Could you be responsible for the death of your Practice? Four key areas to watch!

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What keeps Practice Owners and Managers up at night – 4 key areas to watch!

If you are too busy to read this, you are missing out on an opportunity to learn how to work more efficiently and effectively in a way that is both sustainable and profitable. This news alert is all about setting the right priorities, so that you have more free time to work on what you love to do every day.


 You may be asking, what benefit does high performance practice governance training have for me or my Practice? Your practice is your biggest investment in life. However, your Practice may be the most neglected problem you have, perhaps due to ego, ignorance or apathy.  For some, the recent budget cuts and a jumpy workforce in a do-more-for-less world has led to a head-in-the-sand mentality. However, others have taken a more proactive and less defensive approach, where everything is in context and the Practice is well placed to counter any challenges. Which Practice do you want to be?

How do you run a successful Practice? For legal reasons delegating this to a practice manager is not enough. They did not teach you how to run a Practice in medical/dental or allied health school. Would you perform a procedure on a patient if you had not attended medical or an allied school to gain the experience, training and knowledge required?

The first step to running a strong and successful practice is to ask the right questions so you get the right answers. The right answer to a wrong question means you still have not solved the problem. You need to treat the problem and not the symptom to solve it, but this is difficult if you can not define the problem in the first place. It is important to know the right questions to ask. Using the oft-quoted saying of Donald Rumsfeld, in your position as a business Owner or Practice Manger, you are only positioned to do anything about the known knowns and known unknowns, but not the unknown unknowns.


For example, the Medicare Freeze is one of the known knowns, but did you know that on average GPs will lose up to $30,000 p.a. as a result of this policy? For further detail about the impact of the Freeze, see Seven fast facts about the indexation freeze and What keeps doctors and practice managers up at night. For many Practices, the Freeze has and will make a huge impact, but how much will it specifically affect your practice? What do you need to know to overcome it? Firstly, there are the simple three legged stool solutions:

  1. Increase prices, which means raising the quality perception and experience of your service or product as a valuable service when compared against your competitors;
  2. Cut costs, which means becoming more efficient without reducing quality; or
  3. Increase volume, which means get more patients into your waiting room.

The next key step is to understand the priority that each issue currently facing your practice deserves, and detailing practical solutions to these challenges.

The final step is to ensure that the appropriate systems are working, that all staff are aware of the changes and that any solutions are appropriately monitored and reviewed for performance.

To run a successful Practice, there are four key areas any Owner, CEO or Practice Manager must consider and monitor:


1.Financial – are you financially sustainable?

Financial literacy

Have you ever looked at benchmark results for the healthcare industry and wondered, how did they do that?

For example, how can practices achieve a net profit result of 30%?

Our most recent Good Bad Ugly National benchmark report highlighted that the top 25% of general medical Practices have the following performance indicators. How does your practice rate?

  1. Net profit % (BPS) – 30%. This pays for a family home, a holiday and/or a loved one’s education!
  2. Revenue per full time equivalent doctor – $380,000
  3. No shows  – nil per month
  4. Salaries as % revenue – 32%
  5. Productivity – all FTE – 4 patients per hour
  6. Average fee per patient – $90
  7. Percentage of bulkbilling – 34%
  8. Debtor days – 10
  9. Overhead per FTE – $140,000 p.a. in a high growth practice
  10. Optimum Leverage structure – 3 Owners to 9 non-Owner doctors in a single location

It is not uncommon to find that Practice Managers and/or their Owners are not financially literate. In some cases they do not even care. It is as though no news is good news, resulting in abdication of responsibility to their Accountant. Unfortunately, this is not good enough if you are concerned about your financial security. Often, such a situation is the first sign that a Practice may not be operating efficiently or effectively.

On a more serious note, many Practice Managers and even Owners are not aware that they can be personally liable and that it is illegal to operate a business that cannot meet its debts as and when they fall due. This is called insolvent trading. For example, by now each Practice should have assessed the serious impact of the Medicare Freeze on their bottom line. See: Seven fast facts about the indexation freeze.

For any Practice, the number one priority (like it or not!) is making a profit so that you can make sure that you can pay your bills on time. There is no point in providing high quality comprehensive care where the patient benefits but your Practice dies. In the end, the lack of a sustainable business model will not benefit patients as it will result in the death of the Practice.

Broken railway line

Do you have a problem? Thankfully, this is simple to work out. Ask yourself or your Practice Manager what your business model is. Ask them what your key performance indicators “KPI’s” are. Ask them what your profit margin is on your products and services, and if you are meeting them without compromising quality.

We routinely see that one of the most common problems that Practices have is that they do not have a simple way of understanding their financial statements, and how their necessary but complex legal and tax structures interrelate.

Your Accountants or Advisers need to assist in explaining how to interpret your numbers and what to do next. Many Practices are not financially literate, and therefore cannot operate efficiently even if they desired. Understanding your Practice financial statements and structure is a mandatory requirement for a Practice Owner or Practice Manager. It is hard to get the rest right without first learning the basics of your business. We have simplified this for our clients. See “free quarterly business coaching” below.

2. Customer – who really are your customers i.e. the people that pay you?

Who is your customer

Who are your customers? Most will say the patient. This is partly true. For a Practice, the truth is that the doctors/providers that provide a management fee to the Practice are the key customers. These Providers pay the bills of the Practice. Ask yourself, are they happy? What could you do as a Practice to ensure they are not a flight risk? Have you considered a lower fee for performance, such as a 5% discount to their service fee for all income billed greater than $300,000 p.a. Is this a possibility for your practice? Are there regular empty appointment slots, no shows or consulting rooms?

In addition to keeping Providers happy, many practices also want to attract more fee paying patients  in order to balance the books. Reducing bulk billing is a key strategy to combat the Medicare Freeze. There are many cost effective strategies that you can implement to increase your numbers. See

It is important to target who your customers are and assess what they need and want. To find out the latest on what patients think, see the latest research on how patients choose a practice: :

For what Providers and your Staff want, clients can use our free templates to survey your practice staff, see  .

3. Process – What systems exist that protect your reputation?


Often the cheapest way to increase profits is to improve systems. A big tip is to keep your practice manual up to date. Monitor what recurring problems that the staff report. Prioritise the significant ones and implement them now! Examples include on line appointments and automatic SMS patient follow ups from medical records. On the positive side, look at ways to increase patient awareness of your services like using waiting room TV services such as our alliance partners Tonic Health Media  see

4. Learning and Growth – How does your team learn from errors and opportunities?

I got it

Most importantly your people and positive engagement is critical to any positive outcome. Remaining open and transparent is the key. When we do not understand why we are or are not doing something, this can result in miscommunication, unnecessary fear and mistrust. When you are open and transparent, this empowers and inspires your staff to do the right thing the right way the first time around. The Practice culture should be to work better every day.

Where to from here?

Now for some of you, this exercise may seem like quite a complex and time consuming process. We have been successfully running trials with practices and the results have been remarkable for them. We have codified into a one page Balanced Scorecard report the common key areas that a practice must continuously monitor. Furthermore, we find that within 2 to 4 hours we can train your management team to execute this program.

Balanced Score card Zoom Example

Contact us for more information and a customisable template if you are a client of Health and Life. We have done all the heavy lifting for you. This should ensure it is a quick process to customise this template when you use our Governance and KPI Setting program. For our accounting clients only, we provide free quarterly business coaching with your management team to give feedback on how you are going and what you need to do next to grow your sustainable business.

In these sessions, we will reviewing each of the above KPIs and identify what high performing firms are doing to achieve great results. With each KPI, you will be given a step by step process to improve the profitability of your Practice.

We’ll also chat about the OUTLIERS – those firms that are at the upper end of the top group of the practices. We will give you insight on strategies that these firms implement to achieve exceptional results, including a net profit margin of up to 30%. Finally, we’ll discuss how to actually implement and monitor the changes, rather than simply talking about it.

Where to from here: – managing your practice just got easier!

  1. Obtain confidential second opinion immediately and at no obligation or cost.Advice and support

We say it is important to ask the right questions rather than getting the right answers. To help you understand your unknown unknowns contact us at 1800 077 222 or email at Health and Life – national Health Practice, Tax and Accounting Advisers since 1992. Alternatively visit our website at

We can review your strategy, financial statements and all your arrangements and provide written advice to you for your legal advisers to answer. We are registered tax agents and can do your annual tax and accounting work as well as provide sound advice. Please note we are not lawyers so you must seek independent legal advice on any of the above issues.

It is important to do this now, because it is more expensive to restructure or fix up your practice in the new financial year commencing 1st July see our Why Restructure now article or see Please consult us or your legal or professional adviser before acting on any information.

  1. Join our discussion on Linked In

Join us on Linked In for real time updates see for further updates or keep watching this space.

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