Date Posted: Saturday, March 15, 2025

 

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It is no secret that 2024 was a rough year for many small businesses throughout America, and medical practices were not excluded from the macro-economic challenges of inflation and economic uncertainty. When inflation rises quickly like it occurred in 2023 and 2024, it is hard to keep up and adjust quickly enough to offset the impact. According to AHA.org, inflation grew at 12.4% from 2021-2023, but Medicare reimbursement only adjusted by 5.2% during this same period.

 

Having growing expenses without adjusting revenue leads to decreased financial stability. Since medical practices are highly dependent on third-party payors, it is nearly impossible to adjust their revenue, even if they have the time and foresight to do so since their reimbursement rates are fixed. In these times, it is important to focus on the Key Performance Indicators (KPIs) to help and guide the discussions on operational efficiencies and adjustments of operational overhead.

 

Physicians who own medical practices are focused on providing care for their patients and often lose sight of the details around cash flow forecasting and budgeting. More importantly, the difference between the revenue coming in and the costs going out are gradual changes, and it often takes someone to “step back” and see the big picture before they notice the changes—this is often during tax time when their profits are lower than expected. The Change Healthcare cybersecurity attack was one of those eye-opening events that occurred in 2024 and had an immediate negative effect on cash flow that still has residual challenges today.

 

Based on my 14 years of business consulting and running businesses, there are key steps to start the process of turning around your business to meet both short-term and long-term goals. If you are struggling to make payroll, or if you are just looking to optimize profits, these steps will allow you to take a strategic step forward in turning around the trajectory of your business in 2025!

 

Follow these steps to GROW:

 

G: Gather the Information and Conduct a Thorough Assessment of the Current Practice

 

• Gather 12-24 months of data: You want to see the trends, so gather productivity reports for the past 24 months to understand the trends. Are patient volumes going down? Are costs going up? Are write-offs a problem?
• Evaluate financial health: Review your financial statements to understand your revenue, expenses, and profitability. Identify areas where costs can be reduced, or revenue can be increased. Look at monthly and yearly costs and identify the top 10-20 costs that you are currently spending.  Hint: Payroll should make this list of top 2-3 costs.
• Patient feedback: Collect feedback from your patients through surveys or direct conversations to understand their needs and areas for improvement. This is important for all cases, but if patient volume is going down, then gathering this information will take action to fix the problem.
• Staff performance: Assess the performance of your staff and identify any training or support they might need. During busy months, it is easy to “add” employees instead of training them on new procedures. Understanding staffing ratios will be important when making overhead decisions. 

R: Review the Data and Prioritize Your Easy Wins 

 

• Assess the damage: Now that you have the data, identify the areas that don't line up with benchmark data. This may be billing by rendering provider or collections per provider or MAs to provider ratio. Analyzing the data and looking for trends will allow you to make a list of all potential ways to increase profit in 2025.
• Set clear goals: Define specific, measurable, achievable, relevant, and time-bound (SMART) goals for your practice. This could include improving patient satisfaction, increasing patient volume, or enhancing operational efficiency. These should address both short-term needs (like improving cash flow by $10K per month) and long-term needs (like adding a new mid-level provider in Q3).
• Create an action plan: Develop a detailed plan, outlining the steps needed to achieve your goals. Assign responsibilities and set timelines to ensure accountability.

 

O: Optimize the Practice and Implement Changes

 

• Optimize operations: Streamline your practice operations by adopting enhancements to your existing electronic health records (EHR) systems, such as AI, schedule reminders, or other features. Look at the schedule and determine if you can add more patients by adjusting time slots or set-aside slots. 
• Identify the areas of the practice that are profitable vs losses: In many cases, you can adjust the operations to enhance the profitability of certain components of the practice, but you may need to stop providing a service if you are currently losing money. Remember that this is a business decision, and you can always add it back later in a more profitable situation.
• Enhance patient experience: Focus on improving patient engagement and satisfaction by enhancing communication, reducing wait times, and providing personalized care. 
• Financial management: Address financial issues by renegotiating contracts, reducing unnecessary expenses, and improving revenue cycle management.
• Ask your staff for assistance: Maintain open lines of communication with your staff. Hold regular meetings to discuss updates, gather feedback, and address concerns. They may have the needed insights to make some cost-saving changes in your practice, so listen up and ask for feedback.

 

W: Watch KPIs and Actively Adjust the Practice Until You See the Results You Are Looking For in Terms of Practice Growth

• Track progress: On a weekly/monthly basis, monitor key performance indicators (KPIs) to assess the effectiveness of the changes you've implemented. This could include patient volume, revenue, receipts, and adjustments, but it may also include patient satisfaction scores, appointment wait times, and overall financial performance.
• Adjust KPIs: Be prepared to adjust based on feedback and performance data. Continuous improvement is essential for maintaining progress.

 

Source: Matt Kolinski, DO

 

Matt Koliniski, DO, is an Associate Management Consultant at DoctorsManagement.

 

DoctorsManagement simplifies the business of medicine so that healthcare professionals can focus on caring for patients and controlling the future of their business.

 

https://www.doctorsmanagement.com/

 

 

 

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