Owning a medical practice is a common goal for doctors, and there are many benefits to starting your own healthcare business, including:
- generating more income
- greater flexibility and independence
- flexible working hours
- building a business asset that you can scale, grow and later sell.
But business management skills are not taught in medical school, and there is more to owning and running a medical practice than just treating your patients.
While there are many contributors to the success of a medical practice, financial performance is a critical one. Here we will look at ways to plan and track your financial performance for greater business success.
Plan for success
All successful, sustainable healthcare practices have a solid governance framework that includes the big-picture business strategy, values and mission through to the policies and procedures that inform the daily tasks that achieve your strategic goals.
Financial performance is an integral part of your planning and practice governance. It includes elements such as your business budget, financial compliance obligations such as tax and payroll, and reporting.
Your business plan needs to include a budget, against which you can monitor and measure how your financial performance is tracking: practice revenue and expenses and your growth potential against targets, quality of patient care and staff performance.
The right resources are a financial gain, not strain
When you’re a doctor-owner of a practice, you can’t expect to treat patients and do all the business administration tasks effectively. So, depending on your business structure, you may need to either outsource some services, or employ staff with the necessary skills.
Generally, human resources will be your biggest expense, but also your greatest asset. From office management to reception and administrative staff, you need to choose wisely. Recruit people who are capable, with demonstrated skills in their role, who fit your culture and will positively add to your practice.
Having clear policies and procedures in place is critical to getting good performance from your team – which ultimately impacts your financial performance. And the person who is central to making sure your policies and procedures are up to date and adhered to is your practice manager. A good practice manager helps you get the best out of the resources, from staff to equipment to supplies, which allows you to maintain your flexibility and minimise your costs as practice owner.
Another valuable resource is an automated practice management platform, such as PracticeHub. This online program helps your practice manager keep your policies and procedures current and aligned with legislation and standards. Built-in training modules keep staff upskilled in their roles and there are reminders and alerts for equipment maintenance, practitioner registration and insurance renewals, with the Ahpra Alerts and Certificates of Insurance apps.
Measure performance regularly
Once you’ve outlined what financial success looks like for your practice in your strategy and budget, you can measure how well your business is meeting your goals. Your main indicator of financial performance is your profit and loss statement, which outlines your business income and expenses. Your practice income is determined by factors like the number of doctors working there, average consult time, average fee per consult and number of consults.
These factors drive your gross medical fees and overall financial viability. Your main expenses include salary, wages, rent and tax.
As a practice owner, you need to stay across your profit and loss statement at least quarterly – whether or not you do your own finance admin or outsource to a bookkeeper, payroll or accountant. Cloud-based accounting programs such as Xero give you an overview of your practice finances, quickly and easily.
Know your financial liabilities
Good financial management includes planning for expected or hidden liabilities that may impact your financial performance. One obvious liability – and responsibility – is your payroll obligations.
For example, as a director of a business, you are personally liable for any unpaid superannuation. So, you need to ensure your payroll system is robust and the staff looking after payroll are reliable. Also, if you buy into a practice, you may inherit payroll liabilities such as annual leave or long service leave.
Potential fraud is another, not so obvious, liability you need consider. It can occur if you don’t have your finger on the pulse of your financials or have reliable oversight of your practice’s financial handling. The risk of fraud is substantial in terms of the absolute amount of dollars you can lose during the lifetime of your practice and missed opportunities from that lost money.
The cost of your time as practice owner and doctor is another potential liability, which can drain money from your practice. Most doctors who start a practice spend too much time doing administrative tasks that could be done by someone else at $30 an hour, instead of a doctor’s rate of around $250 an hour.
Over time, losing $250 an hour versus $30 an hour can reduce your enjoyment of owning a practice and your quality of life. So, outsourcing these tasks, or employing the right people to do them, frees you up to do what you do best – care for your patients.
Find out more tips around planning and assessing your practice’s financial performance and watch the replay of our recent webinar.
PracticeHub can help you set up systems and processes that make financial management easier. To find out more, book a demo or call 1300 96 86 36.
Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular practice. Compliance with any recommendations will not in any way guarantee discharge of the duty of care owed to patients and others coming into contact with the health professional or practice. Avant and PracticeHub are not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published. © Avant Mutual Group Limited 2021.
