Like most doctors Krishna describes her business skills as ‘non-existent’. She is a highly trained gynaecologist with some research and medical school prizes. On returning from her overseas fellowship an opportunity to work with a senior colleague in private practice presented itself and she jumped at the opportunity to have an easy introduction to life outside of the public system.
Her private work grew over the first 8 months, with an operating list each fortnight and two consulting session per week. After 12 months Krishna was offered the opportunity to completely take over the private practice as her senior colleague had decided to retire. She was to inherit the medical secretary, rooms lease, practice software, fit-out, computers and goodwill for a nominal fee.
To her it was an exciting, and daunting opportunity, with a functioning practice and everything set-up to continue.
Here are the five things that Krishna should focus on when taking over the practice:
- Review employment contracts and position descriptions of staff
Taking on the responsibilities of an employer is not a trivial undertaking. There are a number of very formal duties that an employer must fulfil, and ignorance is not an excuse for failing to comply. An employer must meet the conditions set-out in the relevant Award (Health Professionals and Support Services Award for admin staff, and the Nurses Award for nursing staff) as well as meet the National Employment Standards.
Krishna will absolutely need to read these documents prior to taking becoming an employer. She will also have to ensure that her practice provides a compliant payroll system to look after pay-slips for staff, PAYG, superannuation payments and entitlements. She is best advised to engage a payroll service provided to look after this administration burden, as it is something that her staff should NOT be responsible for. Prior to agreeing to inherit employees Krishna must have an up to date statement about the entitlements that all staff members are due – including unpaid time, long service leave, over time payments, time in lieu and holiday leave – because she will also be inheriting these debts.
After looking into the compliance requirements Krishna should shift her focus onto the existing position descriptions and importantly she needs to compare these to the practice’s needs and the capabilities demonstrated by the staff members. If there is a discrepancy between what is needed and what is being performed by the team then Krishna should be very careful about taking over the employment of all of those staff members from her senior colleague.
At this point it would be sensible for Krishna to re-write position descriptions in ways that are consistent with how she wants the practice to operate, rather than maintaining a ‘business-as-usual’ approach. Inevitably this will be the best opportunity to improve parts of the practice that may have lagged or become inefficient under the previous doctor nearing retirement.
Recommendations: Utilise Hoxton Practice Management Advisory Services to check and benchmark these parts of your medical small business. Cost: $500-$2000 depending on size of the practice; Engage Hoxton Bookkeeping and Payroll for Award interpretation and payroll functions – Cost $16 per employee per pay cycle.
- Reboot the financial handling system
End-to-end handling of money with in the practice needs to be reviewed as a priority by Krishna. As the new owner she needs to understand all of the processes that the staff use to invoice, receive and reconcile payments. If there is not a fully engaged bookkeeper already in place she should appoint a medically experienced bookkeeper to reconcile invoices and payments within cloud based accounting software (for example Xero or MYOB).
This will provide a level of comfort that all unpaid bills are being chased and that there is ‘another pair of eyes’ looking over the accounts to minimise the risk of fraud or lazy process leading to revenue loss. Unpaid bills can account for up to 30% of practice revenue, and if they are not formally tracked Krishna could end up in a situation where she is unable to chase up old debtors. Fraud is said to impact more than 15% of medical and dental practices, so it is sensible to protect against this.
Recommendation: Optimise work flows in Practice Management Software; Use Surgical Partners for auto-reconciliation – Cost: <0.7% of revenue; Use Xero for cloud based accounting – Cost: approx. $35/mth; and engage Hoxton Bookkeeping to complete the accounts each month – Cost: approx. $200/mth
- Set KPIs for the administration staff
Krishna will get the most out of her team if they are clear about their roles and what expectations she has of them and what the business needs them to do. All too often doctors hope for the best and rely on assumptions that their staff know what is needed to run a practice. Setting up clear lines of communication about expectations and reporting is an important change that Krishna can trigger at the point of her taking over the practice.
A scheduled face to face conversation is needed to discuss these points with each staff member. As a practice owner Krishna needs to make time for this. Simply recording the goals of each and setting up a reporting schedule or review meeting can get the ball rolling. KPIs may be as simple as: filing 100% of faxes by end of the day; chasing up all 30+ day debtors weekly; confirm 80% of new appointments by phone; or even leave work on time 5 days per week.
KPIs are an easy way to motivate staff, identify areas of concern and to go about reinforcing change management.
Performance metrics are most easily justified and reinforced by having clear policies and procedures (P&P) within the practice. P&P documents double up as training material for new staff and can be updated in the face of changes within the practice or as required from external bodies.
Recommendation: Subscribe to PracticeHub to host Policies and Procedures, training materials and KPIs – Cost: $135 per month
- Set a budget
Krishna is likely to experience a significant uplift in her disposable income as a result of increasing her private Gynaecology Practice and taking over the work from her senior colleague. This would be the wrong time to be complacent about the money side of the business. As a priority she should spend time creating financial goals for the business including a budget that predicts expenses and revenue.
Not only will this give her some confidence about how the business is progressing it will also set an important set of benchmarks for her staff. Budgets for practices should take into consideration the pricing model, including a review of different service fees (e.g. in-patient procedures vs. out-patient procedures vs. consultations vs. telehealth). Krishna must consider the need to increase her fees annually and also to give salary increase to her staff – at least consistent with the Award requirements.
- Bring in the experts
Krishna is new to running a small business, she acknowledges that she does not have skills required to manage a small business management – a small business that is likely to generate between $600k and $1M per year. The most effective and complete way she can cover this knowledge deficit is to engage some experts to assist. Specialised software and out-sourced payroll, bookkeeping and business management will be a tax deductable cost of around $30k per year.
The most obvious advantage of using expertise and appropriate software will be reduced stress and hassle for Krishna operating her business. It will also optimise her revenue generation and reduce the amount of lost revenue from debtors management, failure to review pricing, fraud or fines for lack of compliance. This lost revenue can easily exceed $50k per year.
Having this outside expertise also ensures that Krishna is able to immediately become a compliant employer with a structure in place to support her staff and get the most out of them. Her practice will be set-up so that training materials create resilience for when staff leave and reporting structures that give deeper insights into the operation of her business.
Krishna can rest easy at night, and take advantage of financial improvement in her new role as Practice Owner.
Recommendation: Engage Hoxton MPM Practice Management Advisory Service to provide the Business Management – Cost: $10k to $15k per year