Do you know how profitable clinicians are in your group practice?
Do you know how paying a therapist at a different structure will affect your practice’s profitability or your own take home pay?
Enter the clinician profitability sheet. Use this sheet monthly and you’ll be on track to fully understand how a clinician’s pay, revenue, and pay structure affect your total practice profitability. If you’re not using something like this resource, you may be in the dark about the revenue minimums your clinicians need to bring in, or, how a pay structure you’re using may in fact be hurting your practice. It’s a MUST have.
Want this sheet? Just email us at [email protected] and we’ll send a copy right to you.
The transcript of this video is below:
What is Clinician Profitability?
Hey, it’s Nate from Navigator Bookkeeping, and we’re talking today about Clinician Profitability. Now, we’ve mentioned this in some other videos, like our, “Three Bookkeeping Things to Do in Your Private Practice”, but let’s talk about clinician profitability for a private practice a little more specifically. And I wanted to show you this too, so you can kind of see what this looks like.
Now, first of all, before we get into this sheet, let’s just talk about what is clinician profitability. It’s basically a way of looking at the revenue that your clinicians are bringing in monthly, the costs that they’re costing you as a practice, and what they’re taking home, and figuring out what’s the net from that, what are we keeping as a practice from each clinician? That’s what clinician profitability is.
How to Implement Clinician Profitability
Now, I suggest, and what I do with my clients, is we look at this monthly, so that each month you have a gauge of where clinicians are, and how they’re doing, and how much money, basically, the practice is keeping, for each clinician. Our goal is, each clinician is profitable and making money for the practice, and also getting paid a wage that makes sense for them and allows them to live the lifestyle that they want.
So we wanna be in that balance where we’re not cheating them and paying them nothing so we can make tons of profit, but also, we are profitable on each clinician so that our practice is sustainable and healthy, and can continue paying wages. That’s the spot we’re trying to hit.
So let’s look at this document, and I’ll walk you through this, and just something, if you’re interested, if you wanna email me, you can email me at [email protected], and I will send you this. If you don’t wanna create this, I mean, you’re looking at it, so you can kind of create this, but this has all the formulas baked in. So if you want this, I can send it to you, happy to do that. Send me an email.
Breakdown of the Clinician Profitability Sheet
So here’s what we’re gonna do. Let’s look at this. First of all, we have the clinicians in column A there. So we list all the clinicians, we usually just put their name here. Revenue; this is the gross amount that they brought in for the month. So this is the total amount, probably from your EHR, that they brought in. We’re not taking this from QuickBooks, we’re pulling this from some sort of EHR.
So a lot of our clients use SimplePractice, where we’re just basically saying, what was the total they brought in for the month? That’s what we’re entering here. Contractor pay; they may not be contractors. This example I’m showing you is for contractors, but you could also just put this ‘clinician pay’ or ’employee pay’, it doesn’t really matter what the title is. This is what they are making based off of those revenue amounts.
So the formulas in here are based off of the different splits, mostly, that some of these have. So I know this sheet is a mix of salary and split. So some of the people in here might have a 50-50 split, a 60-40 split, something like that, and then some of these clinicians have just a salary.
So you’re gonna enter in here what each clinician is paid, how they’re paid. And the nice way to do this is to use a formula so that when the revenue amounts change, you don’t have to update anything on the clinician pay side. Practice pay; is just saying, how much is your practice keeping after the contractor is paid?
To call back our, ‘Three Bookkeeping Things you Should do in Your Private Practice’ video, this would be gross profit. We talked about gross profit and looking at that margin, this is your gross profit per clinicians. It’s how much are you keeping per each of your clinicians after they are paid. This is a section here that many practices will not think about or will not include in their projections.
This part is pretty normal, how much am I making per clinician? This part we’re saying, what are your total overhead costs per month? So that means rents, utilities, office supplies, software, meals, travel, furniture, all those things. What’s your total cost, and let’s split it evenly amongst each of our clinicians, and that’s what we did here.
Let’s split it evenly amongst our clinicians so that we can figure out, about how much operating cost do we need each clinician to cover. How much revenue do they need to bring in to kind of get into a break-even point? And the break-even point is basically their pay, plus the operating cost. They need to cover at least that much to be bringing in additional money for the practice.
Now, if they’re negative in this column, Practice Pay, that means that either they’re probably salaried, that’s like what’s happening here in row 9, this person is salaried and they didn’t bring in enough to cover their salary, or something is wrong in the formula, ’cause if there’s a split, if they’re making 60-40 or something like that, they’re never gonna be negative.
So most people will be positive here in Practice Pay, and that’s fine. Some people may be negative though, in profit. That means, basically, after the clinician has been paid, in column C, there’s not enough left over to cover the amount of costs that we want them to cover. Now, that doesn’t mean they’re actually losing the practice money, that just means they’re not covering as much costs as we would ideally like them to.
So if someone’s negative here, don’t go and fire them and say, “You’re losing me money.” It’s not what this table is doing. This table is just saying, they’re not making as much as you would like them to. They’re not at that kind of break-even point that you’d ideally want them to be at.
So that’s kind of a key point. Row 8 is a good example here. They didn’t bring in much revenue. There’s $546 left over after they are paid, that the practice kept. And then we want them to cover about $900. They didn’t cover that, so they’re minus $356. They didn’t actually lose $356, they just didn’t cover as much as we want them to.
So to that clinician, I would say to the owner, if that is happening, ’cause obviously, you wanna have a conversation with them and say, “Hey, you’re not meeting your minimums as far as how many clients you’re seeing per week. You need to meet more, you need to see more people so that you’re getting into that profitability point for the practice.” So that’s where this is really gonna come in handy, is you’re gonna know what’s that point every clinician needs to get to. How many people do they need to be seeing per week or per month to get to that point where they’re profitable for the practice?
The other nice part that you can do with this, and this is another big way to use this, which is really helpful for a lot of clients, is, you can look at different pay structures here. So if someone’s doing a 50-50 split and they wanna move to a 60-40 split, you can mess around with this in column C. I could change the formulas to go 60-40 instead of 50-50, and I could see how does that affect the practice, and how does that affect how much my clinician is making. So it’s a really helpful tool to use when you’re kind of testing some things out.
How to Use the Clinician Profitability Sheet
We have a client right now who is wondering if they wanna move everyone to salary from contractor splits, which is a huge change. So we’re using this tool to kind of look, “Hey, what is that actual cost gonna look like for you? How is that gonna change?”
Even if you’re just wanting to move people from 1099 to W-2, just basically change what kind of team member they are in your practice, this is really helpful where you can say, “Okay, we know they’re gonna make this much more because of payroll taxes”, or, “It’s gonna cost us more. What does that actually look like?
How much less money are we gonna make as a practice, and what does that influence? How much more revenue do they need to bring in to cover that?” So you can use this as kind of a sandbox to kind of test out some of those theories as well, so it’s very helpful for that as well.
Summary
So this is the Clinician Profitability Sheet. I think it’s a huge value-add for practice owners, just for the information you’re gonna be able to glean from past months, as well as projections you can make for future months as well.
So like I said, if you’re interested in getting one of these to use for your own practice, just send me an email. You can just put in the subject line, “Clinician Profitability Sheet”, something along those lines, write me some sort of message, and I’ll send that over to you. If you have any questions though, leave a comment below this video, I’m happy to respond, I usually respond pretty quickly. And be on the lookout for other videos we’re doing, and we will talk soon. Thanks.