Running a therapy practice requires many of the same skills needed to be successful in other businesses: the ability to budget, a talent for making hard choices, the knowledge to be able to select cost-saving technologies and services and a desire to stay up-to-date about the intricacies of billing and employee insurance. The savvy practice administrator will soon discover which corners to cut and which best practices to keep at all costs.

Looking at Billing

Billing is the lifeblood of any therapy practice; it brings in revenue for the services provided, hopefully without causing undue costs. However, Colin Swanson, co-owner and director of MRPT Physical Therapy in New York City notes that many practices falter when establishing a billing plan.

“A lot of physical therapists are not trained in terms of business,” Swanson says, noting that other professions, such as dentistry, routinely train their professionals in the practice management skills they will need. Therefore, he finds that one of the biggest mistakes that therapy practices make is outsourcing their billing operations to agencies that charge relatively high fees. “A lot will go for the easy option; a lot will use billing companies that charge 8 or 9 percent of gross revenues,” he says.

In the case of MRPT Physical Therapy, Swanson is experienced with billing and chose practice management software that helps manage the billing; the practice then uses Claimsnet, an Internet service that serves as a gateway to insurance companies, to submit the bills to the insurers. Swanson’s practice pays about $40 a month for this service.

Additionally, prompt turnaround of billing is critical to maintaining the cash flow that a practice needs to operate. This is another place in which MRPT Physical Therapy keeps an eye on processes to manage their money. Swanson notes that paper claims can take three to four weeks to make it through the process to payment. “With electronic claims, it is about seven days’ turnaround,” he says. This keeps the cash flowing to the practice. Swanson also urges practices to keep up with their billing rather than lagging behind, as some practices do. “We bill immediately through our practice management software,” he says.

Negotiating with Vendors

Purchasing products or supplies is another area in which therapy practices can wind up losing money. Lisa Miller, president of Neptune City, N.J.-based VIE Healthcare Inc., offers four suggestions for practices looking to reduce their expenses themselves.

First, “ask all your vendors for 5 percent discounts,” she says, noting that seeing a cost reduction is often as simple as just asking. Second, look at the invoice to see if all discounts have been applied and no unexpected charges have been billed; Miller notes that many practices have a disconnect between the person who negotiated a contract and the one that ultimately pays the invoice, leading to mistakes not being caught. Third, “ask for free or reduced cost shipping” from vendors. Finally, ask employees for places that they think are ripe for cost reduction.

Once these initial steps have been taken, a practice may wish to call in a company like Miller’s, which offers a Capital Expense Reduction Service. With this service, VIE performs an analysis of what the practice is paying for leasing and purchase of equipment and supplies. Without suggesting that the practice change the vendors and products that they have carefully selected, VIE finds places where costs can be reduced.

For example, VIE checks invoices to be sure that negotiated discounts have been applied, as suggested above. And, the company checks the terms and conditions in the contract to see if there are “evergreen clauses,” which cause the contract to renew automatically if certain conditions are not met and certain communications have not taken place by a specified date. “The language is never in favor of the hospital,” Miller says. Additionally, practices can opt to have VIE run sessions in which employees make suggestions about cost savings. VIE finds the places that practices are not fully realizing potential savings without disrupting the choices the practice has already made.

“[Practices] bring us on board to do an analysis at no charge; [price] is completely performance based,” says Miller. Typically, clients will pay a third of whatever VIE saves them for the first year, then they will realize all of the savings in subsequent years.

Insurance Woes

Anyone running a business that offers health insurance as an employee benefit is painfully aware of the skyrocketing costs of this coverage. “Premiums have increased 25 percent over the last few years,” says Swanson. “We try not to skimp on insurance coverage for our employees,” he says, noting that the practice offers a PPO plan that costs $420 a month per employee. While more deluxe plans are available, the practice cannot afford the additional premiums, and the employees, likewise, are unable to shoulder the extra monthly burden that funding the overage would create.

However, practices can take steps to keep premiums under control. One option, of course, is to offer less complete coverage, which is a choice that many practices are reluctant to take. However, there is an option that makes cutting back more bearable.

Some companies and self-employed individuals opt to carry only high deductible insurance, sometimes known as a “catastrophic” plan. Under these plans, coverage does not kick in until the insured has amassed a high amount of charges that he or she has paid for. The amount is typically high enough to keep the insurance company uninvolved in routine well-care and minor illnesses and injuries, although these plans often have negotiated rates with physicians for these services.

The insured parties then fill the gap with a health savings account (HSA). Either the employer, the insured or a combination of the two can make pre-tax contributions to the HSA, which can then be accessed to pay for medications, office visits, eyeglasses and a variety of other health-related expenses. In this way, insurance premiums are kept down while employees still have options for paying for their healthcare.

In sum, managing costs and maintaining cash flow are key to the success of every business. For therapy practices, the challenge is to be a good monetary steward while still providing the highest level of patient care. By paying attention to details, all practice managers will be able to reach this goal.

Jennifer Patterson Lorenzetti is a freelance writer for Therapy Times. Questions or comments can be directed to editorial@valleyforgepress.com.