Planning And Budgeting In Health Care

I have always encouraged a method of budgetary control for clinic success. This is called fractional expense management. In a nutshell, it is the dividing of expenses into percentages of turnover and attempting to not exceed these budgets in order to hit profit targets.

Whilst the percentages on certain elements seem small, it is vitally important that they are kept to that level. Even a small increase in each of the core units, causes a huge change to the bottom line.

The following is an example of the fractional expense ratios at a Physiotherapy Clinic

Marketing 
2%
Local marketing
1%
Miscellaneous/General
6%
Rent
10%
Therapist Wages
50%
Admin Wages
10%
Profit
20%

 A few simple ways of Improving Fractional Expenses

Increased Utilization of Clinic Space

When clinic utilization is maximised, it has the following impact;

• Lowers rent expense ratios
• Lowers Local marketing and miscellaneous expense ratios
• Lowers admin staff ratio
• This may improve profit percentage margins by 2-4%

Improving Return Rates of Patients

When Return Rates are improved by improving clinical care, it has the following impact;

• Lowers therapeutic and admin staff wage ratios

Improving New Patient numbers

When new client numbers are maximised, it has the following impact;

• Leverages any changes in Return rate improvements

So, try fractional expense budgetary control to improve your bottom line. It is a good way to look at the different levers of your business and know which ones aren't working.

It isn't all about simply cutting up front costs, there can be laws of diminishing returns when you cut costs, such as marketing. You need to see where you can improve on things that return you money on a positive basis, and then invest heavily in training on that!

If you have any further questions or need assistance about planning and budgeting in healthcare give us a call on 1300 731 733 today, or email [email protected] for more info.

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