Seven Steps to Improved Profitability

Author: Kim Cavitt, Au.D.

  1. Base all of your pricing based upon your breakeven plus profit rate, per available scheduled hour, per revenue generating provider
    This allows your pricing to reflect YOUR needs and financial goals. Build all of your pricing off of a model were your time and expertise carry a value.

    Let’s do the math. You charge $30 for cerumen removal. It takes you 30 minutes, on average, to complete the procedure and your breakeven plus profit rate, for that same window of time, is $75. This is less than the average co-payment. In this paradigm, you lose money every time you remove cerumen. In one year, you performed 150 cerumen removal procedures at $4500.

    Instead, you charge the patient $75 for the same service. Instead, you received $11250. Not a single patient complained about the price increase because it is still less expensive than the same procedure in a physician’s office.

  2. Accept that there is a difference between reimbursement and coverage.
    Coverage is when a third-party payer pays in whole or in part towards the cost of an item or service. Reimbursement is when you, the provider, get paid by the patient or a third-party source. We need to care more about reimbursement and less about coverage.

    Let’s do the math. You do implantable device evaluation/management. You evaluate 12 implant candidates a year, you fit 10 new speech processors per year, and you program/re-program devices for another 60 patients per year, who produce 40 implant service visits a year. You charge patients privately for communication and functional needs assessments/cochlear implant consultations at $200. You charge $200 for cochlear implant speech processor fitting and orientation. You charge $100 for every troubleshooting/service visit. This equates to $8400 in revenue for charging for services that were medically necessary, yet lacked coverage.

  3. We need to only participate in managed care and third-party network plans or programs that are financially viable for our practices.
    All business is not good business. It is important for audiology practices to be aware of their breakeven plus profit, the time scheduled for each procedure or visit, and the allowable rates from the payer. Do a cost versus benefit analysis of every agreement and determine if the rewards outweigh the risks.

    Let’s do the math. Your breakeven plus profit is $225 per hour. The third-party network will pay you $500 per ear in a dispensing fee. You must manage each patient for one year post-fitting. On average, you will see patients for one, one-hour hearing aid examination and selection, one, one -hour fitting, and four, 30 minute follow-ups within the first year. You require $900 in coverage to breakeven and make a profit. This makes this program financially viable in this case but, if the you see average patients for more than four follow-ups or your breakeven plus profit exceeds $250 per hour, this same program becomes financially untenable.
  4. Stop providing services at no charge.
    Every minute of free services you provide is a minute where you are not covering your breakeven plus profit needs. Also, doctoring professionals do not provide free care. Period.

    Let’s do the math. You provide one free 30 minute service a day, 240 days a year. Let’s value that service at $100. You just gave away $24,000 worth of care.

  5. Practice to your top of your state license and, if you do not think that is expansive enough, work to change it.
    People ask me how audiology can succeed given the threats to the industry. I have an easy, simple answer that has been bearing fruit for years: Practice audiology. Be everything that a patient/consumer cannot receive through disruptive channels. This includes, but is not limited to, cerumen management, communication and functional needs assessments, tinnitus evaluation and management, vestibular evaluation/management, auditory processing evaluation and management, implantable device evaluation/management, pediatric evaluation/management, hearing conservation, and auditory rehabilitation. Most of these services have large, private pay components and can generate revenue and referrals and foster improved relationships and outcomes.

    Let’s do the math. You perform communication and functional needs assessments on all patients seeking a care plan for treatment. You charge $150 for this one hour visit. This visit is typically private pay. You do 480 communication and functional needs assessments in a year. This would amount to $72,000 in revenue.

  6. Read your managed care agreement, provider manual, and medical policies for every payer you agreed to participate.
    Managed care is a game. It is a game with published rules, which exist in the form of your agreement, administrative guidance, bulletins, and medical policies. We have to learn the rules to compete, and possibly win, the game. Knowledge equals power and power yields increased revenue. This, alone, will allow you to maximize reimbursement and improve cash flow (you will have fewer denials).

    Let’s do the math. You never realized that your payers allow you to bill them, or the patient, separately for real-ear measurement. You provide this service to 240 patients in a year at a cost of $75 per patient. Half of these patients were insurance cases where they allow $45 for the real-ear measurement. You receive an additional $14400 a year for billing for services you are already providing.

  7. Reduce your costs of goods.
    No hearing aid cures hearing loss. Every hearing aid still sends sound through a damaged peripheral and central auditory system. No hearing aid or hearing aid manufacturer are markedly better than the other. No hearing aid manufacturer or their representative is worth thousands of extra dollars in gearing aid cost. Negotiate your prices down to their bare bones. Rid yourself of business support, business development funds, rebates, marketing co-ops, and manufacturer “fluff” (gifts, lunches, events). Focus, solely, on getting the lowest price possible for the aids you are most comfortable fitting.

    Let’s again do the math. You dispense 20 aids. That is 240 aids a year. If you cut your cost by a mere $100 per device, you would add an additional $24000 a year to your bottom line for doing no additional work.    
    Dr. Kim Cavitt was a clinical audiologist and preceptor at The Ohio State University and Northwestern University for the first ten years of her career. Since 2001, Dr. Cavitt has operated her own Audiology consulting firm, Audiology Resources, Inc. She currently serves on the State of Illinois Speech Pathology and Audiology Licensure Board. She also serves on committees through AAA and ASHA and is an Adjunct Lecturer at Northwestern University.