HEALTH CARE: Developing a Profitability Culture

One of the most frequent questions I encounter as a health-care business consultant is, “What can we do to increase our profitability?”

It’s an important question, since profitability ultimately drives the success of a medical practice–or any other business, for that matter. In answer, I generally suggest a two-step approach: Generate profit-enhancing ideas and a plan to carry them out, then communicate the plan to employees.

The first step (idea generation and planning) is fairly simple and straightforward. It’s on the second step (employee communication and implementation) where many businesses stumble. Management often forgets that involving employees in a strategic process is critical for their buy-in, and hence for the program’s success.

Too often, managers seem to believe that they are the only ones driving profitability, and make the mistake of viewing employees as merely performing a specific function. They fail to see employees as integral links in the chain to profitability.

Such missteps can affect employee attitudes about the business which can, in turn, adversely affect the behavior of employees in dealing with patients, clients, or customers. The end result can be a negative public image of the organization, which ultimately leads to less business and lower profits.

Business owners must be able to communicate their vision and responsibility for generating and enhancing profit to each member of their workforce. Profits are then seen not just as something that goes into the owner’s pocket, but as a form of productivity shared by all–which translates into better equipment, better supplies, better wages, better benefits, better working conditions, increased job security, and greater organizational pride.

An example of this was a medical clinic that included its entire staff in the strategic planning process. As a team, the staff set specific goals for improving customer service, the quality of care provided, and the professional image of the clinic. As a result, the client realized a 42 percent increase in new patients and in cash receipts. Ideas for increasing profit may be as simple as a minor change in routine. For example, a trash hauling company instructed its drivers and employees to exit their truck after pulling onto a weigh station scale. This lowered the weight enough to save the company $70,000 in taxes over the course of a year.

Medical practices and other businesses have the same ability to find areas unique to their operations where a simple change in protocol can save a significant amount of money in the long run. Not all solutions are simple, however. Often, inability to achieve the more complex solutions is the greatest obstacle to creating and maintaining a profit mentality.

To overcome this, decision-makers must utilize all available resources, particularly employees who have significant front line experience.

A true profit vision means creating a healthy balance between work, family, and other pursuits so that we do not always operate in a crisis mode. There is a critical need to recharge our physical, emotional, and spiritual batteries, so that we ultimately care about the results of our actions.

It goes far beyond the adage that it costs more to recruit and train new employees than it does to retain the ones we already have. The real loss is when the efforts of the employees we already have in place are sabotaged by the absence of a profit culture.

If you look to prosper, not just survive, it’s critical to communicate to your employees the importance of profit and how to achieve it. Creating and sustaining a profit mentality that gets past the numbers and into the daily routine of your staff is the key to long-term prosperity.

Rex Rudolph is a principal in Rehmann Robson, P.C., Michigan’s second largest CPA and consulting firm, whose healthcare management group serves more than 400 medical practices across the state. He can be reached at (231) 946.3230 or BN