Rick's Business of Audiology Blog

Cost Per New Patient

This is a number you really need to know. It is even more critical if your market has a downturn.

It seems you all have some idea of your cost of goods sold. But do you know your cost to acquire a new patient? In good times and in bad advertizing and promotion are a critical part of your professional activities. If you don't brand yourself, someone else will. In good times and in bad some will be more successful than others. If you are spending three times what your competitor is to get a new patient your real cost of doing business is significantly higher than theirs.

You are at a very real competitive disadvantage.

Raising Cash vs Paying

Not that long ago a friend of mine asked me to talk to his son.

His son was about 22 and had just stopped going to school and managed to acquire a job.

His son was about to buy a brand new truck. My friend was hoping his son would keep driving the older car that was available at home.

What to do?

As I visited with his son I realized his son was confusing raising cash for the truck, with paying for the truck.

Retirement – How other people get rich and powerful at your expense.

Retirement = A way for you to become dependent upon others. The retirement idea is a way for others to keep you dependent upon them and always almost poor. Poor people talk about retirement as a "quit work" and live off others concept.  Wealthy people think of becoming financially independent and using their financial resources to help others.

Examples:

Unions: They say work your ass off now at a job you don't like all that much with no future so you can become dependent upon our retirement fund or the government if we can pawn you off on them.

Congress: They say work your ass off now and pay income taxes to us and hope we are financially solvent so we can take care of you in the future.

Financial Planners: They say work your ass off now so you have enough money to give some to us to manage, because you know you aren't smart enough. Sure we will take our cut now, however if you save enough with any luck you will save enough so you can live off of the money we are managing in the future and retire.

News Media: They say work your ass off now, or perhaps don't work and just complain, but if you read what I wrote here is a strategy you can use this week to sooth some fear you probably didn't know you had. Next week I will have something else for you to read or listen to. News media types need you to think you need something different every day, week, hour, or whatever. Most of them have won't expose their pitiful financial situation to you.

The list goes on and on.

There are a whole lot of people who benefit if they can talk you into having retirement as a dream, or wish, or goal.

Wealthy people don't think this way. Wealthy people realize the way to financial independence is to own, or create, cash generating assets. Wealthy people never quit, but always tend to be doing something they enjoy. Poor people want to spend their family wealth and make their children earn it back, wealthy families think of family wealth as a way to empower their children, charities, or other people to do grand things.

Which do you want to be?

Rick

 

Cash or Income: Which do you need?

People often tell me they want to increase their income. Why I ask? Wellll……..

Increase your income and you increase your tax bill. Therefore Congress, wealthy Democrats, the IRS, and people who make a living giving tax advice and selling tax shelters want you to have income.  Anyone who lives off of the government wants you to have income so you will pay taxes to support them.  Other people's goals for you include you having taxable income.  Is that really your goal?

Cash is what you need to pay your bills. Not income. You can have lots of income, little cash, and become insolvent.

Think in terms of increasing your family wealth, and having enough cash to meet your cash needs. You will have a higher standard of living, more fun, and a relatively lower tax bill.

Rick

Tax Free Income: Availiable to You

Tax Free always has a nice ring to it. Here are some things you can do in the U.S.A. to gain some tax free income.

The biggest and most important thing you can do is to own your own business and invest in it. When you own your own business you get the biggest source of tax deferred income available. As you invest and grow your business you generate real value in a tax deferred environment because you don't pay tax on the value of your business until you sell it while you do get to reap the rewards of the investment income. In addition you may find as a business owner continuing education, some trips, meals, and old office equipment, furnishings, and computers that you may want to buy become tax deductible. This is where a good accountant can be worth every penny.

Here are some other items you may want to consider:

1. Hire your kids. If they do real work for reasonable wages their pay is deductable to you and they may be able to earn over $5,000 without paying federal tax. This has the added advantage of providing them with real job skills that they will never get in school a lifelong benefit. In addition they may get to learn what you do, and how important it is to society.
2. Do it yourself. If you have to earn wages to pay a plumber or painter both you and the plumber will pay tax on the money. If you do it yourself not only do you save taxes but you have the satisfaction of knowing you did it. Perhaps spending a weekend painting your office yourself would make it possible where hiring a painter makes it impossible. If you regularly fix up a home you plan to sell the sweat equity can really add up.
3. Help a friend who helps you. The IRS taxes bartered services between strangers, but not between friends. Perhaps a neighbor can clean your gutters and you can test his hearing.
4. Rent your house, trade your house, or housesit for someone else. You can rent your home for up to 14 nights a year without paying tax on the income. If you can trade houses you can really save on vacations. Let's say you live in Phoenix, and have a friend in DC. Schedule your vacations at the same time and trade homes for a couple of weeks. No hotel motel tax, no room fees, and you both get to experience a different part of the country.
5. Don't ignore frequent flier miles. If you make a few business trips a year, and use a credit card with a mileage connection to pay bills you would pay anyway you will occasionally get a free or discounted ticket.
6. 179 Deduction: Use it every year. I am still amazed at how many accountants set up depreciation schedules for equipment that could be quickly 179 expensed reducing current taxable income, and then they charge for setting up and keeping track of the depreciation schedules.
7. Reimburse whenever possible. Give your employees an expense account instead of a raise. If they are currently paying items with post tax dollars that would be deductible to the business this generates tax free income for them. Items like professional dues, continuing education expenses, conference expenses, professional books, and some other items are often paid with after tax dollars when they can be paid with pre tax dollars.

I am not a believer that the goal is not to pay taxes I think paying taxes is one of the important socially responsible things we do as business owners. However as business owners we do pay more taxes than most people so we may as well take advantage when we can. I am not licensed to provide tax advice so your tax advisor is the one to talk to but these are strategies you often can use to enable you to limit your current tax burden.

 

Extra Cash – Not!

She said she was going to do it when she had some "extra cash". To me she just said it won't happen.

I suggested she rethink because I know she really does intend to do it.

She owns an Audiology practice where she wants to help everyone in her community hear. She wants to become financially independent.

She will never have "extra cash" because she has so many good uses for any cash that appears.

So if you find yourself saying you will do something when you have extra cash I encourage you ask yourself if you really want to do it.

It is how you choose to allocate the cash you have that will drive what you accomplish. Extra Cash is only for people who don't recognize their grand opportunities.

Rick

Audiology Offices & Score Keeping Mistakes

Keeping score always influences behavior.

Everyone in your office is keeping score.

You will improve your office by choosing how to keep score. Often we find ourselves keeping score on worthless items because we can. As a leader in your office you want to keep score on things that matter, even if it takes a little effort.

Allowing your scorekeeping activities to be overly influenced by things that are easy, as opposed to inline with your purpose will result in wasted resources as effort is put into things that are distractions.

Yesterday three scorekeeping mistakes appeared.

1. Web site hits: The vendor was telling my client that they could increase the number of web site hits. Like somehow web site hits are a plus. Web site hits are easy to count. They can be counted by someone who has no idea why. If you don't know what your web site is supposed to do then you might find yourself tracking hits because you can. Someone 5 states away, or your competitor, viewing your web site isn't really valuable to you. If the purpose of your web site is to attract hits, like a local newspaper's, where they make a few cents displaying ads to anyone who displays the page than hits are an important measure of success. Not so for a local Audiology Practice.
2. Leaving Early: The office staff would be packed with their jackets on and ready to bolt out the door exactly as the clock hit closing time. This was frustrating to the owner. It is a scorekeeping problem. The staff is keeping score on their ability to leave on time. The Owner on serving patients. The Owner can improve patient care by refocusing the staff scorekeeping onto a patient service measure as opposed to leaving on time.
3. Taxable Income: Our government requires us to keep score on taxable income; and provides very specific ways we must use to keep score (GAAP and the tax code). So it is an easy trap to use it as a scorekeeping item. However taxable income also has an expense associated with it: Taxes. If paying taxes is a goal than keeping score on taxable income is a fine measure. But most professional offices have other purposes. Like service patients, or clients, or customers. Therefore you are better off keeping track of some other measure of professional success. If you are achieving professional excellence, financial independence, and serving your patients, then why measure your success on taxable income?

I know this will cause some of you to think differently.

Rick

IRS Expense Deductions & Depreciation Section 179

Section 179 Deduction allows small businesses to deduct many capital expenditures in the current year as opposed to expensing them over many years.

This enables a business that purchases qualifying items, in particular things like computers, to reduce current taxable income by the cost of the items.

Audiometers, sound rooms, computers, video devices, surround sound systems, and other tangible property qualify.

If your accountant still has you depreciating items and hasn't offered to have them expensed then you owe it to yourself to talk to your accountant.

http://www.irs.gov/formspubs/article/0,,id=177054,00.html

http://biztaxlaw.about.com/od/businesstaxes/a/section179.htm

Rick

Audiology and Collection Agencies

I know, the agency people call you: Persistently. They are sales people and that is what they do. They work for a collection agency and they say they are there to help.

They want you to hand over some of your patient information to them. Why? They say: So they can collect amounts owed to you. Amounts of money you deserve from these deadbeat people who haven't paid you. Money your patients have that is rightfully yours.

But what really happens? They annoy, badger, and otherwise irritate your patients. They send your patient's information to computers "out there somewhere" that connect with other computers to attempt to damage or destroy your patient's financial reputation. In reality, most of the time, they actually collect nothing.

In reality all of the time they irritate your patients and drive not just your patients, but their friends, family, and others they know, away from you.

You spend many dollars, and lots of time and effort, to improve your professional reputation. You go to a lot of effort to improve your relationship with your patients, referral sources, and others in your community.

Even if a collection agency badgers or harasses one of your patients into paying them, and they forward some of it on to you, do you think that patient will ever be back when they have money? Do you think any of their family or friends will receive a positive recommendation about your practice from them? Do you believe you have improved the professional image of Audiology?

If you found yourself turned over to a collection agency by someone you trusted for your health care would you feel better about them or worse? Would you be more or less likely to go back? Would you be more or less likely to recommend them to a friend?

This is one of those situations where you want to think about winning the war, even if you lose a few battles.

Patient bad debts, why does it happen?

I believe there are only a few reasons that explain most of patient non-payment situations: and suggested courses of action for you as a professional health care business owner.

1. Patients don't have the cash. They bought something they cannot afford. Perhaps other health care situations required their money. Perhaps they lost a source of income they expected to have. It makes no real difference. If you loaned money to someone without the means to pay you ought to write it off, or put it in a "we hope to collect in the future" status and hope for a better situation in the future.
2. Patients don't know they owe or feel they ought to owe it. This can be a legitimate misunderstanding between the provider, patient, and often a third party payer. This requires communication and clarification. Typically when understood these amounts are paid. If the amount is not big enough to take the time to clarify then I suggest ignoring it. Don't damage your reputation for a few dollars.
3. Patients didn't like the service or feel it was worth the money asked. They don't pay as a form of protest. Value message clarification is the key in this situation. But there are times when the services provided don't provide the expected value. As a professional then just recognize it, write it off or down, and continue the relationship.
4. The patient doesn't want to pay for health care; they want to spend the money on fun. They don't get your value message and you don't want them as patients, but do you want their recommendations? Do you want their friends, family, and neighbors as patients?

If you loan money, you need to realize you won't always get paid. Accept it is a part of doing business and get on with helping people hear.

Rick

Medicaid Payments Delayed or Missing

Medicaid is a state by state issue so there is no national answer but here are three things to try:

First, check with your state Audiology Association or Speech Language Hearing Association.   Usually they have someone as a government contact.  They often know if it is a statewide problem, or just a problem in your office.  Sometimes there is some quirk that is missed in the billing process that prevents an office from being paid.  These people often know what it is and can help.

BP Oil Spill and Obama

I would feel a lot better about President Obama if he appeared nearly as bothered about our federal spending orgy as he was about the oil spill. I know the oil spill is visible and he can easily blame BP. The spilling of our federal dollars is harder to understand, perhaps beyond his ability to understand. There are many people who can understand a sports tournament bracket who have no idea how to create prosperity. Perhaps he is one of them?

Our federal spending is a far bigger problem. The oil will be metabolized by the earth as oil has been metabolized by the earth for eons. It seems our news people forget oil is a naturally occurring substance that until people started collecting it leaked onto the surface of the earth on its own.

Long after the oil from BP's spill is no longer visible our debt will still be coming due.

Anyone with a credit card knows, it is easy to run up the bills when the credit is good. But not fun when the bills come due.

Long after the oil from BP's spill is no longer visible any knee jerk laws passed will still be haunting us.

Sure we can see the oil now, but let us not allow it to take our focus away from the real issues we face.

Making Money in Audiology

A reminder about money:

Making money is not the big useful goal for successful people.

Making money is the outcome of creating value doing what you love.

If making money was the goal than Michael Jackson would have been one of the happiest people alive. Obviously he wasn't. Nor is he now even alive. Perhaps he would have been better off if he had remained a small time singer and still living making music for all to enjoy. We will never know.

Our news is filled each day with people who have made money and lost at the game of life.

Many "rich" people will talk longingly of the days when they were struggling. When they didn't have much money, but lived to do what they do. They will describe those years as their good years. It was the best when they had purpose, ideals, and focus.

The world will come at you with money messages. Do this and make some money, money here, money there, money messages everywhere.

But money is only a means to an end, not an end in itself. Money can be a boost to your pride, and self esteem, if you are looking to others for your self esteem.

The same with your staff and employees: If your staff and employees don't identify with what you do then money is only at best a short term solution. If they love what you do, and identify with your purpose, then money is secondary. If they believe what you are doing together is important they will be worth whatever you pay them. If not then you are just trading money for time.

When considering your support team this article is worth a read.

http://www.forbes.com/2010/04/06/money-motivation-pay-leadership-managing-employees.html?boxes=Homepagelighttop

 

 

Ethics and “Free” Stuff

ASHA, AAA, and ADA, all have Code of Ethics that discourage, or prohibit depending upon how one reads them, participation in activities that constitute a conflict of interest.   Most third part payers have items in their contracts prohibiting kickbacks or other similar payments.   

If you take Medicaid or Medicare for testing you may find problems even if they don't pay for hearing aids.

Most people believe that the free trips and free marketing allowances and other free stuff offered by many of the companies selling you hearing aids most fall into this prohibited category.   When the buying group is taking you and your spouse to Mexico for a long weekend as a way to influence your choice of supplier I think it is a pretty obvious violation.  Remember the Starkey Cruises of years past, gone.  Just for this reason, it just hasn't caught up with the other guys yet.      

Cost per Patient Decrease!

It has been a great week as I have been reviewing numbers from clients.

Several have managed to decrease their cost per patient significantly and the funds have migrated to the bottom line.

What a wonderful progression!

Less dollars spent on advertizing and more dollars to pay taxes on.

In this case paying taxes is a good thing!

Rick