You own a physician group.
The line in your waiting room goes out the door. Appointments are delayed. Reimbursement is decreasing. Regulations are increasing.
You’re having a hard time making enough money to maintain business operations.
People are mad.
What do you do?
Your Business Is A Factory
Think of your healthcare business as a factory. You operate an assembly line.
Your business takes in patients with healthcare needs. It outputs patients who have received comfort, care and answers.
There are three operational levers that you can adjust in your healthcare factory to create profit. However, beware. Pulling these levers can create profit, but they can also create loss. You want to be mindful about what you are doing.
The 3 Levers of Healthcare Profit:
1. Operational expenses are your costs. They are the paychecks you pay employees. The supplies you purchase. The building where you do business.
2. Inventory is the number of patients in your system at any time. The patients with appointments, in your waiting room, and in your exam rooms.
3. Throughput is the number of patients for whom your office can complete care during a period time. The number of patients who present with healthcare needs and leave having received comfort, care and answers.
You want to:
1. Decrease operational expenses. The less your costs relative to your revenue, the higher your profit.
2. Decrease inventory. The more patients waiting for an appointment to see you, sitting at registration, or staring at the walls of your exam room, the higher your inventory. The higher your inventory, the more employees, the bigger the office, and more supplies you need. The higher your expenses.
3. Increase throughput. You get paid for throughput. The more patients who leave having received comfort, care and answers, the more your business makes.
You want to spend less, use less resources, and see more patients. Sounds easy.
The Amateur Move
The first instinct of any business in a challenging environment is to cut operational expenses. This makes sense. Reduce the costs of business to preserve cash.
You decrease the use and purchase of supplies. You reduce or freeze the hiring of staff. You’re frugal.
But what happens to inventory and throughput? What happens if you cut expenses and it increases the patient’s length of stay and decreases the number of patients that you can see?
You make less. Things are worse. An amateur move. But so common.
Reduce staff and increase waits. Increase the menial workload of your highest paid physicians and nurses and reduce throughput.
Be careful. Each lever you pull can effect the others. It is good to reduce expenses, but not if it increases inventory and decreases throughput. Not if it decreases revenue and profit.
The Primary Goal of Business
The primary goal of your healthcare business is to make money.
Yes. Your mission may be to palliate and cure. You may want to promote a healthier lifestyle. However, the primary goal of any business is to make money.
Money is the fuel for business. Without money your business ceases to operate. Your mission is not fulfilled.
You are paid to see patients. You are paid for throughput.
Figure out the barriers to throughput. Pull that lever. How can you most efficiently address the unmet needs of your patient? How can you most rapidly get them through your healthcare factory?
Putting It Together
To improve the profit of your business you have three levers to pull. You should never just pull a lever. Each one (operational expense, inventory, and throughput) can effect the other. Think and plan accordingly from a global view of these effects.
Throughput pays your bills. Your mission is reflected in throughput. Decrease operational expenses and inventory only in the light of their effects on throughput.
Things you can do now:
Write out the steps of each process in your office. Figure out what resources are needed at each step. Time them. Figure out the key steps that create the longest waits and improve them.
Read The Goal: A Process of Ongoing Improvement by Eliyahu Goldratt. It’s a very accessible and fast read about this topic. Or you can read my kindle highlights.
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