Five Ways to Know for Sure
In your particular circumstances, the quest is to find out if managed care will add dollars to your bottom line. These are the five considerations to make that decision.
I’ve been in chiropractic for nearly two decades and it never ceases to amaze me how many people are teaching, lecturing, writing and giving advice based on information that is years behind the times. We still have people preaching to develop our practices as it was done in 1895. As well, many people are teaching what worked in the 1980s and have not yet moved into this decade.
The truth is, making decisions on running a practice is a very individual situation. There is no one right way; you can incorporate multiple approaches into a single practice. Also, there is not an approach that will work in all economic and geographic circumstances. Many of our so called “instructors” remind me of a surfer who’s caught a big wave, continued to ride it –right into shore–and now stands on his surf board (in the sand) and tells everyone to catch the same wave. The wise business person does not try to ride a wave if it has already gone past. They simply ride one new wave after another and spend very little time standing in the sand. During my years in practice I have ridden many different waves (and many simultaneously–I guess my example breaks down at this point!). Some of them fizzled quickly, others have been extremely powerful.
Some people say we should fight managed care, or ignore it. They say: “stop strangers on the street and tell them how chiropractic will benefit their lives,” and your practice grows regardless of economic or geographic factors. There are probably a few of us who have enough charisma, energy and devotion to ignite fires in the bellies of strangers to want chiropractic treatment so badly they will only go to that specific doctor and pay significant fees out of pocket. However, for most of us this is only mildly successful and the more patients you see the less time you have to go out and “round ’em up.” That does not mean you cannot learn from people who have been successful at this. It does not mean you shouldn’t develop those traits to a higher degree in your own life and practice. I have done a lot of charismatic-type leadership in my life, but I would not want to depend on that as my one and only source for building a profitable practice in today’s environment. In fact, in many geographic environments, I would simply be teaching the public the wonders of chiropractic only to have them go to their PP0 book and find where they could go and have those wonders paid.
Others say a chiropractic practice is no good unless it has 50% or less overhead. I know a lot of chiropractors right now who would love to have an 80% to 85%-overhead-because they are going bankrupt. Those DCs can’t even contemplate a 50% overhead at this point. They need help to infuse additional cash flow or reduce their overhead in a small way so they can survive while positioning themselves to thrive.
I remember in the l980s the big buzz word was “low overhead.” Yet, I was running an extremely high overhead practice. I was riding the wave of advertising and many other approaches that were working to introduce thousands of new people to chiropractic. I liked my bottom line. I would say to people: “I would much rather have 25% of $1.5 million a year than have 50% of $200,000 a year.” Today, many million dollar + collection practices have shrunk; there are some left, but not many.
I’ve also run a low overhead practice. At one point I had an extremely low overhead practice. Less than 20%. But it was an unusual set of circumstances. I had a satellite clinic in a hospital. We were performing quite a few manipulation under anesthesia procedures (which were highly reimbursed procedures) in a very low overhead setting making the net extremely high. But circumstances changed. Manipulation under anesthesia was no longer easy to precertify, and the hospital wanted to put in an Occupational Medicine Clinic throughout the entire floor of the area I occupied. So, I changed locations. I kept an extremely low overhead but the income became so low that it wasn’t worth splitting my time between offices. While I had many options, the option I took was to sell.
Today, I do very little external advertising. Most of my emphasis is put on positioning for managed care plus working internal referral programs. My particular chiropractic market has made major changes in the 1990s. My overhead is much lower, but so is my volume. I decided long ago I did not want a chain of clinics (although some doctors introduce many people to chiropractic and make money this way). If I was still trying to convince strangers on the street how wonderful chiropractic is or trying to ride the wave of external advertising or trying for volumes of MUAs…I would have simply disappeared long ago.
Often times, people think that since I write so much about managed care and have tried to help the chiropractic profession integrate into this managed care system especially through my work on the Board of Shared Physicians Networks that I like or am in favor of managed care. Nothing could be farther from the truth. I would like nothing better than to return to the mid l980s, but the 1980s will never return. There will only be what exists today and changes in the future. If you’re planning for your practice to be profitable and do not take into account changes within the environment it’s like sticking your head in the sand and wishing you could go back in time.
While evaluating whether managed care can add to your bottom line, you do not necessarily have to take all these other types of “advice” into consideration. Why would I make such a statement? The reason is quite simple. You can develop as much charisma as possible, talk to as many people about chiropractic as possible, and still position for managed care. You can develop external advertising (if it works for you) and still position yourself for managed care. You can develop the best cash, PI, Medicare…procedures in the world and still position for managed care. You can evaluate managed care whether you have a high or low overhead. Worst case, the majority of managed care contracts can be terminated with 30 days notice. If you are not sure and get into a contract you don’t like–GET OUT!
The one thing that is “for sure:” if you are not positioned for managed care by getting on panels that are available at this time, you will be left out when those panels close or “out-source” their network development to an Independent Physician Association.
Therefore, your quest now is to answer the question: “In my particular circumstances, will managed care add dollars to my bottom line?” These are the things that I recommend you look at to make that decision:
Would I have to change the entire style and operation of my practice to add managed care patients as an additional classification?
If you have a completely cash practice and are not presently filing insurance, doing PI work, or have staff doing paper work of any significance, then adding managed care to your practice will be a “big deal.” You’ll be filing insurance for the first time and you may have to hire staff which will increase overhead. If you’re already filing insurance, writing reports, performing status examinations, et cetera, then this is simply another financial class. Just like adding Medicare patients, Medicaid patients, PI patients, Workers’ comp patients, standard insurance patients or cash patients to any practice that does not presently care for one of those financial classifications.<br>If you could add managed care patients as a financial classification and not add staff then you could take this on with very little increased overhead. So, what would the next question be?
Are these managed care patients going to take the place of people who would be paying full fees?
If you have a practice now that is “full” of patients paying 95 to 100% of your charges, you could not take managed care patients without moving “full paying” patients out of your schedule. This would be a poor business decision. Obviously, you want to help as many people as you can, but there are only so many hours in the day or so many patients that you wish to see. If you are “full” of “full paying” patients, then adding managed care patients may take away from your bottom line. In today’s environment I seldom hear anyone claim they have a full practice. If they do, it typically means they’ve become complacent or do not know how to move to the next volume level. After all, there are chiropractors who have had chains of clinics that could see thousands of patients (often at extremely high overhead). They may be making less than $1,000 per clinic profit per month. However, if you have 25 clinics at $l,000 per clinic per month average, that can turn into a pretty good income, even with a 95% overhead–not my cup of tea, but that doesn’t make it wrong. If you feel you are “full,” then you are (until you learn something new to move you to higher volumes.)
Do I have empty spaces on my appointment book?
If you have an empty space on your appointment book, why not fill it with a managed care patient? So what if you only get 80%–or 90% of your fees–or even less. Would you rather have zero dollars from your empty four o’clock appointment slot or 50% of your typical fee? Personally, if my schedule has time I would rather fill it with people who are paying something versus having nothing. There are several reasons for this.
- It breeds activity in the office. This makes patients feel that it is a busier, more successful clinic.
- It breeds activity with your staff and keeps them from finding reasons to complain about each otherthe office, et cetera. When the staff is busy, they don’t have time to complain.
- It brings people in the door who need to be exposed to chiropractic.
- It gets you some money instead of no money.
- It gets these patients into your referral pool. Some of them will be injured in accidents or know people who are injured, have better insurance or make solid cash arrangements.
Do you have equipment sitting idle? You’ve paid for the equipment, the electricity doesn’t cost much. Is it sitting doing nothing? Could the equipment have managed care patients on it without having to hire additional staff?
It seems the wise business decision would be to fill-up your schedule, fill-up your equipment, fill-up your staff. People breed people. People bring money. People refer people. Even the super charismatic who is attempting to drag people into their office, telling them about the wonders of chiropractic, would probably rather have 50 new patients a month come through their door, from managed care companies, who have already decided they want chiropractic care, who have already decided they’re ready to hear the message, than work with 50 strangers (who, until spoken to, had no inkling of, no knowledge of and no desire for chiropractic). If these people are so good at showing how important chiropractic is, consider how much better their percentages from “talk” to “action” would be with people who willingly walked through their door–plus they don’t have to take the time to go find them. They could say all the same things and create all the same emotions within those individuals and then be able to say: “and Ms. Jones, you’re also very lucky because your insurance is going to pay for the first 5, 10, 15, 20…of these visits.” Nothing says care stops when the insurance runs out.
Will I have a future “bottom line” at all if I don’t get involved in managed care?
Presently, 40% + of my practice income is from managed care patients. I have no concept of “too many patients” or a ”full” appointment book. The largest volume year we ever had averaged 160 patients per day from one clinic. Our volume is down from that. I strive to maximize influx of Workers’ Comp, P.T.P., L.O.P., cash, Medicare, Medicaid…patients. However; if I had not cultivated managed care, I would have a 40% drop in income and there would be no “bottom line.” In addition, many of my Workers’ comp and Medicare patients have changed to managed care–but I didn’t lose them because I’m on the panel. Virtually 100% of my indemnity insurance (80/20 old-fashioned) patients have converted to managed care over the last 5 years. Where would I be if I had lost them? Some I did lose to HMOs that have no chiropractic care…hence the volume drop–but a drop is better than disaster.
Many people today want to bang their head against the managed care freight train. The fact is chiropractic is only a few cents out of every health care dollar. We do not have the clout to change the system quickly and we do not have the organization and numbers to rebel and say “we won’t play,” therefore shutting down the health care industry. Therefore, managed care is going to evolve as an economic force regardless of whether we like it. As a profession we will be able to impact some areas. We will be able to cause some changes, but we will not be able to dictate how the health care industry will be run. The best bet for a chiropractic practices’ bottom line is to be positioned to take managed care patients and deal with individual contracts as they come up. Patient loyalty is typically as deep as their wallet. If you don’t believe it and think you are going to be able to hold on to your patients if your area is “going managed care”–just talk to virtually anyone in Southern California. Business planning should not be about ego. Business planning should not necessarily be about what you think is right or wrong per se. Business planning should be about what works, what you think the future holds, and being prepared to capitalize on those things so that the most people possible can be introduced to chiropractic care and the highest reimbursement levels possible will go to doctors so that we can continue to live, thrive and fight the battles that our profession has had legislatively and legally on an ongoing basis.” “Dr. Ty Talcott of Dallas, Texas, serves on more than 55 managed care organization (MCO) panels and is on the Board of Trustees of SPN a national independent Physician Association (IPA). A graduate of Logan College of Chiropractic, Dr. Talcott also serves on the board of the Planning Committee for Chiropractic in Texas, is past chairman of the chiropractic committee at Tri-City Hospital and past advisor to the Workers’ Compensation Commission in Texas. He can be reached at 214-231-9391.