Medical practices, and many small business in other industries, are always comparing their current practice numbers, to their past performances.
When people ask, how is the practice doing? Managers respond, “… billing is up 15% when comparing same period last year” or “we saw 100 more patients this March than last March.” Another common response is, “net income is flat compared to last year.”
I think this is the wrong approach.
The pertinent questions to ask is: how are you doing against your goals? In other words, how are you doing against the company’s financial expectations?
Assessing a company’s performance against their forecast, as opposed to past year or past months performance is a better way to measure how well one is really doing and if the practice (or business) is on track or not. It might be great that your up from last year, but if the practice is nowhere near where it needs to be patientwise, moneywise or even budgetwise, then does it really matter?
I’m not suggesting that comparing this month’s numbers with last month’s number is the wrong thing to do. Historical figures are very important. But in terms of running a more efficient operation, determining where you want to be (financially), laying a path towards that goal, and assessing one’s progress in relation to one’s goal, allows for a much better and effective management style.
You know who does this very well?
Wall Street measures a company’s performance by how well they performed when compared to the company’s (or analyst’s) financial expectations. We always hear reports that say “Procter & Gamble shares dropped 10% due to the company missing their quarterly projections.” It didn’t matter if P&G doubled their profit from the previous year. If the company didn’t meet expectations, then they are getting no love (so to speak).
As a result, I’ve changed my tune. I’ve started focusing on getting better at managing financial expectations (determining where I think we ought to be financially and laying a path towards success) for our practice and measuring our current performance with those expectations.
So when people ask me, how is the practice doing, instead of saying, I’m up or down from last year, I can say, we’re right on target with our financial outlook for the year.
For my next post, I’m going to give you some practical examples of how I’ve learned to apply this concept. So remember to check back soon. Or if you want to have my post delivered to your inbox, you can subscribe to this blog by adding your email to the Email Subscription area at the top of the page.