From Overworked to Optimized: A Practice Owner's Path Forward
In this week's episode, Paul Martin and Josh Myers walk through the journey of a practice owner who shifted from overworked days to an optimized, thriving practice, creating options for her future she never thought possible.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good morning and welcome to another episode of Paul Martin's Crucial Conversations. Today once again we are going to be talking to one of our very own Josh Meyers who is our director of consulting services as well as an M&A advisor. Welcome Josh. Thanks good to be here. So today we're going to dive into a client story. This is a client that came to us with a general curiosity of what options she may have for an exit strategy. So Josh, what made you recommend our outside in assessment for this particular client?
Yeah, she she called and her main goal was, hey, I want to retire at some point. I need to figure out what that looks like and I need to make sure I leave my practice in good hands with the next level of generation of her leadership team having a good place to land and grow in. And so she knew where she wanted to go. She didn't know where she was starting and so then she didn't know how to get there, right? So we needed to give her a starting point to say, "What are you working with now?
What is your practice value now? How would potential acquirers view your practice today?" and we needed to give her that objectivity. Yeah. Do do you find that just that starting point for folks can sometimes lead them to better planning for that future exit? Ju just knowing a starting point for sure. It's a reality check for most clients that we work with. Sometimes in a good way and sometimes in a bad way. But I think most people think or most clients would say, "Hey, I'm really busy.
I see a ton of patients. My staff love me, my patients love me, I've got an awesome practice. And unfortunately, sometimes that doesn't translate into value of a practice, right? And so that's where we need to, you know, kind of be the eyes of an acquirer or an objective viewpoint as we do perform that, you know, outside in assessment for patient or for patients for clients. Just to make sure that they know what they're sitting on and what they're working with. That PT in you always comes out, Josh.
They're all they're all patient. You'll never lose that. Never lose that. So once you were able to dig into her data, what stood out to you the most about her business and how it was running dayto day and were there any surprises for her? There were surprises. There's always a surprise, right? There's always something to do. There's always something to work on. But yeah, I would say for her you know, when we perform a an outside in assessment, we're looking at financial performance, operational performance, and even some of the you know, the subjective qualities of your practice.
How strong is your leadership team? How how strong is your internal communication? How hard do your staff expect to work when they show up to work every day? Like all of those things, we look at all of that. And so she checked the boxes for most of those items. But the one that stood out for her the most was her reimbursement per visit was significantly lower than her peers in her region of her state and even in the state and even in, you know, the region of the country.
And this was a client that basically part of, you know, her initial reason for calling us was she wanted us to help her renegotiate her payer rates, right, her payer contracts. And so after performing the outside in assessment, she realized how inefficiently she was currently billing for all of her patients and she realized she had a whole lot more control over her reimbursement rates than she had previously thought. Josh, is that a common theme as you've done hundreds of outside in assessments? Is that a common theme that you find that owners really don't see?
And at no knock on the owner, but really can't get a handle on what is keeping that profit margin low. It's very common. Yeah. Because again, they're busy, they feel busy, they're working 60hour weeks, why shouldn't I be profitable if I'm working 60 hour weeks, right? So that that's I think that's the mentality of a lot of the clients that will call us. For sure. Absolutely. Absolutely. So could you walk us through how charge capture specifically showed up in this story? Yeah. So with this client, we you know again we said you're getting paid much lower than your peers, right?
So we had to say why is that? So we had to look at her revenue cycle. So we looked at you know at the start of it you know what are the therapists how many patients are they seeing? How long are they treating them for? What kind of interventions are they performing? How are they billing? Then we she had in-house billing. So we had to say how, you know, how well is your billing team managing claims, managing denials, getting authorizations and not, you know, treating patients for free because you're, you know, doing things right on that end.
We had to look at the back end of collections. We had to look at over-the-counter collections from the front desk throughout that process when the patients are in the clinic and when they're wrapping up therapy and, you know, maybe even post therapy. And and again, a lot of those facets of the revenue cycle kind of check the box. And so it really came down to the therapists were not billing efficiently for what they do. And the interesting thing that we found was that the therapists were she this client kind of had three different types of payers.
For some of the payers the therapists were under billing, right? Because you need a certain amount of units to hit a threshold of full reimbursement for that visit. They were underbilling. Some of the payers they were over billing, right? Some payers don't need you to see the patient for a full hour or hour and a half or whatever your staff think they need to do to, you know, build a full session. So, some payers were getting overbuild. And then she had Medicare in the mix who was getting build, but it wasn't 100% compliant.
So, all of that was happening on a daily basis. She didn't know it. She just knew that she was busy. And then on top of that, the front desk really didn't have an understanding of their payers. And so the front desk was just putting patients on the schedule and getting people in, but they didn't realize that the way that the patients were being scheduled was affecting and limiting efficient billing on the on the back end when the when the therapist finally spent time with the patient.
So we kind of had to, you know, teach her and her team, her leaders of her clinics, her staff, her front desk, who her payers were, right? And which ones don't need to be underbuild and which ones don't need to be overbuild and which ones need to be compliant. And how do we schedule the day so that you know you can be efficient on the back end with billing. Yeah. Yeah. So this is a huge challenge because it's changing behaviors of people that have been set in their ways for a long time and many times that's including the owner.
Yeah. So you worked really closely with her staff. What was their reaction when you started coaching around billing, coding, schedule management, things that sometimes don't get pointed out to many therapists out in the therapy world today? Yeah, I think you know, I interacted with her clinic manager, she had five clinics, so her clinic managers, her staff, PTS, PTAs, her office manager, and her front desk, right? So, we had to have all those touch points to make sure everybody was aligned with where we're going, right? And so when we interacted with the therapists and the PTAs that were on staff just treating patients, they were grateful for the clarity.
Therapists always want to know, am I compliant and am I doing it right? Right. Like that's just like a typical therapist. If I could stereotype, they don't want to mess up and they don't want to cross the line. And so they were grateful when we taught them, you know, billing rules and definitions of CPT codes that all right, I'm compliant and I'm doing it right. So, they were they were reassured. I was surprised at the level of excitement or engagement from the clinic managers when we started talking about this because I think they all knew the practice was again busy but not maybe financially healthy.
So, they need they knew they needed to ask more of their staff. They weren't sure what and so when most practice owners or our clients are unsure of how much harder to push, they default to not pushing at all. Right? So they were grateful and excited that we could share with them industry standards. Here's what people in your neck of the woods are doing. Here's what people in the rest of your state are doing. Here's what people in your region of the country are doing as far as how they manage these payers, how they schedule patients on the schedule to optimize billing, how they use different CPT codes.
And so they were all of a sudden they all of a sudden had a you know a normal to compare themselves to. And if they pushed to normal, no big deal, right? We're not asking that much more of our staff. We're not pushing our staff too hard because we're acting asking them just to kind of come up to normal. So they were grateful for, you know, comparison to industry standards. So they knew how much to push without pushing too hard. Sure. It's almost like the lens that many therapists have when they're treating patients is about this narrow.
And that what we try to do with them is to open that lens to say, "Okay, I understand how we can make sure that based on the treatment that we're providing for this specific payer that we're going to get paid for what we're doing." And it just kind of widens that lens for them. Which I think is really valuable. It is. So, we've talked about the value and numbers. What changed? What kind of options opened up for this business owner after you went through the work with her staff making these considerable changes, a lot changed in this case.
I always tell my kids, my kids are in high school and junior high. I always tell them, the more you learn, the more choices you will have in life, right? And so that is true for high school kids and it's very true for practice owners as well. The more you learn about your practice, the more options or choices you'll have when it comes to succession planning, exit strategy, finding a future partner, leaving your staff in good hands with, you know, whatever that future entity might be.
So in this case, because that practice owner learned how to keep everything else that was going well in her practice good and incorporate, you know, good schedule management and billing and coding strategies, she had a lot of options when it came to succession planning. So, financially, she probably had a few hundred,000 of EBITDA or profit, right? That moved up closer to a million dollars on a run rate three or four months into the process, right? It didn't it doesn't take long to teach your staff to, you know, manage the schedule and bill and code better.
So her just general profitability 3xed a little bit over 3x valuation wise probably 400% maybe 5x right in valuation because of that because you know again if you're looking for an exit strategy with acquirers you've got EBITDA and then you get paid a multiple of that based on how you know healthy and profitable your practice is the more profitable you are multiple goes up right so not only did she have better financial performance she had you 5x in valuation as a result of the process. Yeah.
Which as you said gave her plenty of choices. Did so I can't wait to hear how did this story end for the business as well as for this owner. Yeah. So it's still ending I guess you could say. The hard part is done and the easy part is the remaining. So yeah, she was able to obviously run a good solid healthy practice. We took her through the process of finding the right partner for the future. She got to take some risk off the table financially, right?
She got paid for a good portion of her practice. Those clinic managers that I talked about, she had five clinics. I think two or three of those clinic managers were really solid tenur providers, managers, leaders that really had kind of hit a ceiling in her practice. And so they were able to step into more responsibility with the parent company and kind of grow beyond her practice even. And then the other couple clinic managers had been in that role for you know a year or two and were kind of growing into leaders of the company.
That future partner had a like a leadership 101 pipeline where they could have some mentoring and some coaching to help them to develop into better leaders. She also got to offload a lot of the headache stuff. Payroll, HR, accounting, credentiing, compliance, like all that kind of stuff. So, you know, this practice owner didn't really enjoy all that. It's kind of a necessary evil of running your practice. And so, she got to ham that off. And so, now that is, you know, check, it's taken care of, right?
It's just on kind of on autopilot for her. And so, she spends her days treating, right, at this point. But she's already found a future partner for the practice. There's already leadership development happening for her current team. And so the only thing she has left to do at this point is to pull the trigger on I'm ready to retire. I'm going to I'm going to walk away. But because she did the work ahead of time and had a good solid healthy practice and has, you know, been with a new partner for several years to help integrate and transition the practice, she can pull the trigger and retire and walk away at some point because she's done all the hard work ahead of time.
So, she's in a sweet spot. She she still gets to enjoy her people. She still gets to treat patients as much as she wants, but she also knows tomorrow if she's ready to retire, she can do that as well. Absolutely. Josh, I don't know about you, but stories like that are why I do what I do and why I started doing what I am doing right now 29 years ago. So yeah. Yeah. Great story. Great story. Y Josh, if there's a clinic owner watching this who feels stuck, they're just not sure how to get to that next level, not sure if they're ready to sell or if there's a market out them out there for them to sell.
What would you say to them based on this specific experience? Yeah, I think in this case the outside in assessment, the b objective business assessment that we performed for this client was would be the answer because again if you're in a practice today and you own a practice and you're busy and you're running around every day and your staff are happy and patients are happy, that's great. But that's your viewpoint of your practice, right? How is an acquirer going to view that practice? They're going to say, "How healthy is it?" financially, how healthy is it operationally, how healthy is it culturally?
And if you don't have a reality check for that today or an objective viewpoint check on that today, either you're diluting yourself or you just don't know where you're starting from, right? And if you're if you're thinking of, you know, retirement is in the next three to five years, you probably need to start that process today because it takes time to implement some strategies and really operate your practice well and then go through the process of finding the right partner and then transitioning and working and then eventually retiring.
So, yeah, the outside in assessment is where you want to start because it's just a good objective viewpoint and reality check of where your practice is today. Absolutely. Absolutely. Josh, as always, did a great job and I, guarantee that, our listeners got a lot of value out of, your time today and appreciate you coming on. Yeah, I'm glad I could be here. Thanks, Paul. And so, for any of you out there listening in today who may just feel stuck or may not have a real focus for the future, if you want to talk to Josh or myself, just click below and let's talk. Have a great rest of your day and have a great weekend. Thank you.
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