Financial Losses For The Medical Practice
Let us have a post that looks closer at the “cost of doing business.” Also called financial losses for medical practices.
You may have heard this term before, but it is essentially the financial hit that one takes while running a business.
Every company has these costs. Think of the last time you were at a restaurant, and they messed up your order. That food was most likely thrown in the trash and then a new dish was prepared. The business “ate” the cost of throwing that food away, not you.
The practice of medicine is a business and there is a cost to operating a business. People like to portray the great side of medicine, well, today lets look at the not so glamorous side of medicine. How my practice “loses” money.
Not Collecting Money Up Front
Many of the patients were kind and wonderful when I first started. However, some patients took advantage of my newness and naiveite. When you open a new practice, the flood gates open for patients that may have been fired by other practices for them to get care at your clinic.
You need to have a way to financially protect yourself. Patients will find a way to avoid paying you if you let them.
For example, one patient kept saying that they would pay their copy at the next visit. Always a sad story about why they could not pay their $40 copay. I figured, look I have no one on the schedule for this time so…some money is better than no money.
Fast forward a year later and that person owed me almost $400 for never paying their copay. She essentially was getting free visits and refusing to pay any copays.
I threatened to send her to collections, and she wrote a bad review on Google and Yelp. She then had the gall to tell me she would remove it if I zeroed out her balance. Sadly, since I only had a handful of reviews I took the financial hit. She removed the review and we both moved on. She has since been fired from the clinic.
Caring Too Much About Negative Reviews
I look back, a little disgusted that I took that agreement and let that patient walk all over me. She held all the power I thought with her negative review.
Sadly, google reviews do have a lot of power when you start out. One bad review can sink your rating and then your search ranking.
I did what I had to do and since then we have firm policies to not let patients get to that point of owing us that much money without a payment plan on file. I enabled that person to take advantage of me and was damn sure I was not going to let it happen again.
Our plan now is that if we get a negative review, we simply try to bury it with positive reviews. We also reply to it in a professional way.
Employees Stealing By Lying About Hours Worked
While I went through a period of time having a bad biller, I rehired my old biller and she worked from home. She racked up the hours, including over time, but I was never seeing any results in terms of increased payments.
Once I hired a totally new biller, she did an audit and showed me that the biller only logged into the computer for 1 hour but put on her time sheet that she worked 9 hours that day.
Essentially my old biller was stealing from me by not having better control over monitoring how many hours my employees worked.
I vowed to never let that happen again and now use a time tracking app called On The Clock which integrates with QuickBooks.
Did you know that Medicare will not pay for Tdap unless its for a laceration in an outpatient clinic? Or that Shingles vaccines need to be obtained at the pharmacy?
I didn’t know that and didn’t find out until we gave out a few thousands of dollars worth of these vaccines to those patients. We ended up asking patients to pay it and those that didn’t we wrote it off.
Huge financial lesson to give out vaccines without realizing the loopholes that make no sense. Why can Shingles vaccine only be given at the pharmacy and not in a clinic? I’m still not sure to be honest.
I really like the person who was a physician employee with the group.
However, I lost a lot of money hiring a doctor during the pandemic who underperformed.
The no show rate for this doctor was 3-4x the other two in the clinic while only having about 60% of the volume load of the other doctors. This should have been a huge red flag and I kept blaming myself as the clinic owner for not making them busy enough.
However, I should have been more objective and realized that this person had numerous complaints from patients and the fact that many of the patients were not following up with them…should have been a sign eariler.
We have since parted ways with this physician, but the financial sting lingers. I’m out about $100,000 by the time you include overhead expenses that their salary did not even cover.
To date, this is now my biggest financial mistake in the clinic. I’ve learned my lesson and in future contracts have put stipulations on days needed to work. For example, this employee took off 7 weeks worth of work in the first 6 months of the year. Turns out they took the time off to do locums during COVID times to make even more money than they could make in my clinic.
I really screwed myself on that contract and wont let that happen again. I plan on a total separate post about this in the future.
I use a EMR called Practice Fusion. They have teamed up with UpDox.com to provide certain services.
I decided to sign up for the “free trial” and tried to cancel it one day too late as in my opinion there are much cheaper, better options out there.
They refused to let me out of a 1 year contract for their services!
We are stuck paying them almost $90 a month for a service that we do not even have a use for. Their billing department has been difficult to get in touch with and refusing to budge on letting us out of the contract.
These recurring expenses have been a part of the financial losses for the clinic and always need to be re-evaluated.
Our clinic is moving towards 100% digital.
Printer ink is insanely expensive. When we started, I was spending almost $800 a month on toner.
Quickly realized that if I bought tablets or cheap laptops and went digital, it would only take a few months to pay this expense off.
Go digital if you can and ditch the printer. It costs you more than you think.
Management Companies Are A Money Suck
Without naming names, some of these management companies will cause huge financial losses.
I’ve received quotes from a company that will create a website for me and set up my advertisement online. Just to do this, they want $3,000 to $4,000 a month!
I host my own website on a Godaddy wordpress site for about $400 a year (includes multiple domains) and do my own advertising for free.
Keep in mind that any advertising dollars you spend is on top of their management fee.
You will find many companies that will be willing to charge you a monthly fee for something you can learn to do over a weekend a a few YouTube videos.
7 thoughts on “Financial Losses For The Medical Practice”
We accept all of our copays upfront. No copay, no service. Patients rarely give us pushback on this and if they do, a reasonable explanation usually helps them understand. One of my biggest money wasters was marketing. I’ve spent countless dollars on people, companies, and services that never really got any new patients in the door. If they did it was at a significant financial cost (cough ZocDoc cough). I’m still looking for the right solution for our marketing strategy.
Oh yeah, good point. So much money wasted on ZocDoc!
Our policy is if the patient does not have a full copay, they must reschedule the visit. Our facility makes no exceptions.
That is a very good idea. Sometimes we let it slide but it honestly ends up just burning us in the end with never collecting or us taking months to collect that copay.
Great insight – thanks. Recently opened a small independent part-time clinic – cash pay only. I’m sending out invoices via email / text after the appointment, so far its ok but Im sure with more volume, there will be problems.
Im going to set up a square reader to accept payment right away. Do you think collecting just AFTER the appointment could work?
My rule was basically – I’m ok with giving a free visit if you refuse to pay or don’t f/u with an invoice, but if you don’t pay… then, you are saying that you aren’t happy with the care, so I won’t see you back.
Great post. Can you share how to invest when you reached the financial independence?
Outside of my business my investment strategy is pretty bland. Mostly index funds. Initially I put 10% of my investments into individual stocks. That has at times ballooned up to 40% as some of the individual stocks have seen pretty steep increases. The financial risk of owning a business is the most risk I’m willing to take.