Serious Lessons Learned from Occupational Medicine Leaders

Financial Lesson in Urgent Care and Occupational Medicine:
Know the Difference Between Profits and Revenue

Many an urgent care center thinks that it is a financial success because it has passed the one-million-dollar, two-million-dollar or some other revenue landmark. But revenue is only one part of the equation. Note: When urgent care professionals speak of revenue they often mistake “revenue”, i.e., billed dollars with “collections”, i.e., bank deposits.

For the sake of this paper, let’s assume that both revenue and collections are healthy. Does that mean that the urgent care center is financially healthy? Of course not. The clinic can be losing hundreds-of-thousands of dollars, even with millions in revenues.

True profits are not just determined by the amount of collected dollars, but by the difference between collections and expenses. Note: For the purpose of simplicity, we are not going into accounting terminology of the differences between net revenue, profits, EBITDA (earnings before I taxes, depreciation and amortization), etc.

The key word here is “profit”. A financially successful urgent care and occupational medicine clinics does not just track revenue and collections. Business success will depend on holding operational expenditures (wages, benefits, rent, interest, etc.) below the level of collections. That may sound basic, but the real application takes an immense amount of personal and fiscal discipline. That is the only way that a clinic will yield true profits.

Our experience has shown that start up clinics tend to make three errors that will affect profitability. The errors are:

1. Excluding occupational medicine in your program

2. Underpaying the owner wages

3. Wasting money on unnecessary expenses
   

Occupational medicine can be the financial engine of your urgent care practice. In a time of economic stress and rising healthcare costs, even a small amount of occupational medicine services can increase revenue and drive your urgent care profitability. For example, if by adding occupational medicine services, you can serve five more patients each day, you might add $400 to your daily collections (annualized to over $120,000). You may even be able to serve these five patient without adding even $100 of expenses, as seeing these patients may not require more staff, will not cost any more in rent, and you will not have add one dollar to your heating or air conditioning bill. That means that you may add $120,000 in annual revenue while adding less than $30,000 to your expenses. Now that’s a real bottom-line impact.
You can add this essential service line by building on your existing urgent care services. Occupational medicine services that you can effortlessly integrate into your urgent care clinic include:

• drug and alcohol testing,

• pre-placement exams and screening,

• and work related injury/illness treatment.
  

Many companies discover that urgent care centers are an excellent, cost-effective alternative to the hospital emergency department for occupational medicine care.

Underpaying owners is a critical financial error. Often providers work at their new clinic while maintaining hours at an Emergency Department or other employment until profitability is obtained. This makes perfect business sense. But when you look at your finances, don’t make the mistake of not accounting for reasonable physician wages. Your clinic is not profitable until you are able to pay yourself reasonable wages and then you have profits left over. You can not imagine how many urgent care centers approach us for sale with the misunderstanding that they can include the owner physician wages in the profits of the center. Many times these urgent care centers are actually losing money and showing absolutely no profits, as the physician is being paid less than the going wage for the hours devoted to the clinic. Even though you are working for yourself, you may be loosing money if you do not account for your wages. Do not omit your true wages in the fee column of your financial statement.

Keep your operational expenses low. You must be able to differentiate between “must haves” and “want to haves”. A good rule of thumb is “used but nice.” Your urgent care should not replicate a fully stocked emergency room. Establish the services you are going to offer then purchase the necessary equipment and hire the necessary staff to deliver those services.

Your successful urgent care and occupational medicine clinic will provide both personal satisfaction and profits!

Wishing you great success.
January 2009