High Performance
Practice Building
High Performance Practice Building combines Best Practice Standard expectations with Client Based Practice Building resulting in a practice building system relying on treatment excellence for increasing referrals and establishing community credibility as THE place for mental health services.
Data Points
To build a practice, you need specific data points. Here are some for consideration.
Data Point 1: Average number of sessions. Calculate your average number of sessions based on the last 200 clients. Without knowing your average number of sessions, calculating cost-benefit ratios, establishing financial projections, and making decisions about general practice building ventures is impossible. Do not eliminate any clients because they were “atypical” situations. Remember, you need an accurate representation of your practice.
Data Point 2: Percentage of Direct Referrals. This data point is calculated by knowing your referral sources per client. If a client was referred to you via a former client, a current client, or a treatment stakeholder (e.g. primary care physician, psychiatrist, school counselor), the referral is considered direct. Since you have already pulled 200 charts calculate your direct referral percentage. If 78 of them were referred by another professional in the community or a current/former client, then you would have a 39% direct referral rate.
Data Point 3: Average reimbursement rate. Using the last six months of treatment calculate how much money you are being paid per session. This will include copayments, insurance payers, cash pay clientele, and no shows or late cancellations collections/non collections. This data point is critical for budgeting, calculating cost-benefit ratios and financial projections.
Formula: Return on investment. It is important you use a very simple working formula when evaluating potential practice building projects. For example purposes we will use a reimbursement rate of $80.00 per session but you should use YOUR calculated reimbursement rate. The formula:
PROJECTED RETURN ON INVESTMENT
Estimated number of referrals is your projection of referrals gained through a project
Average number of sessions represents your average (Data Point 1).
Estimated # referrals x average # sessions X average reimbursement rate
divided by
Average reimbursement rate x number of projected hours + cost of supplies
ACTUAL RETURN ON INVESTMENT
Actual number of referrals are the referrals gained through the chosen endeavor.
Actual number of sessions= total sessions across referrals
Actual number sessions X average reimbursement rate
divided by
Average reimbursement rate x number of projected hours + cost of supplies
Example: You are projecting that attending a networking function will reap three referrals, the event will take 3 hours of time for attendance and preparation, and the cost of supplies is $75.
PROJECTED DOLLAR BENEFIT
3 referrals x 7 sessions each x $80 average reimbursement rate= $1,680
divided by
$80 average reimbursement rate x 3 hours + $75 cost of supplies = $400
= 4.2 return on the investment (420%) projected return on the investment
ACTUAL DOLLAR BENEFIT
You choose to assess your success 30 days post event. You received 2 referrals with a total of 3 sessions (One referral attended two sessions, the other attended one session)
3 total sessions x $80 average reimbursement rate= $240
divided by
$80 average reimbursement rate x 3 hours + $75 cost of supplies = $400
= .6 return on the investment, loss of 40% on the investment
Is a 0.6 return on the investment of acceptable? The answer is simply, no. This endeavor lost money. The question you must ask is what is an acceptable rate of return on your investment for your practice building efforts? Generally speaking, a return on the investment equal to 1.0 is unacceptable. A return on the investment of 2.0 is acceptable but not very good. The return on the investment equal to 3.0 is preferred.
I am very surprised at how often therapists engage in practice building events that lose money. Frequently I hear, “Tracey, I did get a referral from attending the networking function.” Great! You still probably lost money.
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