak Source #2: Service not accounted for/not monetized.
In consulting engagements, we see this one a lot. This happens when some level of effort is simply not being accounted for. For example, blood draws for specialty labs is an area where I frequently see a revenue leak. When looking at the effort used by a medical assistant or nurse for doing a blood draw, centrifuging it, refrigerating or freezing the sample and preparing it to be shipped to the lab, this effort may take 30-45 total minutes, yet most practices don’t charge for it. This is a classic revenue leak. We recommend charging $35 – $40 for specialty blood draws of this nature. Another example is where the doctor comes back from a conference all excited to introduce a new service of some sort, maybe a new specialty test like a food sensitivity test. When I look at the amount of time doctor’s spend analyzing the test and preparing to have a discussion with the patient, this effort is frequently not monetized, thereby resulting in a revenue leak.
There are numerous other examples of revenue leaks and as mentioned, we see them in over 90% of our engagements. If you are not satisfied with your top line revenue, you owe it to your bottom line to get a revenue leak analysis done by eMedicalFusion or any qualified consultant you choose so you can stop the leak and make sure that you are earning the revenue and profits that you deserve for your hard work and risk.