Chiropractic Practitioner: This One Equation Will Change Your Chiropractic Practice

Are you ready for the one equation that will change your practice forever? This equation is so powerful that after working with thousands of practices, I’ve seen practice after practice scale to 6-figure months and beyond.

We’re talking 7-figure years, and that is life-changing for the practice owner and the team we've built to help us drive that practice.

I’ve found some common challenges and issues that every successful practice deals with. These are hot topics in our community of Driven Docs.

So whether you're a fresh chiro right out of school or you're a veteran who's been doing it for decades, most doctors are missing out on this one equation that unlocks the potential of their profitability.

If you master it, not only will it change everything for you, but even your patients will get better outcomes because you’ll finally be able to build your team to deliver that value of care.

Formula 1 - Adjusted Production

As a chiropractor, in this first part of the formula, you're used to thinking in terms of collections and visits, and I get that. I was also very dialed into those numbers in my early days. But then I began to understand and learn the value of production.

Production is the value of the service at its retail fee. We have to understand that because anything less than its retail fee is a discount, and that discount begins to chew into your ability to scale your practice.

So as we look at every service that we provide in the practice, we have to look at the full value of that. Getting paid the full value for most services not only unlocks the profits to build the team for better delivery but also builds the profits that you need to take home to support your family and your dream life. Plus, it even has a direct proportion to the quality of services you provide to your patients.

I have analyzed almost every chiropractic model out there, and what I’ve seen is that when we race to the bottom with our fees, we cannot keep up quality. You see it with almost every type of product out in the industry.

An example of this is when you're riding a bike, and you're getting inner tubes for your tires. If you're going with the cheapest inner tube out there, you're going to be stopping and replacing that inner tube often.

Think about the precious time wasted. Imagine how it sucks the joy out of your ride. And don't forget the mounting frustration when you're stuck on the trail, fumbling with tire changes.

Nobody wants to have to stop and change a tire, especially if you're in the middle of a race. I’ve seen so many of my buddies in triathlons that have to pull off to the side to change those tires, while I’m flying by them.

So I've got to shift your mindset. It is much better to charge the true value of your services. This way, you and your team will get compensated fairly, and your patients receive an outstanding quality product. Your practice becomes synonymous with quality, and your patients experience a remarkable transformation from the outcomes you provide.

You see paying less just means frustration for you and the patient. There's nothing worse than having patients go inactive because they didn't get the outcomes that they wanted. It’s equally frustrating when you can't produce the outcomes that you desired, all because you couldn't build the right team due to budget constraints from raising your prices to the bottom.

Adjusted production on the other hand is the value of the production after discounts. The discounts come in multiple ways, such as cash discounts, insurance write-offs, or special promotions. But every single adjustment affects your bottom line. So make sure that you are happy with the adjusted production value numbers.

Your EHR should be able to pull a report of your production versus your adjusted production. Now this might put you in a bad mood, but I challenge you to go do it. Pull those reports for this last year to date. How much value of services have you produced versus how much have you produced that you anticipate to collect?

You see, the adjusted production is the actual amount of money that you're accepting as payment. That's the number that you should be collecting. But you have to compare that to the amount of work that you're doing. And it's crazy in our healthcare world that we're so accepting of such a big steep adjustment.

You've got to reduce those adjustments so that your adjusted production and your production are closer to each other, and you do that by watching write-offs.

Formula 2 - Adjusted Production Per Hour

Your practice should be broken down into three buckets. We want to look at your admin hours. Those are non-production hours. We don't factor those into this formula because this is the time when we're building the vehicle of your practice. We're training our team members, and we're developing the process to move faster and create more impact.

The next one is preferred hours. These are hours when you're treating patients. You're doing a lot of production in here whether you're delivering chiropractic care, spinal decompression, or doing laser. Or maybe you're an integrated practice and you're doing injections. There are a lot of services being delivered during preferred hours.

The third bucket is what we call extended hours. This is where we slow down. We're doing our consultations, our exams, or our report of findings. We slow down so we can spend more time with those patients.

These are production hours — preferred hours and extended hours together are our production hours.

I want you to calculate those hours per week. How many hours do we have set aside to deliver the value of our services? Then you need to be generating and watching those production reports, the adjusted production, and we're going to divide that by those hours. When we get that number, we now have adjusted production per hour.

We can't collect what we don't produce. There's a little bit of a shift in our profession where we're collecting money out front for services, but are you really monitoring what you're actually delivering on a regular basis?

This is such an important number because it will help us understand our hiring roadmap. How much can we produce as a team? And to produce more, we have to build more. We have to have more valuable services. We have to have more team members who can service more patients, and that's how we increase our production per hour — increase the value of services, or increase the number of services.

Now I'm saying production per hour but remember it's the adjusted production per hour. We're going to take adjusted production divided by the number of hours it took to deliver it. Don't include in those hours your admin time. That does not count for production hours.

Formula 3 - Profit Percentage

Part three of the formula is now taking and looking at what percent of that adjusted production are we actually collecting. That’s because again, we can only collect the services that we've delivered.

Now if you're collecting some of your services upfront, you may actually have over 100% because you're looking at money that you've collected that you haven't delivered the services for, so that'll skew the data.

It's important that you go back and open up a data time frame. Now in BlueIQ, that makes it really easy. You can simply click a button. If you're pulling a practice report, it's a little bit more challenging because you have to pull the time period

You're going to take your collections for that time period. I would open it up to about a six-month time period. So how much did you collect in those six months divided by your actual adjusted production? It should give you a percentage.

Healthy practices are somewhere in the 96% to 98% range. Unfortunately, there are uncollectible services that happen within a practice. So if you can be above that 96%, we're doing pretty well.

If you're getting a low number like in the 70s, that means you may not have insurance allowables put in properly into your patient management system. We talk about this in our community, and it’s like the old saying goes, “Garbage in, garbage out.” To get good results, you’ve got to start with good data.

This means you might need to spend some time making sure your billing team, team member, or billing company has uploaded the proper allowables into your EHR system so we can pull those reports and see what percent of the allowables we’re collecting. This should be in the high 90s.

If you're not, then you have one of two problems — bad data or bad process. If you have bad processes, we’re here to help. In fact, here’s another game-changer: along with tracking how much you're bringing in, I want you to start calculating another really important metric which is what percentage of your collections is being metabolized by your overhead. This is our percent of profits margin, what's left over.

If you're one doctor with a couple of employees, you should be in the 50% to 60% profit range. If you're scaling the volume of your practice, and you're moving from provider or operator into leader, or leader into high performer, your percent of overhead goes up, and the profit margin typically goes down to about 30%. But it's a bigger piece of the pie because you're collecting a lot more money.

And that’s it! This is the equation that will change your practice. If you liked this post, then I want to invite you to our free Facebook group, The Data-Driven Practice, where we talk about these types of topics in your practice on a regular basis. Let us help you build the practice of your dreams. Click here to join, and I will see you on the inside!