Confronted with a host of new and existing challenges, a growing number of physician practices are finding it progressively difficult to remain profitable. But all is not lost! With the emergence of new technologies some practices are rethinking the way they run day-to-day operations in an effort to become more efficient, increase cash flow and reduce their expenses. These 9 tips will help you lay a foundation to build a sound, profitable practice, as well as shed light on the current, underused and lucrative opportunities that exist within the medical community.

1. Better Practice Guide
9 Tips To Creating a Profitable Practice

2. 9 Tips To Creating A Profitable Practice
Tip 1 - Evaluate your cost to practice
Tip 2 - Develop a budget
Tip 3 - Focus On Your Patient Lifetime Value (PVL)
Tip 4 - Improve Patient Retention Strategies
Tip 5 - Take Your Practice Online
Tip 6 - Amplify Word of Mouth
Tip 7 - Make Sure Your Practice Is Searchable
Tip 8 - Revise Your Scheduling Procedure
Tip 9 - Extend Your Service or Product Offering

3. Tip 1 – Evaluate Your Cost to Practice

4. How much does it cost to practice?
• Understand the nature of the costs
involved and how they affect the day to
day running of your practice.
• To do this, you need to look at your
operating expenditure.
• Operating expenditure = fixed costs +
variable costs

5. Fixed and Variable Costs
Fixed
Costs
Variable
Costs
Expenses you incur
irrespective of how
your practice is
performing
Expenses vary
according to your
practices activity
•
•
•
•
Rent
Salaries
Water
Lights
• Stationary
• Medical gloves
• Medical
malpractice
• Insurance

6. Calculating Your Cost to Practice
• In order to regulate your cost structure,
you need to determine what your
operating costs are
• You can view your expenses off your
year-end tax report or you can calculate
them on a monthly basis.
• Once you‟ve identified your operating
cost, you can divide it by the number of
patient visits to get your „cost per
patient visit‟.

7. Practical Example
Variables:
• Monthly Fixed costs (F) = rent + water + lights + salaries
etc.
• Monthly Variable costs (V) = stationary + bed sheets +
medical gloves etc.
If:
•
•
•
•
(F) = R60, 000 per month
(V) = R20, 000 per month
Total Operating Costs (F+V) = R80, 000 per month
Average monthly patient count = 200 patients per month
Then:
• (F+V)/avg. monthly patients = cost per patient visit
• R80, 000/ 200 = R400 per patient visit

8. What Does This Mean?
• From this basic example, you can see
that patients should spend, on average,
more than R400.00 per visit in order for
this practice to be profitable
• This figure will however decrease if you
grow the number of monthly patient
visits while keeping total monthly costs
constant
• More on growing you patient base later

9. Tip 2 - Develop a budget

10. Developing Your Budget
• Following on from point one, the most
effective method for budgeting is to
base your projected revenue on a perpatient basis.
• This will highlight how many patient
visits you must realize each week,
month and year in order to achieve
your revenue goals.

11. Practical Example
If:
• Gross monthly income = R90, 000 per
month (R450 consult fee x 200 monthly
patient visits)
• Total monthly expenses = R80, 000 per
month (see point 1)
Then:
• Net profit before tax = R10, 000 per
month (R90, 000 – R80, 000)

12. The Result?
• At 200 monthly patient visits, it is likely
that this practice will make a profit,
albeit a small one.
• You can, however, increase your profit
margins by increasing the number of
patient visits, decreasing total
expenses or ensuring your practice is
run more efficiently – more on this to
follow.

13. Focus On Your Patient Lifetime Value (PVL)

14. What is PLV?
• PLV, or Patient Lifetime Value, is the
total profit that a specific patient brings
to your practice over a defined period
time.
• By calculating PLV, you can estimate
how much a patient is worth to your
practice and, by extension, how much
you can afford to spend on efforts to
bring in new patients.

15. Calculating PLV
• A patient‟s value is equal to the revenue
he or she generates for you, while he or
she is a patient at your practice (also
referred to as: lifetime span).
• The easiest way to calculate your PLV, is
to take the average spend of a patient per
visit multiplied by the average visits per
year
• Multiplying this figure by the average
lifespan of a patient relative to your
practice (say 3 years) gives you the PLV

16. Practical Example – Dr. Smith‟s Practice
*Important Note
Calculating Referral Rate: Referral Rate is based on the number of
referrals your patients refer to you
Number of Referrals
% Ratio
Referral Rate
0 referrals
0
1.0
2 referrals per 10 patients
(2/10) = 20%
1.2
1 referral per 2 patients
(1/2) = 50%
1.5
1 referral per 20 patients
(1/20) = .05%
1.05

17. Practical Example – Dr. Smith‟s Practice
Continued
If:
• ATV (Your average income per transaction) = total revenue
per annum /total number of treatments per annum = R400
• Average number of treatments per patient per year = 2
• Average number of years a patient stays active on your
database = 5
• Average number of referrals per year: (2/10 = 1.2)
Then:
• LTV R = (ATV) x (Avg. number of patient visits per annum)
x (Avg. number of years a patient stays active on your
database) x (Avg. number of referrals per patient)
• LTV = R400 x 2 x 5 x 1.2 = R4, 800 (over 5 years) or R960
per year

18. What this means is…
• If Dr. Smith ran a marketing campaign that cost R2, 000 and
brought in 8 new patients, it would appear he has only
generated R1, 200 in revenue
– (R400 x 8) – R2, 000 = R1, 200
•
This effectively means he has run the campaign at a loss of
R800
• However, using the LTV model, this campaign would in fact
yield a revenue stream of R36, 400
– (8 x R4, 800) – R2, 000 = R36, 400
• This campaign would actually be quite successful. It is also
important to note that practices should not spend more than the
LTV of a patient, on acquiring new patients. In this case, Doctor
Smith should limit his marketing budget to at most R4, 800.

19. Tip 4 – Improve Patient Retention Strategies

20. Retention Strategy
• According to TARP Worldwide, it‟s five times
cheaper to keep a customer than it is to get a
new one.
So before you set about acquiring new patients, ensure
that you reduce the amount of single visit patients that
drop off your radar.

21. Direct Marketing
The best way to stay engaged with your current
patient base is through direct marketing
channels, such as direct mail/email, telephone
calls and cell phone text messaging.

22. In South Africa today…
According to the MMA (Mobile Marketing Association SA's Mobile Review
2x
3x
7.2
4.6x
There are more
than twice as many
cellphones as there
are TV sets (31.8m
vs. 15.9m)
There are 7.2 times
more homes with
cellphones than
landline telephones
SMS text
messaging is used by
3 times
more people
than email.
There are 4.6 times
more households
with a cellphone than a
computer

23. Mobile Marketing in SA
• Mobile marketing is probably the most popular, and
best suited marketing channel for the South African
market
• It is particularly effective because it enables you to
create messages that are both relevant and timely
• You can SMS patients to notify them of relevant
discounts, appropriate changes in operating hours or
new business processes and procedures
• Be sure to provide patients with an option to “OPT
OUT”

24. Implement a Feedback Process
• Just because someone books an initial visit, doesn’t
mean they’re going to come back. Staying engaged is
only helpful if you’re offering an exceptional service
• Try implementing a feedback process by encouraging
your patients to fill out quick and easy feedback forms
or cards.
• Affording patients the opportunity to express what
pleases and displeases them will provide you with
invaluable insight into improving your service offering
• Remember, engaging with your current patient base
through direct marketing efforts and improving your
practice’s efficiency can drastically help reduce your
overhead and increase your profitability

25. Tip 5 – Take Your Practice Online

26. Numbers Don‟t Lie!
According to Google, over
500,000 South Africans
search online for a doctor
or medical practitioner
every month.
That’s 11 South
Africans searching
for a doctor every
minute!
According to a 2012 study published in
the Journal of the American Medical
Association, patients who engaged
with their physicians online also
averaged more office visits.

27. What Should Your Profile Look Like?
• Setting up and maintaining a website can be complicated
and time consuming, so it’s advised that you hire an expert
to design and host it on your behalf
• You should post everything that will enhance your image
and express your capabilities
Location and
Contact
Information
Updates or
insights on
relevant
news
Professional
focus
Profile
Picture
Blog (if you
write one)
Credentials

28. Visit RecoMed
• If you feel that you have neither the
time, nor the knowhow to create and
maintain an online profile visit
www.recomed.co.za
• RecoMed is a South African based
company that specializes in providing
medical practitioners a strong online
presence, at low cost and without need
for a lengthy or complicated
development process

29. Tip 6 – Amplify Word of Mouth

30. Word of Mouth
• Doctors have often relied on “word-ofmouth” as a primary marketing tool
• However this marketing strategy has
severe limitations!
• People rarely talk about their doctor
visits and if they do few people are
there to take the advice.

31. Use An Online Review Service
82% of consumers research a
product before buying it
More than 70% of consumers
worldwide trust online reviews
Survey: Over 60% of respondents
name patient reviews as a primary
influencer when selecting a new
doctor online.
Every half-star improvement in a
physician‟s overall rating was
accompanied by a 37% increase in
appointments booked

32. RecoMed
• It‟s quite clear that patients source,
trust and are influenced by online
reviews
• With RecoMed patients can leave
reviews of their doctors services
• All reviews are moderated and verified
by RecoMed staff before being
published

33. Tip 7 – Make Sure Your Practice Is Searchable

34. Claim Your RecoMed Profile
• It stands to reason that your most loyal
patients are those that stay within close
proximity to your practice
• Therefore gaining new and loyal patients
could be as simple as ensuring that those
closest to you can easily discover where you
are
• Highlighting your proximity to nearby patients
is an easy, inexpensive way to attract new
patients, and increase revenue
• To ensure your practice is visible online,
simply claim your profile at
www.recomed.co.za

35. Tip 8 – Revise Your Scheduling Procedure
•
Tip 8 – Revise Your Scheduling Procedur

36. Offer an Online Booking System
• An Intuit survey documented
that 81 % of patients say they
would like to schedule
appointments and fill out
registration forms online, with
a significant percentage
adding they would consider
switching providers in order to
take advantage of such
services

37. Why Offer Online Booking
• It can save your receptionist up to 40
hours per month
• The reduction in phone-time will afford
your staff the freedom to work on other
areas of the business, ensuring your
practice is more productive, more
efficient and therefore more profitable
• You can offer same-day appointments
• You can effortlessly fill last minute
cancellations

38. RecoMed‟s Online Booking System
HOW IT WORKS
1. Patient books an appointment from the doctor’s RecoMed
profile
1. The doctor receives an email depicting the requested
appointment time, the patients contact information and
the reason that patient has requested the visit
1. The doctor then “confirms” the request from their
RecoMed profile
1. The patient is notified that his/her appointment has been
successfully scheduled

39. Tip 9 –Extend Your Service or Product Offering

40. Learn a New Skill
• Doctors can supplement their practice
earnings by offering extra services or
products that may otherwise fall outside
the traditional realm of their clinics
practice
• Learning a new skill, such as
acupuncture therapy, can help extend
your service offering and open up new
revenue streams for you to exploit

41. Product Offerings
• Nowadays physicians are offering
everything from pregnancy calendars to
advice on aging
• It is, however, important to remember
that the most successful ideas speak to
the needs of your current patient base.

42. Examples of Extended Product Offerings
Offering
Prostheses or wigs to
chemotherapy patients
Gynaecologists or
Obstetricians
Offering
Personalized pregnancy
calendars
Dermatologists
Offering
Skin care products
Orthopaedists
Offering
Back support
(braces, belts etc.)
General
Surgeons

43. In Summation
• If you understand your „cost to
practice‟, implement retention
strategies, and exploit the endless pool
of resources the internet has to offer,
you can reduce your overhead, create
an efficient and productive work
environment, and ultimately ensure
your practice‟s profitability!