recomed - improve your practice's profitability

Better Practice Guide

9 Tips To Creating a Profitable Practice

9 Tips To Creating A Profitable Practice

Tip 1 - Evaluate your cost to practiceTip 2 - Develop a budgetTip 3 - Focus On Your Patient Lifetime Value (PVL)Tip 4 - Improve Patient Retention Strategies Tip 5 - Take Your Practice Online Tip 6 - Amplify Word of MouthTip 7 - Make Sure Your Practice Is SearchableTip 8 - Revise Your Scheduling ProcedureTip 9 - Extend Your Service or Product Offering

Tip 1 – Evaluate Your Cost to Practice

How much does it cost to practice?

• Understand the nature of the costs involved and how they affect the day to day running of your practice.

• To do this, you need to look at your operating expenditure.

• Operating expenditure = fixed costs + variable costs

Fixed and Variable Costs

Fixed Costs

Variable

Costs

Expenses you incur irrespective

of how your practice is

performing

Expenses vary according to your practices activity

• Rent• Salaries• Water • Lights

• Stationary• Medical

gloves• Medical

malpractice• Insurance

Calculating Your Cost to Practice

• In order to regulate your cost structure, you need to determine what your operating costs are

• You can view your expenses off your year-end tax report or you can calculate them on a monthly basis.

• Once you’ve identified your operating cost, you can divide it by the number of patient visits to get your ‘cost per patient visit’.

Practical Example

Variables: • Monthly Fixed costs (F) = rent + water + lights +

salaries etc.• Monthly Variable costs (V) = stationary + bed sheets +

medical gloves etc.

If: • (F) = R60, 000 per month • (V) = R20, 000 per month • Total Operating Costs (F+V) = R80, 000 per month • Average monthly patient count = 200 patients per

month  Then: • (F+V)/avg. monthly patients = cost per patient visit• R80, 000/ 200 = R400 per patient visit

What Does This Mean?

• From this basic example, you can see that patients should spend, on average, more than R400.00 per visit in order for this practice to be profitable

• This figure will however decrease if you grow the number of monthly patient visits while keeping total monthly costs constant

• More on growing you patient base later

Tip 2 - Develop a budget

Developing Your Budget

• Following on from point one, the most effective method for budgeting is to base your projected revenue on a per-patient basis.

• This will highlight how many patient visits you must realize each week, month and year in order to achieve your revenue goals.

Practical Example

If: • Gross monthly income = R90, 000

per month (R450 consult fee x 200 monthly patient visits)

• Total monthly expenses = R80, 000 per month (see point 1)

 Then: • Net profit before tax = R10, 000

per month (R90, 000 – R80, 000)

The Result?

• At 200 monthly patient visits, it is likely that this practice will make a profit, albeit a small one.

• You can, however, increase your profit margins by increasing the number of patient visits, decreasing total expenses or ensuring your practice is run more efficiently – more on this to follow.

Focus On Your Patient Lifetime Value (PVL)

What is PLV?

• PLV, or Patient Lifetime Value, is the total profit that a specific patient brings to your practice over a defined period time.

• By calculating PLV, you can estimate how much a patient is worth to your practice and, by extension, how much you can afford to spend on efforts to bring in new patients.

Calculating PLV

• A patient’s value is equal to the revenue he or she generates for you, while he or she is a patient at your practice (also referred to as: lifetime span).

• The easiest way to calculate your PLV, is to take the average spend of a patient per visit multiplied by the average visits per year

• Multiplying this figure by the average lifespan of a patient relative to your practice (say 3 years) gives you the PLV

Practical Example – Dr. Smith’s Practice

*Important NoteCalculating Referral Rate: Referral Rate is based on the number of referrals your patients refer to you

Number of Referrals % Ratio Referral Rate

0 referrals 0 1.0

2 referrals per 10 patients (2/10) = 20% 1.2

1 referral per 2 patients (1/2) = 50% 1.5

1 referral per 20 patients (1/20) = .05% 1.05

Practical Example – Dr. Smith’s Practice Continued

If: • ATV (Your average income per transaction) = total

revenue per annum /total number of treatments per annum = R400

• Average number of treatments per patient per year = 2• Average number of years a patient stays active on your

database = 5• Average number of referrals per year: (2/10 = 1.2) Then: • LTV R = (ATV) x (Avg. number of patient visits per

annum) x (Avg. number of years a patient stays active on your database) x (Avg. number of referrals per patient)

• LTV = R400 x 2 x 5 x 1.2 = R4, 800 (over 5 years) or R960 per year

What this means is…

• If Dr. Smith ran a marketing campaign that cost R2, 000 and brought in 8 new patients, it would appear he has only generated R1, 200 in revenue

– (R400 x 8) – R2, 000 = R1, 200

•  This effectively means he has run the campaign at a loss of R800

• However, using the LTV model, this campaign would in fact yield a revenue stream of R36, 400

– (8 x R4, 800) – R2, 000 = R36, 400

• This campaign would actually be quite successful. It is also important to note that practices should not spend more than the LTV of a patient, on acquiring new patients. In this case, Doctor Smith should limit his marketing budget to at most R4, 800.

Tip 4 – Improve Patient Retention Strategies  

Retention Strategy

• According to TARP Worldwide, it’s five times cheaper to keep a customer than it is to get a new one.

So before you set about acquiring new patients, ensure that you reduce the amount of single visit patients that drop off your radar.

Direct Marketing

The best way to stay engaged with your current patient base is through direct

marketing channels, such as direct mail/email, telephone calls and cell

phone text messaging.

In South Africa today…

There are more than twice as many cellphones as there

are TV sets (31.8m vs. 15.9m)

2 x

There are 7.2 times more homes with cellphones than landline telephones

SMS text messaging is used by 3 times more people than email.

There are 4.6 times more households with a cellphone than a computer

7.2 4.6x

3x

According to the MMA (Mobile Marketing Association SA's Mobile Review

Mobile Marketing in SA

• Mobile marketing is probably the most popular, and best suited marketing channel for the South African market

• It is particularly effective because it enables you to create messages that are both relevant and timely

• You can SMS patients to notify them of relevant discounts, appropriate changes in operating hours or new business processes and procedures

• Be sure to provide patients with an option to “OPT OUT”

Implement a Feedback Process

• Just because someone books an initial visit, doesn’t mean they’re going to come back. Staying engaged is only helpful if you’re offering an exceptional service

• Try implementing a feedback process by encouraging your patients to fill out quick and easy feedback forms or cards.

• Affording patients the opportunity to express what pleases and displeases them will provide you with invaluable insight into improving your service offering

• Remember, engaging with your current patient base through direct marketing efforts and improving your practice’s efficiency can drastically help reduce your overhead and increase your profitability

Tip 5 – Take Your Practice Online  

Numbers Don’t Lie!

According to Google, over 500,000 South Africans search online for a doctor or medical practitioner every month. That’s 11 South

Africans searching for a doctor every minute! According to a 2012 study

published in the Journal of the American Medical Association, patients who engaged with their physicians online also averaged more office visits.

What Should Your Profile Look Like?

• Setting up and maintaining a website can be complicated and time consuming, so it’s advised that you hire an expert to design and host it on your behalf

• You should post everything that will enhance your image and express your capabilities

Location and Contact

Information

Credentials

Professional focus

Blog (if you write one)

Profile Picture

Updates or insights on

relevant news

Visit RecoMed

• If you feel that you have neither the time, nor the knowhow to create and maintain an online profile visit www.recomed.co.za

• RecoMed is a South African based company that specializes in providing medical practitioners a strong online presence, at low cost and without need for a lengthy or complicated development process

Tip 6 – Amplify Word of Mouth  

Word of Mouth

• Doctors have often relied on “word-of-mouth” as a primary marketing tool

• However this marketing strategy has severe limitations!

• People rarely talk about their doctor visits and if they do few people are there to take the advice.

Use An Online Review Service

82% of consumers research a product before buying it

More than 70% of consumers worldwide trust online reviews

Survey: Over 60% of respondents name patient reviews as a primary influencer when selecting a new doctor online.

Every half-star improvement in a physician’s overall rating was accompanied by a 37% increase in appointments booked

RecoMed

• It’s quite clear that patients source, trust and are influenced by online reviews

• With RecoMed patients can leave reviews of their doctors services

• All reviews are moderated and verified by RecoMed staff before being published

Tip 7 – Make Sure Your Practice Is Searchable

Claim Your RecoMed Profile

• It stands to reason that your most loyal patients are those that stay within close proximity to your practice

• Therefore gaining new and loyal patients could be as simple as ensuring that those closest to you can easily discover where you are

• Highlighting your proximity to nearby patients is an easy, inexpensive way to attract new patients, and increase revenue

• To ensure your practice is visible online, simply claim your profile at www.recomed.co.za

Tip 8 – Revise Your Scheduling Procedure

•Tip 8 – Revise Your Scheduling Procedur

Offer an Online Booking System

• An Intuit survey documented that 81 % of patients say they would like to schedule appointments and fill out registration forms online, with a significant percentage adding they would consider switching providers in order to take advantage of such services

Why Offer Online Booking

• It can save your receptionist up to 40 hours per month

• The reduction in phone-time will afford your staff the freedom to work on other areas of the business, ensuring your practice is more productive, more efficient and therefore more profitable

• You can offer same-day appointments

• You can effortlessly fill last minute cancellations

RecoMed’s Online Booking System

HOW IT WORKS

1. Patient books an appointment from the doctor’s RecoMed profile

2. The doctor receives an email depicting the requested appointment time, the patients contact information and the reason that patient has requested the visit

3. The doctor then “confirms” the request from their RecoMed profile

4. The patient is notified that his/her appointment has been successfully scheduled

Tip 9 –Extend Your Service or Product Offering

Learn a New Skill

• Doctors can supplement their practice earnings by offering extra services or products that may otherwise fall outside the traditional realm of their clinics practice

• Learning a new skill, such as acupuncture therapy, can help extend your service offering and open up new revenue streams for you to exploit

Product Offerings

• Nowadays physicians are offering everything from pregnancy calendars to advice on aging

• It is, however, important to remember that the most successful ideas speak to the needs of your current patient base.

Examples of Extended Product Offerings

OfferingGeneral Surgeons

Prostheses or wigs to chemotherapy patients

Gynaecologists or Obstetricians

Personalized pregnancy calendars

Offering

Offering

Offering

Dermatologists

Orthopaedists

Skin care products

Back support (braces, belts etc.)

In Summation

• If you understand your ‘cost to practice’, implement retention strategies, and exploit the endless pool of resources the internet has to offer, you can reduce your overhead, create an efficient and productive work environment, and ultimately ensure your practice’s profitability!