In medicine, the word profit can garner negative connotations. Often, we see doctors who run practices that make hardly any profit, and don’t feel comfortable discussing practice income and expenses with their other doctors – be they employees or contractors. Every time the medicare rebate goes up, the normal practice increases their fees respectively, and around 60% of this increase in fees goes directly to the practitioner. What we have seen in the last five plus years is that the rebates just aren’t keeping up. Fee growth has had to come to cover costs of running a practice.
We find doctors are more concerned with patient care and clinical governance than numbers. It’s probably why you became a doctor, and I became an Accountant. What we see though, as Accountants, is that if you are not continually reviewing your cost base, and associated revenues the already slim margins on your practice diminish further. Not making profit, or making very small profit can lead to big issues in a practice.
Running a practice is expensive. Rostering adequate nurse ratios, mandated award rate increases, rent increases, computer and technology costs, it all adds up. Throw in COVID19 that initially made all general practices into bulk billing practices just over twelve months ago. Initially, the move to bulk billing was a significant hit to most practices. Practices have to be run lean, you have to be able to react quickly. Look at Personal Protective Equipment.
General Practices that had cash surpluses, based on prior profits, were able to buy bulk equipment supplies at the beginning of COVID, they had the cash available to act.
Only practices that are sustainable can:
- Well-staffed reception – think short wait times on the phone
- Good nurse to doctor ratios
- Consistent administration staff – good rapport with patients
- Well maintained premises
- Current and working technology
- Replace technology and equipment breakdowns quickly
In short, you need profits and the associated cashflows to be able to run a good practice. Talk to us today to get a better understanding of how to make your medical practice sustainable now and into the future.