To resurrect your practice from ruins, return to your roots.
A successful practice is the sum of several interlocking parts that work together to create a winning business. When you walk into an all-star operation, you can feel the positive energy, the motivation, the electric atmosphere of people who love what they do and are doing it well. But this type of practice is the exception.
In fact, most chiropractors are working somewhere between soaring success and foundering failure, neither minding their millions nor battling bankruptcy. But when you look at how practice consultants can turn around a troubled operation, you also see how any practice can improve its position.
Wrong turns, poor planning
Although it can happen, the typical practice in trouble didn’t get there overnight. Perhaps the owner got complacent, or didn’t spot signs of a problem back when it would have been easier to manage. It’s possible that a few bad hires led to a poor practice culture. And it’s not uncommon for a DC to lose sight of his or her original purpose in pursuing chiropractic, then waste time and money on fruitless activities.
As with any business, dead reckoning is a dangerous way to travel. Is the DC studying metrics like patient visit average (PVA), recall rate, conversion average, and the all-important billings and collections averages? You won’t know where your practice is going if all you focus on is the sheer volume of traffic moving through your doors.
Thus, by the time a practice is listing heavily to port, the problems it faces have usually been festering, ignored but growing worse over time, and correcting them will likely take time, too.
Signs of stress
Practice consultants who work in this area can spot problems large and small. A DC’s business that is about to fail will often display warning signs difficult to spot because they’ve become the new normal. As the office systems in place are familiar and unquestioned, the vision of an impartial observer can be vital in effecting a recovery.
“The first thing when we go into an office, I’ll profile the practice based on their statistics,” Ted Arkfeld, DC, CPC says. “I want to see the quantity and dollar amount of exams and re-exams.” Most consultants, like Arkfeld, focus on the financials early in an assessment. But after that, there’s a lot more than numbers to consider.
Jeremy Brubaker, DC, will look at trends over the last 30, 60, and 90 days in the practice: “And one of the primary things I look at is the doctor. Is there stress, burnout, is overhead out of control? Are expenses way ahead of income?” As a consultant, Brubaker has seen a common pattern of doctors trying to spend their way out of trouble.
“You’ll see them spending thousands on Internet marketing. They’re trying to right the ship and don’t know how to do it, and are just spending money on advertising plans, equipment, decompression tables—and there’s nothing wrong with that, but you have to know how to use that equipment,” he says.
Before you can search for solutions though, you have to be aware that there’s a problem. “You’re looking for an early warning sign,” says Peter Fernandez, DC, another turnaround expert. “The doctor should be keeping stats on his practice. He should have an accountant who’s giving him monthly profit-and-loss statements. And he has to review them.”
In some cases, the problem isn’t related to statistics and trends as much as it’s a reflection of the doctor’s mindset. Garrett Gunderson, a wealth management specialist, has seen cases in which practices go into a downward spiral because the owner was fixated on cutting costs rather than increasing production: “Sometimes cost-cutting is a good exercise every so often, but as an ongoing process it leads to a survival mentality, which isn’t thinking about serving the patient or growing the infrastructure—it’s about hanging onto every dollar, and that’s a small-minded perspective that’s counterproductive.”
Taking the temperature
Before talking about turnaround techniques and deploying a recovery strategy, a consultant first has to assess the depth of the damage. Fernandez starts with PVA and profit-and-loss statistics. “Statistics won’t lie,” he says. “Emotions can, but not statistics.”
Fernandez wants to see at least three referrals for every patient acquired through advertising. He estimates the cost of gaining a new patient through marketing efforts is between $150 and $200. “And that’s being conservative. With bad advertising, it could be as much as $500,” he says.
In gauging the current health of a practice, note that different types of practices can experience different kinds of problems. Brubaker looks at financial security, wanting to know if the practice is on a thin line or if there’s a margin of safety: “Are they playing the insurance game, just collecting what insurance pays? Are they stable, or if insurance goes away, will they be in trouble?”
In addition to knowing how many patients the practice sees in a given week, Gunderson looks at the types of patients as well. He notes that some DCs are exclusively focused on patient volume. “But when you consider overhead, sometimes that won’t lead to profit,” he says.
For example, some patients might be costing a practice money instead of bringing it in. Their insurance company might be paying what amounts to net, so that the time spent seeing the patient generates a loss and, worse yet, that visit could have been spent with a more valuable client.
Furthermore, some practices get into trouble because they’re leaving too much profit on the table. “What I typically see is there’s a loss of revenue due to incorrect coding,” Arkfeld says. He’ll look at a doctor’s new patient exams and re-exams, and check whether codes 98940, 98941, and 98942 are being applied correctly. And because repeat visits are common in most practices, he’ll check for codes 99212, 99213, 99214, and 99215, too.
Arkfeld also reviews the DC’s documentation to make sure they can support these services. In particular, he’ll look for evidence of down coding: “Many times, with new and established patients, the documentation would support a higher level of code,” he says. Doctors who try to “fly under the radar” of insurance auditors actually wind up raising red flags because their coding stands out against industry averages.
First, stop the bleeding
Before looking at new profit centers and additional sources of revenue that can shore up a practice’s financial well-being, a consultant will want to put a stop to any areas where cash is leaking out—a surprisingly common problem. Unnecessary spending tends to be a major culprit in this regard.
Fernandez finds that when a chiropractor is struggling, a typical response is to spend money in a desperate bid to return the practice to profitability. Some will go overboard attending seminars with their staff, which not only is expensive on its own but costs the practice in patient acquisition and treatment.
“Another area is equipment being leased or financed that the doctor isn’t using,” Fernandez says. “If a doc isn’t using a piece of equipment at least 20 times a week, get rid of it.”
In some cases, a practice will be hemorrhaging money due to structural problems, causing it to pay more in taxes than necessary. “People think they should spend on write-offs to save on taxes, so they leak money spending to save on taxes,” Brubaker says. A better way to address flawed business operations is restructuring to become an S corporation.
Small problems also have a tendency to add up to a large one. Brubaker looks for excessive patient recalls. A staff might be proud of their patient return records, but if a client cancels on Tuesday and is subsequently rescheduled for Thursday, the missed visit is both a loss for that day and a slot that could have been filled with a paying customer. Over time, this pattern can cost a practice thousands in lost income.
“Here’s a great example we see all the time,” Gunderson says. “People come in, and they get their kids adjusted for free.” He also notes that more than 90 percent of the DCs he works with are paying too much in taxes, and many are paying too much in interest, overpaying financial institutions, and need to raise their credit scores.
Like Gunderson, Arkfeld also sees DCs literally giving away services they should be charging for, and urges those clients to halt such behavior: “We give away the farm because DCs are just nice guys. I’ve practiced in multidisciplinary clinics, and I’ve never seen them give anything away—never free exams.”
Back on track
In any turnaround story, you’ll find classic “fixes” abound. Study your own practice and consider applying some of the hard-won lessons that have led others to safety and success. Of course, one of the first things to consider is hiring a consultant. A seasoned pro will know what to look for, and what needs fixing first.
Complicating the picture is that, compared to past decades, there are more philosophies of chiropractic now, leading to more varieties of practices and concomitantly more types of problems. Nevertheless, most experts start the same way in any rescue plan: with the doctor.
“If their attitude is wrong, then we’re wasting time,” Brubaker says. “How bad is he beat up? How do we get his concepts on the right path? A lot of doctors don’t have the concepts of success. By the time we’re seeing them, they’ve been grinding for years.”
Brubaker wants to know if the doctor has a sense of purpose. Does he or she still have the spirit that led them to chiropractic in the first place? “Are they way off track in their philosophy? I can give them tips, but if they don’t have the right attitude and commitment, a turnaround is unlikely.”
A restoration of cash flow is equally urgent. Some struggling DCs won’t reach out for professional help until they are only weeks away from bankruptcy. Gunderson looks to get the practice reorganized so that 70 percent of the doctor’s time is spent on the practice’s core competency, which will usually be providing adjustments. The remaining time can be spent on marketing and ancillary services.
Next, the focus may shift to building liquidity rapidly, and stopping any overpayments and profit leaks. It may be necessary to decrease employee compensation, and possibly reduce staffing levels, but Gunderson focuses on the first three before suggesting more severe measures.
When Arkfeld goes to work, he starts with the basics. Ideally, each patient is placed on a care plan. There should be a report of findings, and a payment plan needs to be established. Then the doctor works through the care plan with the patient, and repeats this process until the patient plateaus and can be either released from care or transitioned to a maintenance program if financially feasible. “Just doing that can increase cash flow immediately. You get the cash flow going, and the coding going, and the reimbursements start going up in a compliant manner,” he says.
One thing Fernandez drives at is time and activity control: “Either you’re treating a patient or getting a new one—nothing else.” He’ll help the DC set up cost-efficient marketing programs, because a doctor who’s going broke will likely be unable to afford expensive broadcast or print advertising. Screenings, community talks, anything that gets the DC out meeting people and selling services will be a priority.
You might notice that the first thing that needs to change in a practice crisis is the doctor’s mindset. The practice got into trouble, and it cannot grow healthily unless the doctor recovers and starts to adapt in a positive way.
All businesses reflect the character of their owners. The ancient adage, “Physician, heal thyself,” firmly applies when the mission is to save a practice in peril.
Daniel Sosnoski is the editor- in-chief of Chiropractic Economics. He can be reached at 904-567- 1539, email@example.com, or through ChiroEco.com.