Showing how your costs and revenue work together to shape your results. By defining and measuring these key ingredients, you can stop guessing, start calculating, and make smarter decisions to grow profit and sustainability.
Episode 3 | Watch on YouTube
If you have ever heard the word algorithm and immediately felt overwhelmed, you are not alone. But here is the thing: for your private practice, a business algorithm is simply your recipe, the set of rules and calculations that define how your practice operates to achieve a specific result.
If you are baking a cake, your algorithm is two cups of flour, one cup of sugar, and two eggs. Change one ingredient and the outcome changes. It is not the same cake anymore. Your private practice works the same way. Your recipe is made up of your labor costs, reimbursement rates, rent, and productivity levels.
When you define the algorithm, you are doing the math behind your success. This is the foundation of sound healthcare financial management, and it is what separates practices that scale from ones that stall.
Say you see 100 patients a week at $100 per visit, and it costs you $60 per visit in labor. Your algorithm tells you that you have $4,000 left each week for overhead and profit. Want more profit? Change an ingredient: increase your rate, optimize labor costs, or reduce overhead. You cannot improve what you do not measure, and you cannot measure what you have not defined.
If you do not know your recipe, you cannot bake the same cake twice. Start small: pull your numbers from last quarter and identify your top three cost drivers and revenue sources. For benchmarking, MGMA's practice management resources are an excellent place to compare your numbers against industry standards and find areas of opportunity.
