Developing an Action Plan for Your Business, Part III
August 2017 Issue
In the previous articles in this series, I discussed the importance of conducting a business review and developing an action plan, which included defining the purpose of the business and then deconstructing it by paring the business down to its essential building blocks. We then began developing the picture by adding depth to the first four of the 13 building blocks that were identified for this example. In this article, we will conclude that step and set the stage for implementing the plan.
STEP 3: DEVELOPING THE PICTURE, continued from Part II
Building Block 5: Prescribers/Referral Sources
Do you know who your top ten referral sources were in the last quarter without looking at a report? If you can't rattle the names off in an instant, you don't know your referral sources personally. You should know their needs, why they refer patients to you, the challenges they face, and how you can work together to meet those challenges and serve their patients. How do you market to referral sources, and how do you thank them for referrals while staying inside legal parameters? Do you have tools in place to monitor referral activity? Would you know if a source has increased or decreased referrals to your practice? How do you find new referral sources? Takeaway question: How do you go from waiting for work to come in to being in demand?
Building Block 6: Patients
Our patients love us! You may think that, and it may be true of some of them. But how do you know for sure? Testimonials, letters, phone calls, or even personal words of gratitude are great and should be shared with your staff and with the public via the myriad forms of communication available. If you haven't shared any positive comments, you need to get creative. Use social media, dedicate a spot on your website, and dedicate a site at your office. Post a wall of happiness with photos, comments, etc. What would be more interesting to a patient waiting to be seen—watching the news or perusing a collage of success stories posted by your patients? The best way to generate positive outcomes and success stories is by putting patients first. Are you doing that? How do you make their visit to your office easier? Is a financial representative available to discuss their financial responsibilities? Does your website provide online registration, up-to-date contact information, online bill pay, and helpful industry news and links? Have you ever called your office and asked a question just to see how it went? Do you regularly request feedback from patients and make it easy for them to provide such information? Takeaway question: How do your patients view your practice from first contact to last? Determine the answer to that question and then study your findings.
Building Block 7: Procurement/Purchasing
After personnel costs, purchasing accounts for the second highest use of cash in most businesses. Given this, do your company's purchasing procedures reflect savvy shopping? If you are not comparing prices, products, and services from all your vendors, you are doing your company a disservice. If you buy your O&P products from a distributor, it is important to compare the prices and discounts the various distributors offer. A 1-2 percent difference in discounts could save you a significant amount of money. Who places the orders for your company? Are there any restrictions or limits, i.e. purchases over a certain dollar amount that need approval? Have you reviewed your ordering process? Do you have a good receiving system in place? It is common to receive invoices with errors. Does your accounts payable processor match invoices to packing slips to ensure you are only paying for the goods your company received? What about returns? You should send products back in a timely manner and also have a tracking mechanism to monitor when credit is received. Takeaway question: Can you easily and accurately tie purchases to patient transactions, either via billing software or a spreadsheet, so there is cost data available for every transaction that has been billed?
Building Block 8: Production
Not every O&P practice has its own production facility, but for those that do, it needs to be reviewed regularly. Start at the front door. Is the shop layout efficient so that products travel the minimum distance from start to finish? Are the proper tools and machinery in place? Abraham Lincoln, when asked how he would go about cutting down a tree in six hours, responded, "I would spend the first two hours sharpening the axe." Are your machines maintained regularly? Is production tied to the front office/ billing process? If not, it needs to be. There is nothing worse than a busy fabrication facility producing a device only to find out later the order has been cancelled due to an insurance issue. Clearly defined procedures about delaying production until receiving approval from billing are a must. Are there quality assurance programs in place, as well as job costing methods, so it is clear how much it costs to produce each product? Takeaway question: Are the devices produced in your fabrication facility of a better quality and is the overall process more cost effective than utilizing central fabrication?
Building Block 9: Procedures/Clinical
This block is about standards, professional practices, and compliance. Given that this is such an important aspect of the business, how is your practice staying current with the numerous challenges facing practitioners, such as compliance with the Health Insurance Portability and Accountability Act, documentation, and new technology? Do you regularly provide your practitioners with specific profession-related training to keep them up to date on the latest happenings in all aspects of their jobs? Are review procedures in place regarding how patients are seen; protocols to follow; documentation to produce, obtain, and retain; and standards for patient care? Takeaway question: Do your practitioners have the tools, training, and techniques necessary to provide successful patient outcomes?
Building Blocks 10 and 11: Processing Billing and Payments
Billing claims accurately is one of the most overlooked revenue enhancement activities available to any practice. The time to review claims for completeness and correctness is before the claim is submitted, not when a payment is being posted. Does your office have a front-end review process? If so, who is performing the review? A goal of 100 percent accuracy for billing everything that is supplied is not a far-fetched idea. To attain this goal, a start-to-finish review of the billing process is necessary. Does the staff have the correct tools and proper education regarding medical policies, manufacturers, and Pricing, Data Analysis and Coding (PDAC) information? Is there an efficient means to transfer information from the practitioner to the biller to the payer? Have you identified and eliminated any gaps in the process where information might get lost or detached from the billing trail? Is there a clear procedure for receiving and posting payments, monitoring outstanding balances, and following up on claim denials? Who is authorized to write off balances? Are sound financial policies regarding distribution of duties and proper checks and balances in place? Is centralized billing an option? Are audit requests monitored for submission and results, and are new procedures instituted if necessary? Takeaway question: How confident are you that every possible code is billed and the associated funds collected and deposited into the company bank account? Do you have a method of determining if they are not?
Building Block 12: Profit
Is everything adding up? Will your company still be in business one year from now? The only way to answer these questions is to have accurate, reliable, and effective financial recording and reporting policies and procedures in place. How is profitability measured and reported? Are you meeting your budget? Do you have a budget? How do you set financial goals? Do you use key performance indicators to monitor important aspects of the business? There are many drivers of profitability in a typical O&P practice, but two—payer contracts and fee schedules—are often overlooked or taken for granted. Do you review contracts to ensure they are still viable? A contract may have been in place for over a decade without a change in reimbursement rate. Can you group the contracts into tiers of poor, good, and best payers to provide a means to assess the overall health of your business? For example, if 50 percent of the work is coming from poor payers, there is a problem. While there may be a viable reason for having contracts with poor payers, it is imperative to know the overall payer mix to properly manage contracts and make changes as needed. Another overlooked area of profitability is the fee schedule. Fee schedules need to be reviewed annually to ensure accuracy, competitiveness, and reasonableness. What is being charged is important and what is being earned on those charges is critical. Do you know which individual products are profitable and which ones are not? Can you back up your assumptions with numbers? Financial statements and account analyses should be reviewed regularly. They are the means of knowing how the business is performing, where concern and action are needed, and what the future may have in store. Ignore them at your peril.
Building Block 13: Planning
How does a company move from Point A to Point B? Whether it is initial development and entry, growth and expansion, or succession, planning at every level is critical. How will you enter new markets, attract employees, and address new government regulations? Does your company have a regular pattern of meeting to plan for the future? Although you may be familiar with the adage, "Failure to plan is planning to fail," are you acting accordingly? Do you purposefully take time to review and consider what is happening in the business, where you want the business to go, and how you propose to get there? Who is part of that process in your company? If you are the sole planner, do you seek outside counsel and guidance from experts in various fields? Do you share your thoughts with people you trust to get unbiased opinions? If you have a team in place, do you meet often enough to make a difference? Can you honestly answer the question, "Do you know where you want the company to be at a specific time in the future, and if so, do you know how you plan to get there?"
The building blocks have been completed, and in the final article of this series we will tackle perhaps the most challenging part of the whole process: implementing the plan via distribution of the work.
Chris Field, MBA, has worked for Boas Surgical, based in Bethlehem, Pennsylvania, for over 15 years. He serves as the treasurer of the Pennsylvania Orthotic and Prosthetic Society and was named the CFO of the Year by the Lehigh Valley Business Journal in 2014.