NEW ORLEANS — There are five financial myths in the O&P profession, according to a presenter at the American Academy of Orthotists & Prosthetists Annual Meeting and Scientific Symposium, here.
Rob Benedetti, MBA, consultant for PROMISE Consulting, offered tips for running an O&P patient care facility successfully, making it profitable while providing patients with the best care.
PROMISE Consulting has assisted close to 50 companies in 19 different states during the past 18 years.
“You can still make money in this industry,” Benedetti said. “We believe this industry is still viable, it is still worthwhile to work in and it is still worthwhile to get educated in.”
Benedetti cited RAC audits, health insurance uncertainty, escalating costs and higher taxes as a few of the challenges the industry faces.
Myth vs. fact
Benedetti said there are five financial myths O&P facility owners face. The first is that money in the checking account at the end of the year equates to financial stability; finance is more complex than that. If an O&P facility’s checking account has a surplus at the end of the year, owners should question where the money came from and whether it should be in the checking account.
The second myth is that if the owner concentrates solely on quality of service and patient care, the books will take care of themselves.
“You can work all you want and you can be the best clinician, be the best owner and love your patients and give them the best quality and care and still lose money,” he said.
O&P facility owners should know what their budget is and where the company is headed. The fourth myth is that budgets are of little value and are a waste of time. Benedetti said, “You need to spend some time and figure out what your budget is, what your forecast is.”
Benedetti feels the idea that “my biggest assets are my people” is a myth; equally important, or possibly more important, are the facility’s accounts receivable and inventory.
Patient care vs. profit
Benedetti said many O&P facility owners tend to overlook profit to focus on their patients, thinking that good quality patient care will translate to a profitable business. But profit needs to be a priority so that facilities can continue to serve patients.
“Your practice is not going to survive if you cannot pull a profit for the month, the quarter or the year,” Benedetti said. “Your patients – as much as you love them, as much as they love you – when your doors close and they have to go down the street to your competitor, they are going to be wondering what happened to their favorite clinician in town.”
Patients patronize the O&P clinicians of their choice because they like them and because they have helped them in some way.
“You cannot have money unless you have a patient,” he said, but there is more to being profitable than just being good to the patients.
A common pitfall for O&P facility owners is the lack of a budget plan. Without a plan companies begin to accrue incumbent expenses which need to be cut down to save money.
“When you start looking at your budget, look at the line item cost and when you do it methodically and deliberately you start questioning why you are doing this, why is this so much, and things begin to shake off. That is why you do a budget,” he said.
Poor financial reports is another pitfall.
“Many small businesses do not keep accurate financial records, many of them do not balance a checkbook or they are paying an accounting firm for this function,” Benedetti said, explaining that O&P facility owners can do anything that accounting firms can do through financial software except for taxes and adjustments.
There is a lack of entrepreneurial focus, owners need to understand their marketing efforts, whether they want to keep existing customers or generate new ones, and if marketing is focused or haphazard to the company.
“Put your money where patients are going to see, feel, touch and understand what your company is behind,” Benedetti said.
Many companies manage cash poorly. Benedetti suggests that 4% of cash receipts should be the goal for year in and year out and that owners need to have a cash reserve somewhere that is untouchable, in case of debt or another reason. A loan always should be a last resort, he said.
Lastly, there may be a lack of leadership. Benedetti said each facility needs to create an entrepreneurial niche.
“Understand what you are good at and make it better. You have a niche in your town. Never overlook that. Develop that, maintain that, be known for that,” he said.
Benedetti said following these steps can help alleviate financial pressure. Sometimes owners may need to cut staff, or overtime and maybe even look for less expensive health insurance.
“We should be spending an equal amount of time between generating more revenue and reducing costs,” Benedetti said, explaining the importance of controlling costs to avoid financial pressure. – by Monica Jaramillo
Benedetti R. If you don’t know your numbers, you don’t know your company: Staying profitable in the O&P world. Presented at: American Academy of Orthotists and Prosthetists Annual Meeting and Scientific Symposium; Feb. 18-21, 2015; New Orleans.
Disclosure: Benedetti reports no relevant financial disclosures.