A Real Engine For Generating Value
This week, Paul challenges a common assumption: that more clinics automatically equals more value. Instead, he offers a framework for growth where optimization, not just expansion, drives long-term success.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good morning and welcome to another episode of the Martin Rehab M&A Advisory. I am Paul Martin and I am the founder and president of Martin Healthcare Advisors. And I am really excited about this show today because what I really want to do today is challenge how you think about growth in your outpatient rehabilitation business. You know, too often we chase simply size and number of clinics, but real value and what buyers are paying for and what you get rewarded for in the end needs to be built through a balance of growth and optimization.
And that is what this video is entitled grow and optimize. So let's walk through how we can actually do both. Now many owners, including myself way back when, think of growth as a straight line. You know, it's that straight line that just keeps growing and growing. Open more clinics, acquire more practices, and the revenues and the profitability will flow. Well, real growth, the kind that will really lead build long-term value, will lead to long-term value, it's stepwise. You grow, then you pause to optimize that growth, then you grow again, and you pause and optimize again.
And if you skip the optimization, you will never see the full value of your growth efforts. So here's the model. Think of growth like a staircase. Each time you step up, you need to pause and solidify your footing. And that means optimizing. And as we look at optimizing, we look at recruiting, we look at scheduling, we look at charge capture, we look at billing, so that each level of growth is not just getting bigger and bigger, but stronger and more profitable than the last step of growth.
You really don't want to just keep growing if you're not adding to your bottom line. Because if you're not adding to your bottom line, you're not adding value to your company. So, what are some of the things that really fuel growth? Well, growth can come in two directions, two types of growth that we see in the outpatient rehabilitation industry. First as the large acquirers call them denovos or new startups and second making acquisitions and both are really valid ways in order to grow. The key is knowing your market knowing your capacity and understanding your operational bandwidth.
You know not every market needs a new location. So sometimes acquiring a great local practice is faster and more strategic than doing a startup location. We are also finding that in this current market with staff is difficult to attract and retain that sometimes you're doing a small acquisition because you're getting staff. And if you have a local operator that has staffed their clinic, well, that could be a real valuable acquisition for you for the future. All right. Now, what powers optimization? So, how do you optimize and do that profitable profit and do that with profitability?
So, again, once you've grown, optimization is really we believe it's where the magic happens. And that means, as I just described, hiring the right therapist, not just warm bodies. It means a schedule that is centered around the patient, which typically when the schedule is scheduled around the patient, it's a schedule with productivity in mind. And it means ensuring that every visit is built appropriate appropriately and done within compliance standards. And when you put all that together, remember your therapists are providing skilled care. They should be billing for that same skilled care.
Those are the highest billing rates. So again, when you put the scheduling efficiencies and what we call charge capture together, that's where you find EPIDA or your true cash flow. That's where you will find it and that's where it will go to that bottom line. And sometimes if we're growing and growing and growing, we're not look at some of those elements of the business that will drive that profitability. You know, we're going to continue today a little bit more talking about recruiting because recruiting supports that growth.
Very many rehab businesses expand and then they're scrambling to find clinicians and that's kind of a backwards way of growing. You need recruiting pipelines in place before you grow. You need to build a recruiting engine. We have worked long a long time on looking at all of the strategies that are out there and how we can build for our clients literally a recruiting engine. And that comes with building those relationships. It comes with looking locally for new staff. It comes with strengthening your brand and a real focus on retention because turnover is extremely expensive and can be very damaging to culture.
It's really hard to hire new professionals when you've simply or literally over the past three months you've lost a couple professionals. I think that's one of the first questions that as a new candidate for a company would be asked is how many therapists do you lose. Scheduling and billing efficiency is also huge. Your schedule is literally a profit engine or it can be seen as a liability. Every gap, every no-show, every underbuild code becomes lost margins becomes lost epida. And fixing that doesn't require heroics. It requires systems and processes that you will input that will track and monitor where you are.
You're going to set you're going to set goals and targets and you're going to track and monitor making sure that your therapists are meeting those goals and targets and making sure that they've bought into them. Build a schedule that works. Make sure you coach it or have someone that's coaching it. And then you got to really audit billing to make sure that the clinical work is actually showing up in the bills that are going out to those insurance companies. You know, we also believe that in order to optimize, you need to build tools to track that progress.
You know, you can't optimize if you don't track. So, as I mentioned, setting KPIs, sharing them with your team, looking at productivity, schedule utiliz utilization, billing accuracy every month. You know, the best businesses that we advise, we import and make sure they have dashboards that all the leaders in the company are looking at and looking at every single week. This is gives you an ability to drive the decisions that you make. So, let's talk about the value payoff. Again, it's not just about operations. This is about value.
Buyers are just not paying for size. They're going to pay a premium for well-run, efficient, and profitable b businesses. You don't get there by simply growth alone. You get there by growing and optimizing every single step of the way. So, what's the next step that you would take? You know, where are you? Are you ready to take your next growth step or have you not optimized your last growth step that you've taken? You know, here at Martin Healthcare Advisors, we help you figure those things out and then we help you act on those needs.
Growth without a plan sometimes and oftentimes will lead to chaos. Growth with optimization, that's what will lead to real value. I appreciate all of you joining me today. And if you have any questions on the content that we've covered today with our growth and optimize show today, please click below and let's talk. I look forward to talking to you in the near future and have a great rest of your day and a great weekend. Thank you.
Want to talk about your own business?
Marlton, NJ 08053