If y0u were to ask the average business owner, how much does it cost to make widgets, my guess is that 9 out of 10 would know exactly what that figure is.
On the other hand, if you were to ask a doctor who owns the practice, how much is it costing you to see each patient, I’d argue 9 out of 10 wouldn’t know.
Now, I’m making huge assumptions of course, but I think the point is valid. Doctor’s offices do a very poor job of understanding basic business principles, such as, figuring out their cost.
Figuring out cost can get complicated, and there is certainly a lot of ways of doing it. But I tend to think that there is elegance is simplicity.
Gather the total number of encounters. Next, gather all your expenses. Then, you divide the two:
- Expenses – 850,000
- Encounters – 10,000
850,000 / 10,000 = $85
Under this scenario, each encounter is costing the practice $85.
Knowing, measuring and benchmarking this number will put you on the right path to stay ahead of the curve.