What We Hear: May, 2015

Agencies that continue to struggle need to look at their operations and understand that adding people to fix a process does not work.  Fixing a process and improving that process, including workflow, does work.

Many agencies have overhead rate and burden that is too high.  This high rate hampers an agency’s ability to grow and, in some cases, even puts them in a position where cash is too tight.

To fix the issue of higher overhead, agencies need to analyze their workflow, starting with the acceptance of referrals up to admission. Agencies then need to analyze their internal work flow for processing documentation, billing and QA.

If you are going to survive and keep your agency profitable, you will need to operate efficiently and wisely.  We see too many agencies with overhead rates that are sometimes 10-20% higher than their clinical or direct overhead rate.

A successful agency operates on efficiency.  Therefore, your agency should have a clinical or direct expense of less than 50% of revenue and an overhead rate (including administrator/owner salary) of less than 40%.  This model allows you to have a cushion of 10% profit.  The model should apply to financials, but also cash!  Remember, don’t rely on your bank account balance to manage your agency.  Agencies that do well use financial and statistical data, coupled with cash to succeed.

 

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