REPLAY: Improve Your Profitability One Step at a Time
MHA consultant Josh Meyers joins Paul to discuss charge capture, scheduling, practice liaison programs, leading change, and the three metrics PT business owners should track to drive EBITDA.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good morning and welcome to another episode of Crucial Conversations. I'm Paul Martin. I am the founder and president of Martin Healthcare Advisors and we're gonna have a crucial conversation today with our very own Josh Meyers. Hey Josh, how you doing? Doing well, thanks Paul. Thanks for having me on. Josh is a consultant with Martin Healthcare Advisors and has really taken improving companies performance to totally new levels that we at Martin Healthcare Advisors have seen in the past. And what we wanted to do today was to talk to Josh a little bit about how he is making such dramatic changes in value driving EPIDA lowering risk in the clients that he has been working with since his time with Martin Healthcare Advisors.
So Josh, let's jump in. Sounds good. So Josh, let's start with the assessment. Share with us how you identify some of these areas of opportunity for improvements in a physical therapy practices EPIDA and as well as the risk profile. Sure. Yeah. I think with almost every client we work with, we start with what's called an outside in assessment. Which is basically a look at the company from the eyes of an acquirer, from the eyes of the market to say, you know, what kind of cash flow is this company generating and then what are the risk factors that are associated with that cash flow production.
And so when we do an outside in assessment for a client, part of the work that we do is we really do a deep dive into operations because the operations are what truly drive the revenue performance of a company. And when we do a deep dive into operations, we look at, you know, all the different typical ratios you'd see at a PT company. And when one of those metrics isn't performing, it kind of sticks out like a sore thumb. You know, a lot of times companies do most things well, but then there's always a few things that could really use some improvement or that with some improvement would really affect the bottom line.
Absolutely. Absolutely. And so Josh, one of the things that you have really kind of upped our game at Martin Healthcare Advisors is in the area of what I know you and we call charge cap charge capture. What are some of the common charge capture opportunities that physical therapy business owners just tend to overlook and how do you help your clients capitalize on these to improve their cash per visit? Sure. When you think of cash per visit, obviously that's just a simple metric that says how much cash or how many collections dollars of collections came in a given month and how many patients did I see in that given month and that's the ratio of those two numbers.
So it really there's a process, right? It's it's everything from coding and billing to claims being sent out to collections and AR in the back end. And anywhere along that process, it can get disrupted and it affects your ratio of your cash per visit. On the front end with the therapists, we've done a lot of work with educating with, you know, using the right CPT codes, billing for the level of skilled service that PTs are providing. We've also done a lot of education with you know Medicare billing rules and the AMA billing rules and the different the diff differentiating between the two.
And that helps therapists either you know be more efficient with their billing or more efficient with scheduling. Mentioning scheduling a lot of times receptionists or the people that put patients on the schedule can impair billing as well if patients aren't being scheduled accordingly to allow for maximum billing and coding per payer. Right. And so that's an option that we look at as well. And then on the back end, with collections, we really look at over-the-counter collections, statements going out, clean claims going out, and, you know, really kind of doing a screen of AR in the back end to say how much money are you leaving on the table because you're not collecting that, you know, at the time of service or cleanly when you do your billing.
So yeah, so there's a big spectrum, but a lot of levers to pull in that realm. And as a former owner who managed, you know, physical therapy professionals. You come with a lot of experience in how difficult it is sometimes to change those habits, those billing habits. And so how have you seen that your clients and maybe you can give us a quick success story, how they're able to change those behaviors of their staff and really empower them to you know have the energy as well as have you know, let's call it choice of better words here.
We're going to call it not just knowledge but the wantingness to bill appropriately for the skilled care that they're actually providing. Tell us a quick story on how you worked with a client to do that. Yeah, sure. I think with any change process, no matter what kind of change you're trying to implement in a practice, you have to overcome the people part of things, right? People are naturally resistant to change and people are naturally they naturally default to the status quo, right? And they even if it's good change they default to the status quo.
And so in order to enact you know in this case like at a charge capture change we have to help the therapists overcome a fear of change and we have to give them permission to change and we have to create an environment in the clinic where it's okay to talk about the change and we have to create objective measurements so we can objectively say is this change taking place. So all of those things go into making change happen. You can't just tell someone hey do this and it happens.
I mean, that'd be nice, but that doesn't usually happen that way. Yeah. So, I guess with a recent client, the way from a charge cap charge capture example, we started off with some education with the staff, right? We needed to make sure the staff knew CPT code definitions, Medicare and AMA billing rules. And we did an inservice for the staff. But before that inservice, I made sure that the practice owner knew this content hands down. You know, just eyes closed, can give feedback. I helped the practice owner practice giving feedback to staff so that way when I did some education for their staff, they could circle back in the next day, that afternoon, and work alongside their staff and give feedback to make that happen.
We also, this was a multicl clinic practice. We also identified some like change champions in each of the clinics and made sure that there was somebody on site locally at each clinic that was really bought into why we're doing this change, why it's important to do, how it's healthy for the business, all those things. And that person was also another person that could help reinforce the change, answer questions, alleviate fears of change, things like that. So you kind of really have to look at a change process as a whole and put a framework around it and then you can go forward with some education and ask for the change.
So what kind of improvements have you seen with some of your clients in terms of change in value change in EBITDA what gle yeah with respect to like charge capture and encoding. Yeah just that one change. Yeah. So, I think the extreme example, I think we have a patient, a client that started around $90 cash per visit. They identified the fact that they could be reimbursed for more than four units and had never build more than four units. They didn't know that some CPT codes existed.
And so, we really went from like $90, $100 a visit to about $135 per visit, which is definitely not the norm. But just shining a light on this aspect of your business. A lot of times clients don't really know what their fee schedules are. Clients don't know what's allowed to be built for certain payers. You know, some payers you can build in a ball code with four units. Sometimes you can't. All those little exceptions. And when you just kind of do a screen to say, "What are you guys currently doing?
How can we potentially improve that?" There's there's a lot of change to be had. Yeah. And then that becomes the new norm. And moving forward with those kind of changes it can be hundreds and hundreds and hundreds of thousands of dollars to the bottom line which can mean millions of dollars on evaluation. Yep. Very true. So scheduling is always a big issue in physical therapy practices. What are some of the real benefits that business owners can expect to see as a result of improved efficient scheduling?
Sure. I guess I guess when you think about scheduling, I think every practice owner says, you know, they interpret that as how many patients am I seeing per day, right? But we all know that patients cancel, patients no-show, patients call and switch to tomorrow. So I guess for a quick example, if you want to see 12 visits in a day as a therapist, right, and you start your day with 12 visits on your schedule, you're not going to end your day with 12 visits on your schedule, right?
That's just it doesn't work like that. So you can back into it and say, "All right, I know what my cancellation rate is, and if it's 10%, I need to schedule 10% more than that 12 visits per day, you know, 13 or 14 patients every day, to make sure that happens." But I think the the other thing that's really worked well is with clear communication around scheduling. I think a lot of times practice owners will tell their staff, "We need to see more patients." Or they, you know, they'll tell the therapist, "You need to see more patients in a day." Or they'll tell the receptionist, "You need to schedule more patients this week." And what does more mean?
Right? That it's not clear in any way. So, but if you can have a target of like, hey, I know my business metrics and I know that to be profitable and have a healthy profit margin, I need to see x amount of patients per day. And back into that with your cancellation rate. Okay, all of a sudden, you know what? You need to schedule 66 visits this week so I can see 60 visits this week. And then everybody has clear communication. Everybody knows if they're succeeding or not.
Everybody knows if they're winning or not. You know, as a as a front desk scheduler, that person wants to know, am I doing a good job at my job? And if I know that I hit my 66 visits for that week, for example, I've done a good job this week. And if I haven't hit that target, I probably need to change something that I'm doing or do something differently to hit that target. So, some of it is being intentional about the numbers. Some of it is bringing all of your staff into the picture with respect to scheduling.
It helps to know your payers, right? There's certain payers that you need to have more time on the schedule to build the maximum number of units or the maximum reimbursement. There's other payers where you want the least amount of time on the schedule and everywhere in between. So, knowing your payers, knowing your staff capacity, you know, what therapists can handle a few more patients here and there, which ones can't, and working as a team approach to make that happen. So, there's a lot of different ways you can manage a schedule, but it definitely if you take a team approach, I think that's the best the best route to go to have the most success.
But then be objective in the process as well. Yeah, absolutely. And you know, I think you hit something really important there. As you said, scheduling involves everybody, right? Front desk. It's not just all up to the front desk. It's just not all up to the therapist. It really involves everybody. And to get the schedule right is so important. And what you know we really pride ourselves in is that when we look at patient outcomes is that while we are improving operation and financial outcomes we are not sacrificing at all patient outcomes and you know we're pressing to have that absolutely measured and continue to have that measured because that gives the staff physical therapists who are doctors right doctors of physical therapy kind of the shade that they still know that they're getting the same outcomes even though we're being more efficient.
And I think that's, you know, that's what's been, I think, so rewarding really for our entire team, Dave, Wayne, Elaine, you know, all of the consultants, that we've been able to maintain that continued financial operations, but also that clinical performance as well. Josh, let's talk about marketing efforts. You know we have over the years really refined a practice leaison. What kind of success are you seeing with your clients implementing a practice leaison program? Yeah. I guess the first thing that comes to mind is good things happen when you leave the clinic, right?
If if all you do is just treat patients in your clinic and never tell anybody in the world that you're doing great things or giving feedback to anybody in the world, they don't know about you, right? They can't come find you. So yeah, so the role of a practice liaison is huge with practices. With some of our clients that have one or two clinics, you know, they maybe can't they don't have a budget for a practice liaison. So we train the practice owner or the clinic owner to play that role.
And in clinics where they have, you know, or companies where they have three or four clinics or more, there's a budget for a practice liaison and it perfectly makes sense to go that route and make it higher. But yeah, we've seen tremendous improvement with the use of a practice liaison. I think there's kind of I guess in a nutshell there's probably two approaches that we take to making sure that a practice liaison is effective. A subjective approach and an objective approach. Subjectively we're making sure that we're coaching the practice liaison to be having the right kind of conversations.
We don't want a sales rep, right? We we don't want them going to doctor's offices and saying, "Would you like to buy our therapy?" that's not where we go with it. It's more of a service strategy where we can make sure we're meeting needs for referral sources. We're make we're making referral the referral process frictionless. We're making sure that we are sending patients back and feedback from patients outcomes that patients are happy and having a great experience with therapy because that's what referral sources want is they want to just say I made a referral it went great the patient was happy and so subjectively we make sure that the practice liaison is really speaking to those items and then objectively we've got tools that we help a practice liaison organize and structure their territory and territory geography management.
So, we can prioritize referral sources based on referral trends. We've got tools that help make sure that no one falls off the radar. You name it, we can be pretty objective with how we organize a practice liaison's 40-hour work week to make sure that they're the most productive during that time. Absolutely. So, it's a training on the message that they're providing. It sounds like Josh obviously. And then it's objectively measuring whether or not the message that they're going out with is being effective. Yeah. And so yeah.
Yeah. Good stuff. Good stuff. Josh, you know, not all your clients have gone perfect, right? Right. You know, what are some of the challenges that you have faced in helping clients to improve their value and how have you overcome them? Yeah, it's easy to put change on paper and say this will happen. But when you start interacting with people like I mentioned before with the change process, people default to the status quo and resist change at all levels, right? So I think when it comes to implementing change and overcoming that you've got to get past that fear of change and manage that change process.
I think if I if I think of a couple recent examples, I would say some of the biggest barriers to change or the biggest frustrations we have with change was actually the clinic owner themsself, right? Himself or herself where that clinic owner either had read the book the 4-hour work week and said, "I'm going to check out for 36 hours a week." Or the other end of the spectrum is I'm a clinic owner. I'm so busy with patients because I don't have staff. I'm treating 40 hours a week and I don't have time to leave my company.
And either way, you have an absent owner that that's not interacting with their clinic leads or their staff. And making sure that the clinic owner is physically present at clinics and emotionally and mentally present at clinics has gone has made so much progress because we've had some owners that have kind of checked out and once we've said, "Hey, how about if you check back in?" Just the fact that practice owner shows up in a clinic, people work a little harder. People smile a little bit more.
There's a little more activity that happens in each clinic. So, making sure that there's a leader present who cares about the staff, who can give great feedback to the staff, who can be, you know, lead by example and be an example that way. All that has gone a long way to help improve change. And don't get me wrong, it's still hard. There's still, you know, anytime you roll out a change process, twothirds of the people will buy in and make change right away. The other third drag their feet a little bit, and there's always the one or two people that are like, I ain't doing this no matter what.
So, we still have to overcome that. But when you have an active, present leader in clinics, it just helps everything so much better. Yeah, really good points. And I think that it's it makes sense to us when we talk to some owners why they have kind of taken that little bit of a step back and you know, checked out just a little bit. Because, you know, there's this fear of losing staff and if you push them too hard, we could lose staff. And I think that's one of the areas where you know I know in conversations that we have that we're finding that staff becomes more engaged when the owner has now the skill set the tools to confront the staff in the right way impact this change that actually culture becomes better than when they were just kind of left up to doing what they wanted to do.
And the owner was kind of, you know, off to the side really unhappy because they're not happy with the with the performance. So, you know, kind of that molding of giving them the skill set of how to get back in. And then their staff seeing that has really led to, you know, for years I think, you know, business owners just feeling better about what they get to do every day. Josh, you know, we talk about driving EPIDA, lowering risk, and but I don't think that, you know, and in our experience, and I know you don't approach it this way.
We don't go to the staff and say, "Hey, our goal here is to drive EPIDA and lower risk." so discuss a little bit about kind of staff training and how we then engage the staff to in the back room they're actually driving EBITDA lowering risk. How do we ensure that the client's teams are equipped to make these improvements and help make this change? Yeah, that's a good question because there's there are some therapists like staff therapists that are very aware that a business has to run in a healthy way and there are some staff therapists that have no clue of what they're reimbured for visit per visit.
That the fact that they see eight visits a day, they lose money. If they see 12 visits a day, they make money and there's a small margin, you know, that way. And so yeah, so sometimes it's educating the staff about really low-level, small bits of financial insight to say, "Hey, the actions you take on a daily basis affect our business, and we need you to perform it at least this minimum level so that way we have money to give you raises and buy new equipment and pay for your continuing ed." and at the same time, there's also therapists that are that want to be leaders, right?
Like they've been out of school for a couple years. They can see that they can have a path to a clinic director role, maybe a regional manager role, and they're just hungry for more business knowledge, business skill development, because we don't get that in PT school, right? You might get like business 101 and it's, you know, four weeks and you're done. And that's not enough to run a business. And so, you know, feeding those hungry therapists some leadership skill education, some business skill education goes a long way to help them, you know, understand how to run the business.
And then on top of either one of those, whether it's a therapist that just needs to know that a business exists or a therapist that really wants to become a great leader, you've got to give them something objective to measure and monitor, right? So whether it's a simple dashboard with three things we're going to work on this month or it's, you know, dashboards that we work with our clients that are, you know, there's hundreds of metrics that we can highlight and shine the light on certain ones to make sure everything's running as it should.
I think I think giving an objective number of for feedback goes a long way, right? Because then people, like I said before, people know if they're winning. People know if they're successful. And who doesn't want to know that, right, in your work? I'm working hard all week. I want to know that I've made a difference and that I've performed well. And if I can give an a staff therapist or a clinic manager an objective piece of feedback that says, "Yep, you've hit the target. Awesome job." That's a great thing to be able to do as a practice owner.
Absolutely, Josh. I I'll I always tell the story of we were working with a client in New York and the client had finally gotten to where he wanted the clinical directors actually to know whether they were profitable or not in their own clinics. And I can remember we showed one of the clinical directors what her profit margin was and she was actually very angry that the business owner had not shared this information with her sooner. She thought she was doing okay, but and literally over the next three to six months, she was right par with all the other clinic directors because they kind of made it a little so yeah, you know, sometimes when we provide them with the information or empowering them, and I'm not suggesting we show every clinic director the profitability, but you know, when we give it more information, and then we measure it seems to make a big difference.
We talk about driving EBITDA, earnings before interest, taxes, depreciation, and amortization. And by driving EPIDA, we're going to improve value. If there were just a couple of the key metrics, Josh, that you would recommend physical therapy business owners track, what would those be? That's good because my brain is wired to process spreadsheets and data and I could give you 50. But I want three. I know. Yeah. That's exactly that's where sometimes less is more. Right. Or keeping things very simple. Let's let's leaders have a very acute intense focus on one or two levers to pull.
Right. So I would agree like you if you're if you're if a practice owner is new at this, you don't want to focus on 50. It'll never happen. You want one or two, maybe three at the most. I guess I would first of all just say it's pretty simple, but the number of evals you have coming into your clinic, right? That's the engine for your clinic to drive your business. That's what keeps your schedules full. That's what shows that you have a growth story. You know, if I look at your business for the last five years, what have you done?
You know, everybody had a dip during COVID, but have you rebounded from COVID and grown since then? And if you're not used to measuring that, put a number on a piece of paper. How many vals did you have in the first month of this year, the second month of this year? What are your goals for this month? And then everything you do when you interact with your staff and all of your extra work, free time while you're at work, you should be focusing on what can I do to make sure that I'm having more val coming into my practice.
Right? That's it's one thing to pick a metric, but it's another thing to execute around it, consistently message around it, bring that content into interactions that you have weekly with your staff, monthly with your staff meetings. Make sure your non-treating therapist or non-treating staff know this. The receptionist, the marketing team, they all need to know, we're working on a vows this month. What can we all do as a team to make this happen? And believe me, there's a role for every single employee to play, not just therapists.
So Val would be number one. We already mentioned it a little bit, but cash per visit. And it's not just look up the number and know what you got. It's look up the number and where do you want to be, right? And you need to make know where along that spectrum of coding, billing, submitting claims, getting paid, and collections, where are things falling off, and what end of it can you improve or do you need to improve a little bit along the way with all of that?
So, collections per visit is a is a simple metric, but there's a lot of levers you can pull to make sure that metric improves. And then I think the third one I would probably pick would be probably visits per referral. That gives you a level of engagement, right? So, visits per referral if a client doesn't know what that is or potential or practice owner doesn't know what that is. If you in a given month, just how many visits did you see? You know, 100 visits, how many vows did you have, 10 of just divide those two out, I got 10 visits per referral.
If you measure it weekly, it kind of does a lot of this. But if you look at it monthly or quarterly, you can definitely see a solid trend. And it really gives you a some insight into how engaging your therapists are, how engaging your staff are, how engaging your front desk and reception team is. Because yeah, if patients are having an awesome experience, they come to therapy a lot, right? The industry benchmark for visits per referral is about 10 to 12. If you're above 12, you're executing well and you've got a probably a very engaged patient base.
If you are, you know, less than 10, something's wrong, right? Either all of your patients are coming for, you know, eight visits. That's a few weeks, right? And they're gone. Or you got maybe worse, you've got your you know, your Medicare patient that's working on balance and falls and strengthening that comes for 60 visits. That means you've got 10 other avails that came for the avail. And that's even worse because they're not buying into the fact that your therapists are confident they can help get rid of their pain or improve their function.
So, it's an average metric and sometimes it's everybody in one pot and sometimes you have both ends of the spectrum that feed into that average. But either way, there's an engagement issue that's going on at a practice if that metric is low. So, those are probably the top three that I would pick. If a practice owner isn't used to focusing on any metrics, pick one or two of those and really go after it and really make all of your messaging and all of your interaction with your staff focused on that metric.
You'd be surprised. It'll it'll start to change. Yeah. And I really like the way in which you and Dave and Wayne and Elaine go about this kind of one metric at a time. Really focusing on as you said, we got to get we got to get more new patients. When we get those new patients, we have to have our therapists engaging deeper with these patients in order to make sure that they get their full plan of care. So just taking one by one and just making those two changes then the incredible impact that we can have on topline and bottom line.
Yeah. So, you know, for somebody like yourself, how do you stay current with industry trends, best practices, and then how do you integrate what you learn from that to work with your clients and help them kind of stay ahead of the competition in terms of, you know, up to up-to-date industry information? Yeah. I always have to laugh. My wife always jokes with me and says that if I could get paid to go to school forever, that's what I would do. So, I'm one of those like lifelong learners where I I've got to learn something new every day or I feel like something's missing.
It's like if you go to the gym and you don't sweat, something you didn't work hard enough, right? Yeah. So, so several avenues. I'm a PT, right? So, you know, in PT school, we didn't get a whole lot of business education. So, I went back and got my MBA a few years ago and I intentionally did that because I wanted to be able to speak the business language better, accounting, finance, economics. At the same time I was able to structure that program to really overweight my coursework to change management, organizational development and people skills just to manage you know the work we do as a company now we manage change right and so the better we can manage people and change and expectations that helps.
So that's one extreme of I'm willing to seek out whatever it takes to have the right education and mindset and tools to share with our clients. At the same time, I'm always reading a book or a podcast on leadership, change management, people skills, people developments, and it might maybe it surprised some people, but the work we do with clients, we don't just say schedule more visits, see more vows, charge more. We say here's how you need to lead your people. Here's how you need to manage change.
Here's how you need to have difficult conversations with staff. And so, it's not just PT specific, but it's managing people, right? Okay. So, there's a lot of that goes into it. And then thirdly, I guess I would say I learn a lot from every single client that I work with, right? So, every client we work with is doing something right. Sometimes they're doing a lot right, but there are things that I learn from one client that I can share with another client. Because it's one thing for me to say, hey, you should try this.
Here's an idea for you to try. But if I also say, hey, another client's doing this and is successful doing this, then it's even more readily acceptable, readily accepted from another client. So yeah, even just I'm always taking notes. If you saw my notes I take after every conversation. I've got notes for me. I've got notes for the client. And then I've got notes for things I need to just put it put away that are going to be useful for clients down the road. So yeah, kind of that's kind of how I conceptualize what I take in and how I feed it back out.
But yeah, I'm always learning something. Awesome. Awesome. So Josh, what advice would you have for physical therapy business owners who are out there listening today on how they could get started focusing on improving their value, driving their EPIDA? What are what's like the first step they should take? Call me, call us. No. You know what I guess I would say, put a number on a piece of paper, right? Like start to measure something. If if you've just treated patients and you love to treat patients and you love to just interact with patients, put a number on a piece of paper.
You know, if it's a valves, if it's your collections per visit, if it's your visits per referral, if it's another metric that you feel like your practice just needs this and you it's kind of been nagging at you for the last couple years and now's the time to do it, put a number on a piece of paper. Look at the trend of what that number's been and what can you do going forward to improve that number. And again, it's it it's not putting the number on the piece of paper that matters.
It's the fact that you start to interact with your staff in different ways. You start to talk about different things when you interact with your staff on a weekly basis, on a monthly basis and staff meetings. It's how you bring even, you know, reception, marketing team, everybody else into the picture to make sure that you can improve that one metric. But if you don't write it down and you don't give yourself a scorecard or a way to measure it, how I mentioned earlier, like just being better is so vague of a goal, it disappears in a couple hours and you have nothing to focus on and you don't know if you're winning or not.
But if you write put a number on a piece of paper and then go after that number and that number should change, right? If you work on it for a month and it doesn't change, do something different, do something more, work harder at it, right? And if it does change and it's at an acceptable rate or position, then you find a new number, right? You keep that first number on autopilot and then you find the second number. What do I want to change now? And you go after it.
So when we work with clients, we don't we don't say, "Here's the 10 things you need to change today and do it all at once, right? We we make the first change, get it at a good run rate, get it on autopilot, then we bring in the next change, get that at a good run rate, good autopilot, and then on down the line. So, just like you can't expect your staff to, make a ton of change all at once, practice owners can't absorb and process and retain and execute well a whole lot of change all at once, right?
So, having a focus on one number goes a long way. Absolutely. Absolutely. You know, for all of you out there today who listened in, I think you have gotten some great advice on taking that first step and really starting to drive your value. If some of the things that were discussed today are areas of change, we use the word change a lot today and it's a very important word as well as action that you will need to take in order to create more value in your practice.
But if you'd like to talk to myself or Josh about some of the things we discussed today, click below. Let's talk. Josh, it was great having you today and we look forward to having you continue to serve more clients in the future. So thank thanks for coming on with me today. You're welcome. I enjoyed it. Thanks, Paul. All right, take care everybody. All right, see you guys.
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