What matters most is a common phrase used in today’s business environment. It is no different in a podiatric medical practice.   What really matters is always at the top of the list and in this article we will explore what matters most in today’s practice environment.

Cash Flow

The most prevalent question about valuing a practice is – what is the single biggest factor affecting value?  It is cash flow.  The cash flow of the practice starts at the amount of monies collected from services and ends with the amount of monies remaining once the overhead expenses of the practice have been paid.  The amount of monies remaining once the overhead has been paid can be used for compensation to the owner and debt repayment.  These factors are the most critical in determining the cash flow matters for a practice which influence the value and pricing of a practice.

Infrastructure

The next consideration is what type of infrastructure exist in the practice?  Are policies and procedures in place for the accomplishment of task, assignment of duties and responsibilities and the allocation of resources?   Infrastructure also includes the process for compliance with government and regulatory matters such as OSHA and HIPAA.   The infrastructure of a practice will be a major component in the ability to transfer the revenue stream of the practice from one owner to another.  When a highly structured practice is sold or adds an associate the risk is reduced for the new owner/associate due to the consistency developed and the fundamental operating process put in place.

Staff

The staff of the practice are generally the first contact with the practice a patient has.  If the staff is well trained, understands their role and responsibility the opportunity for the patient to have a positive experience is greatly enhanced an also allows the doctor greater flexibility and time to treat the patient.  An appropriate level of staffing is what fits the particular situation of the practice.  An industry benchmark is 4 staff for each doctor.  This may be adjusted based upon the scope of care in the market, the patient base and the preferences of the doctor.

Accounts Receivable Management

While this overlaps with the cash flow it is important to note the management of accounts receivable.  A consistently applied policy related to copays and deductibles, as well as a consistent approach to turning accounts out to collection are important.  Further, one of the most important issues in the management of accounts receivable is developing a complete file for all payors under contract.  The development of a comprehensive file with the contract and lead schedule with the key attributes of the contract will provide the accounts receivable staff with a quick reference regarding the agreed upon payment structure for the payor.

Payor Mix

The payor mix of the practice has a direct impact on the cash flow of the practice and very often the staffing requirements for the clinical process.  The general benchmark for a podiatric medical practice is Medicare composes approximately 40% of the total payor mix.  This varies by state and practice type but this is the general industry bench mark.  Additionally, patient payments compose approximately 15-20% of the practice payments as well.  The balance is split among the various commercial payors in the market.

Location

This variable is a key ingredient of what matters most in a podiatric medical practice.  We realize that practices come in all sizes, shapes and forms; however, location matters.  The location of a practice can have a significant impact on the type of patients generated and the sources of those patients.  In today’s environment the hours of operation are dictated by the location and the ability of the patients to “get to” the office.  A well located office with an easily accessible entrance well marked and positioned in a “comfortable” setting will lend itself to attracting both patients and referrals.

Referral Sources

A practice with a well established base for referrals provides a consistent source for new patients.  Referrals from MD specialties such as: family practice, vascular, plastics, internal medicine, endocrinology, and orthopedics provide a practice with a strong basis for a consistent patient flow.  Further, a strong word of mouth from existing and former patients provides the practice with patients that come due to a positive personal experience.

We have addressed the issues of what matters most in today’s podiatric medical practice valuable matters for consideration.

To find out more about practice valuation and what matters about your practice you can contact Mike Crosby at Provider Resources, LLC.  Our email is mcrosby@providerresources.com and our phone number is (888)-776-2430.