A business plan helps you get control of your practice
Decide what you want to do, how you’ll do it
If you’re like many physicians, you may feel as if your practice is controlling you, instead of vice versa. Today’s practices must deal with everything from excessive paperwork to long billing delays and collecting co-pays but these seemingly little things can add up. That’s why Peter Lucash, president and chief executive officer of Lucash & Co., a Charleston, SC, consulting and advisory firm, is a fervent believer that physicians need a business plan to survive in today’s health care environment. "A business plan helps physicians get control of their practices and know what is going on," Lucash says.
In a nutshell, creating a business plan requires taking a series of steps that let you know what is going on in your practice. It helps you make intelligent decisions about what you want to do in the future, Lucash says. "The analysis has multiple purposes and multiple uses," he adds. Although the plan should be outlined in some sort of written form, a big, elaborate document isn’t necessary, Lucash points out. "The essence of a plan is not the written document. The essence is what you are going to do with it. The whole purpose of a business plan is the actions you will take," he adds. You aren’t developing a business plan for the exercise, you’re doing it to gain control of your practice and your life, he emphasizes.
A business plan has to be an individual decision, made by the physicians in the practice, Lucash says. "I can produce a plan for a practice, but there is only so much an outsider can do. Only physicians can sit down and decide what they want to do. It’s a real individual decision. There’s no cookbook method for planning," he says.
The first step in creating a business plan is to get a handle on the nuts and bolts of your practice to see what changes you can afford to make. Look at your financial analyses to see where the money is coming in, where it is going out, and what is sitting there and not being collected. Look at your patients. Where are they coming from? What is the most common age group? What kinds of problems do they present with? "Invariably, there will be a surprise or two when a practice analyzes its patients," Lucash says.
You should be able to get information on your patients from your practice system. It should report the number of patients by age, sex, and zip code. Lucash suggests using zip codes, rather than cities or towns because they help you better pinpoint where your patients live. For instance, your practice may be getting a number of patients who are on the other side of town. In this case, you should look at why they are coming, and who is referring them. "If you have a lot of patients who are being referred by one physician, it might be time that you talked to him," he says.
You may have to reformat the data to give you the information you need but it’s not a difficult process, Lucash says. Most software will allow you to set up a report format so you have to reformat the data only once. Look at your monthly spreadsheet to give you an intuitive feel for what is going on financially with the practice. "When I was a practice manager, I spent 10 minutes once a month looking at the spreadsheet. You can feel it in your bones after a while," Lucash says.
Know what it costs to see your patients. "A classic example of how a business plan can help is that it gives physicians the knowledge they need to know whether or not to sign a managed care contract," Lucash says. If you know your patient costs, you can compare it to the per-member-per-month reimbursement offered by a health care plan.
"Many physicians sign managed care contracts without knowing whether they are good or bad, or even if they don’t like the contract, they don’t realize what the impact is on their practice, he says. For instance, one physician client of Lucash’s was considering a contract with an insurer that was notorious for low payments. However, when he crunched the numbers the contract didn’t seem so bad. The HMO had a strong push for preventive medicine and gave physicians cash bonuses for immunizations and mammograms. Based on patient history and cost of treatment, the practice concluded that the combination of the preventive medicine bonuses and reimbursement was enough to make the contract worthwhile.
Once you have your financial and patient information in hand, you can look at what you want to do in the future. Ask yourself if you’re busy enough. Do you want to grow? Should you add another physician? All physicians in the group should figure out what they want to do personally and professionally. "There are always other patients who can come in the doors. Doctors need to decide if they are taking on too much. Or, if they want to retire at age 55, they may be willing to work even harder to do so," he says.