Use Your Numbers What’s essential to private practice success? A solid financial plan that you tweak based on what your practice spends and earns. Features
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Features  |   January 01, 2018
Use Your Numbers
Author Notes
  • Shannon Butkus, MS, CCC-SLP, is working toward her PhD in health care economics at Texas A&M University and is executive director of Butkus & Associates, Inc., which provides pediatric speech and language services in and around Houston. She is a member of ASHA’s Health Care Economics Committee and is an affiliate of ASHA Special Interest Group 11, Administration and Supervision. shannon.butkus@butkusandassociates.com
    Shannon Butkus, MS, CCC-SLP, is working toward her PhD in health care economics at Texas A&M University and is executive director of Butkus & Associates, Inc., which provides pediatric speech and language services in and around Houston. She is a member of ASHA’s Health Care Economics Committee and is an affiliate of ASHA Special Interest Group 11, Administration and Supervision. shannon.butkus@butkusandassociates.com ×
Article Information
Practice Management / Professional Issues & Training / Features
Features   |   January 01, 2018
Use Your Numbers
The ASHA Leader, January 2018, Vol. 23, 42-49. doi:10.1044/leader.FTR1.23012018.42
The ASHA Leader, January 2018, Vol. 23, 42-49. doi:10.1044/leader.FTR1.23012018.42
$100,000.It took me almost nine months, but this is the check amount I once received from an insurer who paid my claims incorrectly over a period of several months.
Considering I own a small private practice, that was a huge sum of money to me. At any given time, my staff of about 10 clinicians serves roughly 150 patients in the greater Houston area. Several times, I almost gave up hope that I’d ever see that money. But sheer determination, and the fact that I’d worked hard for it, kept me going.
The experience taught me an important business lesson: I needed to think less like a speech-language pathologist and more like an entrepreneur if I was going to thrive as a private practice owner.
Nine years have passed since this happened and, while I don’t do as much direct treatment any more, I’m still actively engaged in the business of running my business. What does that mean exactly? It means I have a financial plan. It also means I know detailed information about our practice expenses, contract terms, and amount and sources of weekly revenue.
I know when things are working, when they aren’t and when it’s time to pivot (think health care reform). What follows is a financial primer of sorts that includes key business metrics my husband and I monitor and strategies we use internally to identify our practice expenses and ensure correct and (as much as possible) timely reimbursement.

I needed to think less like a speech-language pathologist and more like an entrepreneur if I was going to thrive as a private practice owner.

Do you have a plan?
Every great business starts with a plan. Key members of a practice’s leadership team identify their mission and vision, develop measurable goals, and create an action plan to achieve those goals. You should consider building your leadership team in a way that lets you draw from the experiences of people with knowledge in strategic planning, financial analysis and operational processes.
If you’re thinking about starting a private practice or already own one but aren’t sure you have a great plan, here are some essential elements to consider:
1. Identify your resources.
Start by taking stock of your assets.
  • Do you have adequate capital (money)? Generally, it is a good idea to keep at least three to six months of your operating expenses in cash reserves. I’d also recommend establishing a line of credit. You might not need it now but you could in the future, especially if you experience a sudden decline in reimbursement or an insurer is late paying claims.

  • Do you have the right balance of clinical and support staff? We follow an 80-20 rule in our practice: 80 percent of our employees provide clinical services, and 20 percent perform administrative tasks. To any extent possible, we don’t ask our clinical staff to complete tasks our administrative staff could complete, as this takes them away from the revenue-generating activities we hired them for.

  • What equipment and supplies do you have? What equipment do you need to add? Here you should be thinking about things like your computers, scanners and therapy materials. If old computers are slowing down your administrative staff or causing your clinicians to struggle to complete documentation, it might be time to upgrade your technology.

  • Is your building space the right size? If your space is too small, it could prevent you from expanding. If it is too big, you could lose money. If you have more space than you need, consider subleasing a treatment room to a related professional to offset your facility costs. Similarly, if limited space is preventing you from expanding, and you see an opportunity for growth and increased revenue, seek new or additional facility space.

2. Identify tasks that move you toward your goals.
I suggest putting tasks in chronological order and identifying those that can be done simultaneously to achieve efficiencies. If you’re just starting out, you could perhaps work on credentialing and contracting while also developing a marketing plan to recruit clients. Also assign tasks to specific staff members. You could, for example, designate one member of your staff as your contracts specialist and assign marketing tasks to another. Don’t assume someone else will do it.
3. Develop a mechanism to measure progress.
Establish short- and long-term business goals and meet weekly with key members of your leadership to discuss your progress. An example of a short-term business goal might be to establish two new contracts with insurers within 120 days. A long-term goal might be to increase your gross revenues by 20 percent over a 12-month period. Recalibrate your goals and timelines as needed. No one makes a perfect plan the first try.
4. Do you have a plan to replace staff and materials when necessary?
Don’t assume your staff will be with you forever or that they won’t experience a family emergency that takes them away from your practice. How quickly can you respond to unexpected staffing needs to avoid a decline in revenue? Have you planned for ordering essential materials like test protocols?

Generally, it is a good idea to keep at least three to six months of your operating expenses in cash reserves.

Products and services
Whether you are just starting your practice or are a seasoned veteran, think about the range of services your practice provides. An overly narrow service line could limit the number of clients you serve or prevent you from expanding. An overly broad service line, however, could cause you to lose your focus and overextend yourself financially.
Our practice evaluates the services we offer at least twice a year and adjusts our offerings where we see growth opportunities. In addition to providing traditional speech-language treatment, we’ve added staff and teacher development trainings, preschool screenings, and continuing education courses modeled on our documentation practices. We also aren’t afraid to discontinue a service if we aren’t seeing the financial return we expected. On occasion, we’ve even considered terminating a contract with an insurer over issues related to administrative burden or unfavorable contract conditions. Bottom line: You need to be flexible.
Contracts and billing model
Once you’ve identified the services you’d like to offer, you should establish a range of contracts with insurers, related professionals and community providers such as private schools and community and assisted-living programs for young adults with special needs. Even if you are a specialty provider, it’s wise to build a diverse platform of payers. Relying on an all-cash business could be problematic during an economic downturn.
Also, relying on one type or source of insurance is challenging, especially when a payer suddenly decides to lower reimbursement rates or change its payment methodology. Given insurers’ heightened interest in paying for value as opposed to volume, anticipate that your contract terms will change if they haven’t already.
Contracting isn’t always easy, especially if you work in an area where there is an abundance of providers. To gain an advantage during the contracting process, many insurers rely on narrow provider networks—that is, they could have a “closed panel” that means they aren’t accepting new providers. This situation is important to consider if you’re just starting out, as it could pose a barrier to entering the market and establishing a caseload.
Another consideration is the rate at which you contract. Some insurers set a predetermined, non-negotiable fee schedule. Others may be willing to negotiate a contract, especially if you have been a contracted provider with them for a considerable period. If the reimbursement rate offered isn’t sufficient to meet your expenses and make a reasonable profit, you may need to walk away from the contract.

We don’t ask our clinical staff to complete tasks our administrative staff could complete, as this takes them away from the revenue-generating activities we hired them for.

Practice expenses and pricing
Next on my list of key business metrics are practice expenses and pricing. Plain and simple: You can’t establish a price if you don’t know your costs. This is one of the most common mistakes I see on social media forums. Private practice owners ask others for help setting fees.
This crowd-sourcing is well-intentioned, but it is more important to evaluate your direct and indirect costs, as well as your fixed and variable costs, prior to establishing a price. Then use that information, along with the knowledge you have about your market area (supply and demand), to determine a price.
So, what exactly are your costs? Here is a breakdown:
  • Direct costs—associated directly with the service you provide, they include salary and materials costs, payroll taxes, workers’ compensation insurance and travel reimbursements.

  • Indirect costs—related to your overhead, they include support-staff salaries, insurance, taxes, facilities and administration costs.

  • Fixed costs—they stay the same whether you have an abundance of patients or fewer patients than you’d like, and include facility expenses and insurance policies.

  • Variable expenses—they change with your patient volume and include things like mileage reimbursement, hourly wages and materials.

Once you have working knowledge of your costs, you can establish your price. Ensure that your fees are sufficient to cover all your practice expenses and generate enough revenue to make a reasonable profit. You’re not in this to work for free! That said, if your price is too high, consumers may be priced out of your services, making it hard to establish a client base. Conversely, if your price is too low, you’ll likely struggle to cover your expenses. You’ll need more referrals and may not reach your financial goals.
We evaluate our practice expenses monthly to make sure they align with our expectations. Where possible, we minimize all costs without compromising the quality of care we provide to our clients. At least twice yearly, we evaluate our pricing structure and make sure it is reasonable based on our practice expenses and financial goals. Though we don’t like to, we sometimes need to increase the price of our services to keep the books balanced.

If you don’t have a solid practice plan already, establish one so that you can stay abreast of changes in reimbursement.

Monitor your money
In our practice, we start and end each week with financial monitoring tasks. At the beginning, we identify our expected revenue for the week based on the number of sessions we plan to provide. Generally, we expect to complete at least 95 percent of our planned visits. At the end, we calculate the revenue we generated based on the actual number of sessions completed.
We break this down by insurer and staff member and use it as a starting point for tracking our accounts receivable (all outstanding money). As we receive payments from insurers, we mark our accounts receivable as paid.
Once monthly, we take time to identify outstanding accounts receivable. This process helps us follow up on claims that were denied in error, processed incorrectly or inadvertently overlooked during billing. It also helps us identify insurers that have not paid claims in a timely manner so that we can track the interest they owe us. As a result of this process, we collect 95 percent of our accounts receivable in 45 days and more than 98 percent of our accou nts receivable in 60 days.
Why is this important?
Savvy management of the business side of a private practice is always essential to its success, but it’s more critical than ever as health care reform constantly tightens controls on reimbursement. New and changing alternative payment models (see “Show Us the Merit”) will challenge even the most business-savvy among us.
If you don’t have a solid practice plan already, it is important that you establish one so that you can stay abreast of—or better yet, get ahead of—changes in reimbursement rates and other aspects of the health care marketplace. Change is inevitable, but if you’re equipped with a solid plan, you will have the tools and resources you need to succeed. Happy planning!
Private Practice Resources for You

Clinicians looking to start or grow a private practice can find information specific to audiologists and speech-language pathologists on ASHA’s and other websites. Here’s a sampling:

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January 2018
Volume 23, Issue 1