Revenue River

If you’re in business, it’s important to identify and understand where your revenue comes from.  As chiropractors, it’s obvious that your revenue comes from your patients.  But how many categories of revenue comprise the total revenue you can generate?  What are your specific revenue streams and how do you enhance and maximize those revenue streams?

If you owned a bicycle shop and wanted to better understand your revenue streams, you might break those revenue streams down into more specific categories, such as bike sales, repairs, rentals, and parts.  You break these categories down so you can better manage and track each category and make better decisions about possible improvements.

If you want to increase revenue in one category, you need to focus on that category and make informed decisions about how to increase activity in that category.  That might mean doing more focused advertising/marketing in that category or implementing new policies and strategies related to that category.

For example, if you wanted to improve revenues in the repair category, you might send out texts, social media posts, or emails to your customers about the importance of bicycle maintenance and offer some incentive to get their bike tuned up.  Or, you might do some other marketing to let folks know your shop is an expert at fixing and maintaining bicycles.  There are many things you can do, internally and externally, to amplify the activity in the revenue stream you are trying to improve.

The point is to first identify your revenue streams and then develop strategies and plans to effectively enhance the revenue-generating capacity of that unique revenue stream.  If you don’t specifically know what your revenue streams are, it’s difficult to develop strategies to enhance them.

What are the revenue streams you have as a chiropractor?  The answers will vary related to your practice style, but let’s focus on the primary revenue stream for most chiropractors—patient care.

The bulk of your revenue typically comes from the care you offer to the folks in your community.  There are two subcategories related to revenue from patient care: third-party revenue and self-pay revenue.  You can further break these categories down into more specific categories, such as exam fees, adjustments, therapies, lifestyle consulting, etc.  Plus, the nature of the two subcategories is often dynamic—the quality and quantity of reimbursement is subject to change relevant to several factors.

For example, your insured patient likely has limitations on what the insurer will pay.  When the insurance runs out, this patient becomes a self-pay patient, or a non-pay patient, because they quit coming in to see you since the insurance is used up.  What’s your strategy with this patient?  Do you have policies to accommodate this kind of patient?  You should, because if you don’t, you’re not maximizing your revenue potential with this patient.

There are some 30 million people in America without health insurance.  There are over 40 million people enrolled in some variation of the ACA plan, which does not include chiropractic as an essential health benefit.  There are millions more with insurance that limits payment (or visits) to chiropractors.  At the end of the day (i.e., the end of insurance coverage), you could easily assume that over half of your potential patient population at some point fits in the category of self-pay.

Third-party and self-pay patients are different animals.  They exist on different levels…their capacities are different.  It’s easier to get a third-party patient to follow your recommendations than it is to get a self-pay patient to follow your recommendations.  One of the most important factors to understand about this is the factor of capacity, or as we refer to it, financial capacity.  It’s a simple, undeniable observation: the average American can only tolerate levels of expenditure that fall within their financial capacity to tolerate—especially in the absence of pain or crisis.

Your patient might believe everything you tell them, but when they don’t have pain and are paying for care out of their own pocket, it is much easier for them to rationalize missing a few visits to pay for a new jacket or braces for little Johnny.  Third-party, pay-based policies in your office do not accommodate the financial capacities of your self-pay patients.  That’s just reality.  The question becomes, “How can I better accommodate these patients to provide services to them while still remaining profitable and enhancing my revenue stream?”

The answer is to provide a fee that’s profitable for you within the financial capacity of your patients—so those patients don’t have to choose between a fee that’s outside their tolerance or missing treatment.  There is a great difference between the perceived value of your service for $30 or $40 compared to $70 or $80 when a patient is paying out of their own pocket.  To determine what that “sweet spot” fee might be, it helps to understand the expenditure habits of your average patients.

It's like there’s a switch that goes off in the brain of the consumer when they see a certain point.  That “price point” either conjures up an emotion of affordability, or an emotion that causes the consumer to more closely evaluate the value of whatever he or she might be wanting to buy.  You might want the Mercedes SUV, but you settle for the Toyota Four Runner.  The Toyota “price point” worked better in your mind and didn’t set off the capacity limit switch.

There’s a psychology to financial tolerance.  It’s a line you mentally come up to that creates some consternation as to whether the value you perceive equals the price you pay.  If it avoids the threshold, you have tolerance for the purchase without second-guessing your choice.  If it exceeds the threshold, you often find ways to justify not spending the money.  The financial capacity of your self-pay patients is often a major barrier to longer-term, regular chiropractic care.

When you create a fee in line with your patients’ financial capacity that’s still profitable for your business, you eliminate or greatly reduce the financial barriers to access.  When people come in more often, even at a reduced fee, you end up making more money.  You also enhance your image and brand in your community.  Now folks tell their friends you’re an affordable provider.  The unspoken reality of that is the perception that you care more about people than you do money.  Yahtzee!

How do you find the perfect self-pay fee?  There isn’t a perfect fee.  However, a good starting point is to take the per capita income in your area and multiply it by 0.1% (0.001).  The answer will be close to what you should charge for an average visit for a self-pay patient (plus or minus a few dollars).  Note, that’s a fee that is likely to avoid the consternation that accompanies higher fees.  It will be a fee in line with many other expenditures your patients make—and don’t think twice about making.

For example, it costs around $40 to play a round of golf at a public course…$40 to go bowling…$30 to $40 for a movie and popcorn.  People spend about $40 to $50 a week on clothes…$30 to $50 a week on gas.  These are all things people have the capacity to pay for and don’t think too much about spending on those things.  That’s where you want your “self-pay” fees to be, too—where it’s something they want to buy and don’t have to mentally decide whether they can afford it or not.

One of the critical elements of enhancing your revenue stream is maximizing your time.  If you have holes in your patient schedule—times where you’re not seeing patients—you need strategies and policies to help fill those holes.  If your visit costs $80 and you’re seeing 20 patients a day, you’re seeing 2.5 patients per hour.  Invariably, you will have dead slots in scheduling where you could be seeing more patients.

Would you rather see more self-pay patients that day at $40 or $50 per visit, or sit around waiting on the next insured patient?  Dead time is a loss of production that produces zero income.  You must have patient activity to enhance revenue.  Making your services more financially accessible is a prime factor in increasing patient activity.

The Preferred Chiropractic Doctor program (PCD) is the ideal vehicle to help you legally create financial policies in your office to accommodate third-party and self-pay patients.  It’s a great program to help you transition the patient with exhausted benefits to the patient that perceives value in your service and can afford to pay for that service.  It’s a great program to help you fill the holes in your schedule and enhance the stream of revenue you want to create.

As chiropractors, many of us focus more on doing our best to serve our patients.  That’s a highly commendable trait that often separates us, in a good way, from other healthcare disciplines.  But an interesting thing happens when you also start focusing more from a business perspective.  The holes and inefficiencies in your practice start diminishing, and you begin realizing previously unfulfilled potential.  Your machine becomes more efficient and those efficiencies transport to other aspects of your practice and life.  You become better and busier.  Your patients become better and more committed.  Your community becomes better, because you’ve touched lives and improved them—all because you made the effort to improve the business side of your practice.

There are pragmatic and humanistic elements related to something as basic as identifying your revenue streams.  Pragmatically as you enhance the business components, the natural consequences are that the humanistic elements are augmented as well.  Efficiencies transport from one category to another.  Your enhanced business acumen enhances your humanistic ability.

Identify your streams of revenue.  Write them down.  Ask yourself how you might improve the related areas.  Keep asking, keep finding solutions, and keep taking action.  When you do that, you’ll build something of greater value for you and the folks you serve.  You’ll arrive at the Revenue River!

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