Improve chiropractic clinic profitability by increasing PVA
What is PVA and how do you use it? An increasing number of chiropractors have been experiencing anxiety about the future success of their practice. Their concerns span a gamut of issues– from lack of patient feedback about their patient relationships to lack of control of practice management processes to unpredictability of patient flow and cash flow to low profitability.
Shrinking practice profitability is a result of five forces that conspire for a “perfect storm:”
- Rising costs of doing business, from rent to payroll to insurance
- Shrinking insurance reimbursements
- Increasingly stringent regulations and growing frequency of audits
- Delays and underpayments of insurance claims
- Patient flow fluctuations
3 steps to gain control over your practice’s profitability:
Regaining your peace of mind and taking control back into your hands requires a methodical approach consisting of three steps.
- Measure your case profitability and set a goal for it: Profitability or case profit margin is a ratio of case fees collected minus case costs, divided by case fees collected. Case fees collected is the money spent by the patient in your office over the lifetime of that patient.
- Measure your patient visit average (PVA): The sad thing about profitability is that there is no way to control it directly. But the good news is that it grows in step with your Patient Visit Average (PVA). In other words, you can control your case profitability indirectly by controlling your PVA.
- Increase your PVA: Figure out ways to have your patients commit to more than one visit and keep implementing new ideas until your practice’s profitability meets your goals.
How to determine case fees collected?
The case-fees-collected statistic can be calculated by dividing total collections by the number of cases. This approach has a major shortcoming because it requires the chiropractor to wait until all cases have terminated. For a reliable approximation of the same number without waiting for termination of every patient, follow the two-step approach below:
1. Calculate all collections for a given time period.
2. Divide that figure by the total number of new patients for the same time period.
For instance, if Dr. Joe treated 20 new patients last month and collected $10,000, then his case-fees-collected last month were $500. In other words, the average patient last month spent $1,000 before terminating care.
How to determine case costs?
You can use the same approach to calculate your case costs:
1. Compile total overhead for the same time period used to calculate case fees collected.
2. Divide your total overhead by the total number of new patients for the same time period.
For instance, if Dr. Joe treated 20 new patients last month and his total overhead during the same month was $10,000, then his case-costs last month was $500. In other words, the care of average patient last month cost Dr. Joe $500.
What does Profitability mean?
If your fee to cost ratio is greater than one then you have a profitable practice. Otherwise, you are losing money. Common sense dictates that a profitable practice that takes care of its owner manages a 3:1 ratio of fees to costs, or about 67% profit margin.
A common fallacy among many practice owners is the belief that increasing the number of new patients positively impacts profitability. But this may not necessarily be true since increasing the number of patients also increases the overhead, potentially decreasing profitability even further and defeating the purpose of increasing the number of patients.
How to compute Patient Visit Average?
PVA is a measure of your retention, or your ability to retain patients. In other words, it is a relationship quality indicator. The higher the PVA, the better is your relationship with your patients. As in an earlier calculation, the Patient Visit Average statistic can be calculated by dividing total visits by the number of patients. This approach has the same shortcoming as above because it requires to wait until all patients have terminated. For a reliable approximation of the same number without waiting for termination of every patient,simply divide your total visits for a given time period by the total number of new patients for the same time period.
For instance, if Dr. Joe had 300 patient visits last month, including 20 new patients, then his PVA would be 15. In other words, the average new patient returns 15 times to see Dr. Joe.
5 steps for improving your PVA
The way to increase PVA is to create a lifetime-maintenance practice. Maintenance patients have a greater understanding and appreciation of what chiropractic has to offer.
- Create customized treatment plans: Give your patients a customized plan that is tailored to their specific problems at the end of their first session.
- Block schedule the entire plan in advance: Help your patients understand that you are offering them a complete treatment plan – not a session by session experience.
- Train your team: Practice “role play,” including specific verbiage and intonation. Without practicing in advance, you leave it to your staff to come up with the right things to say on the spot. Every mistake they make can keep a new patient from coming back and even more importantly – prevent them from benefiting from your treatment plan.
- Set goals and display results: What you can measure, you can manage and on the same side of the coin what you measure will improve.
- Go the extra mile: Send thank you letters for referrals. Acknowledge special events like anniversaries, graduations, weddings, or funerals. Thank your patients for being on time, complying with your treatment plan, and meeting payment deadlines.
Learn more about increasing your practice revenue.
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