<img style="float: right;" src="https:\/\/opedge.com\/Content\/OldArticles\/images\/2003-04_05\/Schmitke,-Randy.jpg" hspace="4" vspace="4" \/>\r\n\r\n<b><i>"Yes." Now that is an answer that will\r\nget some folks' blood boiling. Immediately, your thoughts might\r\nbe...<\/i><\/b>\r\n\r\n<i>"How does he know what I can or can't afford to do? He doesn't know my company. He doesn't know the difficulties I have had in getting paid by insurance companies. I can't give away any more of my revenue dollars, because I won't be able to pay for components, overhead, and other expenses. This discounting thing is crazy-it just leads to poor-quality patient care."<\/i>\r\n\r\n<b>You're right<\/b> . I do not know what your practice\r\nis experiencing. Nor do I know the financial position of your\r\ncompany: how much debt you have, your payer mix, or the volume and\r\ntype of business you do. However, what I do know and what I think\r\nyou will agree with, are three fundamental principles of business.\r\nThese principles have stood the test of time in our free-enterprise\r\neconomic system and today influence almost every industry.\r\n\r\n<b>The principles are:<\/b>\r\n<ul>\r\n \t<li>Business is about perspective;<\/li>\r\n \t<li>Change is imminent;<\/li>\r\n \t<li>Competition always produces\u00a0something better.<\/li>\r\n<\/ul>\r\n<h2>Beauty Is In the Eye of the Beholder<\/h2>\r\nBeauty is about perspective. Business is about perspective. Each\r\nof us looks at inward and outward beauty with different results.\r\nEach of us looks at business methods, processes, approaches, etc.,\r\nthrough unique eyes. Often there isn't a right or wrong answer, but\r\nthere are methods and approaches that produce better results than\r\nothers. These results are influenced greatly by the people\r\ninvolved, the technology used, governmental restrictions, customer\r\nneeds, and many other factors. A company's view on the influencing\r\nfactors and the challenges involved, combined with its ability to\r\nexecute business strategies and decisions based on this view, can\r\nultimately be the deciding factor in success or failure.\r\n<h2>'Change' Is Not a Four-Letter Word<\/h2>\r\nWe talk a lot about "change" and the fact that we need to do a\r\nbetter job of accepting it, but it seems that most of us are still\r\nresistant to it. What really happens is that we are willing to\r\naccept change on a selective basis.\r\n\r\nIf we think that change is going to affect us negatively, then\r\nwe become less willing to allow it or facilitate it. We commonly do\r\nthis without considering why the change is occurring, what the\r\nintended result is, and how it might positively affect others\r\ninvolved.\r\n\r\n<img style="float: right;" src="https:\/\/opedge.com\/Content\/OldArticles\/images\/2003-04_05\/CA-Finance.jpg" hspace="4" vspace="4" \/>\r\n\r\nThe O&P industry is changing. Although the changes occurring in O&P and in healthcare as a whole do not always leave us where we want to be, the intent of these changes is logical. We need to improve our healthcare system by providing more patients with high-quality care in the most efficient and cost-effective manner possible. To accomplish this, change is required.\r\n<h2>Don't Whine-Compete!<\/h2>\r\nCompetition remains a pillar of the free enterprise system. The logic has been proven time and again that when there is plenty of competition in the marketplace, true competitors will figure out how to do things better, faster, or cheaper because that is what they must do to survive. Why should the business of healthcare be any different? The focus of the O&P industry should be on competing, not on making excuses as to why we should not have to compete.\r\n\r\nIf you consider any other industry, you'll see that similar\r\nforces are at play. How do we think progress is made? My father,\r\nwho is now retired from General Motors, used to say that foreign\r\ncars were junk compared to American-made automobiles. However, the\r\nJapanese figured out how to make cars more efficiently for a\r\ncheaper price and with the same or greater quality. After the Big\r\nThree realized these competitors were here to stay, they had to\r\nraise their own bar and compete harder.\r\n\r\nI am not suggesting that, both individually and as an industry,\r\nwe shouldn't push back against the tide of legislative issues or\r\nmake our case to insurance companies, vendors, government\r\nofficials, or others - because I think we should. We should make\r\nour best arguments to position our industry to offer the best\r\npatient care possible. We should support our\r\n\r\nassociations who present our position. And we should not be\r\nnaive in thinking that all competition is fair competition. But\r\nlet's focus on competing, not on making excuses.\r\n\r\nThere are practical actions that a facility owner can take to\r\nprepare his business for providing services at a reduced fee.\r\n<h2>Consider your business model.<\/h2>\r\nHave you consciously talked through what your business model is\r\nand how you intend to leverage it for success? Are you making\r\ndecisions that are consistent with the structure of that model?\r\n\r\nFor example, are you a "boutique" provider? If you are, then you\r\nprobably are very small and operate without accepting contracts.\r\nMost of your work is done through Medicare, complemented by a\r\nsmattering of individually negotiated work with third-party\r\nadministrators or cash-basis patients. If you are considering\r\nadopting this business model, then you need to be sure that your\r\ngeographic market can support it and that your expenses can handle\r\nlow-volume and possibly fluctuating work.\r\n\r\nShould you consider growing through merger or acquisition?\r\nGeographic coverage through size often positions you to handle\r\ngreater volume - and to attract greater volume through contracting\r\n- which may allow you to spread your fixed costs over more sales\r\ndollars. Increased volume may allow you to leverage an investment\r\nin technology, which can perhaps make your business more efficient\r\nin the long run.\r\n\r\nAre you actively leveraging or pursuing an alliance or network\r\nrelationship? Is there a way you can maintain one office location\r\nwith limited staff, yet achieve the presence of a larger\r\nfacility?\r\n<h2>Reporting, reporting, reporting.<\/h2>\r\n<img style="float: right;" src="https:\/\/opedge.com\/Content\/OldArticles\/images\/2003-04_05\/CA-Money-Graph.jpg" hspace="4" vspace="4" \/>\r\n\r\nAre you getting good reporting on your business? You need to become intimately knowledgeable about what is happening in your business beyond your "gut feelings." Do you know what percentage of your business is from Medicare, managed care payers, or VA? Have these numbers changed over the last couple of years? Do you know what percentage of your gross sales dollar you write off\r\nas a "contract allowance" on average each month? Do you know what percentage of your sales dollar goes to the actual production of prostheses or orthoses?\r\n\r\nIf you don't have solid information that takes you only minutes a month to digest and analyze, then take some time to ask your accountant or software provider to help you put a plan together to accurately gather this information. If you don't have someone you\r\nalready know who can help you, call your colleagues for references until you find someone who can.\r\n\r\nGood information provides the knowledge necessary to make good\r\nbusiness decisions.\r\n<h2>Leverage technology.<\/h2>\r\nTechnology is not the solution to every problem, but it is a\r\ntool. Are you using technology to its optimal level in your\r\npractice? Are you minimizing the number of administrative staff\r\ninvolved in operations because you have implemented an efficient\r\npatient scheduling, patient registration, and medical billing\r\nsystem? Have you analyzed how collections might be improved by\r\nutilizing the system to organize information or produce automatic\r\nfollow-up letters? How are you handling purchasing and payables?\r\nHave you considered CAD lately?\r\n\r\nResearching technology and how it might affect your practice\r\ntakes time, but so does everything worthwhile in life.\r\n<h2>Minimize fixed costs and maximize variable costs.<\/h2>\r\nFixed costs are those costs that exist no matter what the volume\r\nof business is. A practitioner earning a fixed salary of $60,000\r\nannually will earn this salary whether he\/she generates $300,000 in\r\nsales or $750,000 in sales. A variable cost is one that fluctuates\r\nin the total amount, depending on volume, but which generally\r\nremains the same for each individual unit. The cost of the\r\ncomponents in a device is normally variable in character because it\r\nis incurred per unit.\r\n\r\nWhen you are evaluating your financial statements and analyzing\r\nyour costs, are there any costs that you could shift from fixed to\r\nvariable? Have you considered shifting some fixed compensation to\r\nincentive-based compensation? Under incentive compensation, the\r\nstaff members are sharing in the risks and successes of the\r\ncompany, and thus often have greater motivation to make productive\r\nchanges and push harder on a day-to-day basis.\r\n\r\nHave you considered lately how central fabrication might be used\r\nin your operation? Do you really need all your satellite offices,\r\nor can you reduce these fixed costs through office-sharing\r\narrangements or alternative scheduling of practitioner time?\r\n\r\nThe reality is that I cannot tell you if you can or cannot\r\nafford to discount. Nor can I tell you ten magical steps to make\r\nyour business more successful and more profitable. But I hope that\r\nI have challenged your thought processes and your perspective. I\r\nhope I have encouraged you to be a better business person - because\r\nyou are in the business of patient care, and discounting is a\r\nbusiness issue.