Would you be surprised to learn that physicians regularly walk away from 30 percent or more of their income? Different groups of physicians leave money on the table for different reasons.
Here are some of the most common mistakes that physicians make.
Failure to Negotiate Contracts
In Sheryl Sandberg’s book, Lean In: Women, Work and the Will to Lead, she shared that she was a seasoned executive when Mark Zuckerberg invited her to join Facebook as the COO. She was actually just inclined to accept the first offer he made.
When she discussed it with her husband, he told her the first offer is just the starting point of a negotiation. He recommended she make a counteroffer. She did and Zuckerberg came back to her with a much more lucrative proposal.
If Sandberg reached her level of professional success without knowing basic negotiation etiquette, how many physicians make the same mistake?
Whether you are signing an employment contract, a buy-sell agreement, or even a lease, run it by legal counsel, and especially acquire some basic negotiation skills. The ability to persuade others is a skill that will serve you with colleagues, patients, and family.
Failure to Collect What You’re Owed for Clinical Services
Physicians in private practice walk away from an average of 30% of their incomes when they do not follow up on rejected insurance claims. A medical billing expert remembered the day his new client showed him his “Porsche drawer” filled with rejected insurance claims. This physician knew that if he contested the rejections, he could fund his dream car; he just never found time.
If you are in private practice, what is your claim rejection rate? Outsourcing your medical billing could bring claim rejection rates to as low as 2 to 5%. This may be the fastest and easiest way to increase your cash flow.
Many medical practices suffer with a systems problem: they do not have policies and procedures in place to collect the portion of the bill for which patients are responsible. On average, patients pay about 50% of their portion of the medical bills.
Create a transparent payment policy that you share with all patients. Accept credit card payments at your office. Build relationships with companies that offer lending for medical procedures. That way you get paid in full, and the financial risks are transferred to the lenders.
Failure to Minimize Your Taxes
We all have duties to pay taxes; however, most physicians pay far more than the tax code requires. You are best served by working with a CPA who has extensive experience with physicians like yourself. Further, consider tax consequences of all of your financial choices. A physician was delighted to sell his practice; however, he was horrified to discover that he had to write a check to the IRS for 80% of the sale price.
Failure to Negotiate Terms of Loans
You will most likely borrow money to make big and small purchases. The interest that you pay on a loan is not carved in stone.
Shop around for mortgages. Some banks will match lower interest rates. Call your credit card company and ask them to decrease the interest that you pay. You are in the best position to negotiate if you have high credit scores.
Failure to Scrutinize Expenses
Do you know what your monthly expenses are? Take a look at all of the goods and services you purchase and ask these questions:
· What is this for?
· Do I need it?
· Can I reduce or eliminate it?
· Can I get a better price somewhere else?
Being Penny-Wise and Pound-Foolish
You have heard the expression, “You have to spend money to make money.” Sometimes the unwillingness to make investments in yourself can be the costliest income mistakes you will make.
Here are wise ways to spend money that will allow you to increase your income potential.
Failure to Harness the Power of Leverage
Archimedes said, “Give me a place to stand and with a lever I will move the whole world.”
What is leverage? Think of an Allen wrench inserted into an Allen screw. You can put the long end or the short end of the wrench into the screw. If you put the short end in, you have a longer lever arm. This allows you to get more results from your efforts.
You leverage your staff to optimize your ability to generate revenue. Could you hire a partner or a PA to allow you to engage in more profitable activities? You leverage borrowed money to make investments, whether it’s new equipment or a practice makeover. Explore whether it makes more financial sense to own or to lease your office space, equipment, or car. Your accountant or financial advisor can offer you opinions.
Failure to Protect against Fraud and Embezzlement
Do you have checks and balances in place to help keep your honest employees honest? A colleague told me that she should have listened to her intuition about her “trusted office manager.” She discovered that over the years, this person embezzled hundreds of thousands of dollars.
Medical practices have the highest embezzlement rate of any service industry. According to an MGMA study, 83% of medical practices report that they have been victims of embezzlement.
Put systems in place to protect yourself.
Remember, it's not what you make; it's what you keep.
Promote your financial health by not walking away from your money!
· Education and training. Invest to expand your clinical knowledge, financial literacy, or business skills.
· Marketing. Avoid being the best-kept secret in town. However, it’s always important to keep track of your investment of time, energy, and money and measure the outcome. You want to get a healthy return on your investment (ROI). Or as we say, “Keep your eye on the ROI.”
· Buy more time. Yes, you can clean your house and mow your lawn. If you find activities like these relaxing, please indulge! However, when you hire people to take care of these activities, you buy time to optimize your revenue.
· Hire experts. The investment you make seeking expert advice will almost always put you in a better financial position.
· Buy protection. Do not skimp on insuring the assets that have the most value to you, including your income potential. It’s not a fun or sexy way to spend money, but when you need it, you’ll be glad you had it.