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Founder Letter: Should You Trim Practice Expenses?

Is it possible to increase your cash-flow without cutting expenses? Check out this article to learn more and what you should consider.

Heidi Jannenga
5 min read
June 7, 2016
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Managing a practice isn’t easy, and it’s natural to be overwhelmed by the pressure to cut costs and boost your bottom line. What I learned in my experience as a multi-clinic director, though, is that it’s actually possible to improve your cash flow without resorting to trimming expenses. I’m not saying it won’t be challenging; but, it is doable. You simply have to look at managing your cash flow in a new way. For me, that meant working with my husband (well, boyfriend at the time), to create a documentation solution that saved my clinics thousands of dollars in dictation costs. For you, it might mean increasing your profits by negotiating better contracts. Whatever the case may be, I urge you to look beyond axing costs to increase your profitability. Specifically, it’s crucial that you consider:

What Your Bottom Line Isn’t Telling You

When it comes to making financial changes, this Axial article explains that “most companies habitually attend to the bottom line by rigorously managing operations and costs. They often implement lean initiatives for key business processes, and managers rely on ‘dashboards’ of financial performance metrics to flash early warnings of trends.” Now, don’t get me wrong; being familiar with your income after expenses is crucially important. But, the point I want to emphasize is that your bottom line is merely an indicator of financial growth—not the driving force of financial success. After all, you can cut and cut and cut—and still be left with slowly trickling income at the top. So, if you really want to achieve sustainable growth—and who doesn’t?—you have to focus on your top line (i.e., gross revenue) first.

What Your Care is Costing Your Practice

Now, to start making smart financial changes in your practice, you must first make a plan. This will help you step back, look at the bigger picture, and really assess how you’re doing business. And one smart way to approach this is through understanding the cost of care in your practice. Here’s are some factors you should consider:

Fee Schedules

First, review your fee schedules. And when you do, be sure to pay special attention to those payers that base their fee schedules on Medicare’s. Because Medicare payments are already fairly low, you’ll want to make sure that your other contracts pay—at the very least—100% of what Medicare pays. Furthermore, make sure that you’re taking the time to reference those schedules before you bill. That way, you’ll ensure that you’re always billing the correct amount for your services—and thus, collecting the maximum amount of payment.

Now, if you find that any of your private payers aren’t paying you the rates you deserve, then it’s time to dump them. You should be earning what’s fair. Plus, when you ditch those low-paying contracts, you’re not only standing up for yourself—you’re also advocating for fair payment across the PT industry as a whole.


Knowing the ins and outs of your fee schedules doesn’t only affect the way you deal with insurance companies; you can also use this insight to inform your rates for cash-pay patients. For example: If you determine that an average session in your clinic costs a patient $50, and you want to make a 15% profit, then you’d need to charge cash-pay patients $65 a visit. It’s simple math, right? You should be operating at a profit, not a loss. And the right data can help you develop a payment structure that’ll help you do just that.


If you find yourself waiving copays or totally writing off services, you’re setting yourself up for disaster. But, if this is something you discover when you’re evaluating your financial practices, you can make some changes to recoup a portion of this revenue. One way you can put a stop to write-offs and track down balances owed: hire a collections agency. It might sound scary, but when you enlist a team of experts to collect on your behalf, you save yourself the time—and the headaches—associated with tracking down these past-due charges. And if you’re nervous about the cost of hiring an agency, don’t be. Most collections agencies receive payment based on what they collect, which means they won’t get paid until you do.

Plus, when you hire a quality collections agency, you also avoid landing yourself in any potentially sticky legal situations. As this Windfall article explains, “Third-party agencies are knowledgeable in both federal collection laws and the laws that govern the state in which the agency holds a license. Allowing a debt collection agency to recover unpaid debts on your behalf eliminates the legal risks involved with attempting to collect debts on your own.” So, whether you hire help to avoid having to perform collections in-house, or you simply want to ensure you stay on the right side of the law, it might be a good idea for your practice to look for help.

How Smart Staff Changes Can Save You Money

When you’re really struggling to find ways to improve your P&L, it can be tempting to cut staff to quickly save some cash. I can understand where you’re coming from; after all, as this Quickbooks article explains, “the true cost of paying each of your employees is significantly higher than their hourly rate.” So, when you eliminate an employee, you’re eliminating more than just the cost of paying that staffer’s salary. But even so, I strongly advise against leaning out your team as a first-resort cost-saving measure. Instead, I would suggest making some staffing changes that don’t involve firing—and you’d be surprised to know there are a lot of options that fall into that bucket. Start by reviewing the following staffing cost factors:


CEUs are often included in benefits packages—which I think is hugely beneficial. However, just because you pay for your staff members’ CEUs doesn’t mean you also have to offer all-expenses-paid trips on the company’s dime. There are smarter ways to provide your staff with quality educational credits. For example, you can offer CEUs through online programs like Medbridge—which features unlimited CEUs at a low membership cost—or even encourage your team members to attend local courses, thus lessening the cost of travel. Something else that should factor into your decision to offer CEUs to your staff: earning those credits should increase the company’s ROI. And one way to ensure you’re getting that return is to track outcomes. For example, if one of your staff members has lower outcome scores for knee injuries compared to the rest of your clinic’s therapists, then you can work with him or her to select CEU courses that focus on the knee. Then, when you see his or her scores improve, you’ll be able to link that progress back to the CEU courses he or she attended.


It might be tempting to cut a local or national APTA membership from your benefits package. However, I can’t advise against this one enough. Doing so diminishes the advocacy power of our profession—which we really can’t afford to do. So, if you’re going to keep any of your employee perks, I really hope you’ll continue offering this particular benefit.


As for determining staff salaries: realistically, you should only pay what’s fair for your market. And if you need help determining what that is, keep an eye on the WebPT Blog. We’ll be posting an article that covers this topic in greater depth later this summer. But, something else I want to stress is the importance of keeping an open mind. If you put a strict limit on the salaries you’re willing to offer, you might miss out on talent that could elevate your entire practice. So, I recommend evaluating compensation on a case-by-case basis. Still, bear in mind that a candidate’s decision on whether or not to join your team isn’t based solely on money; your clinic’s company culture plays a major role your ability to attract top talent.

How Improving Efficiency Isn’t a Loss

If you want to improve operational efficiency in your practice, there are many opportunities for you to do so. First, you should constantly review all of your systems, partners, and processes and identify any consistent pain points. For my clinics, the most glaring inefficiency was in documentation—especially the dictation component. In yours, it might be billing. If that’s the case, don’t be afraid to switch systems. You might find that a billing service or a new billing software is just what you need to remove those efficiency roadblocks. And if you’re nervous that switching to more efficient systems will affect your staff—don’t be. You can use this change to hone in on what your staff is truly good at, remove unnecessary processes, and build up each team member’s strengths. The key is to include them in the decision-making process. That way they feel accountable for the changes occurring.

I truly believe that if we stop focusing on indicators of financial success and start focusing on ways to expand the value of our services, we’ll see our bottom lines grow—without having to trim expenses. Yes, making changes is difficult, but you can’t let your fear hold you back from transforming your practice for the better. After all, it’s up to you to take care of what matters most: your business, yourself, and your patients.


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