What Can you Learn from Airline Industry
to Make Your Practice Profitable?
The airline industry has a notorious history of not making profits. But there one company that stands out from the rest– Southwest Airlines. Like me, you probably fly with them on a regular basis. Led by president and CEO Gary Kelly, Southwest Airlines has outperformed every one of its rivals year after year and produced amazing profits.
In order for Southwest to be crystal clear on their brand– a low cost airline they make trade-offs. The trade-offs that they are willing to make are strategic business decisions to keep the cost of doing business down. Their trade-offs are not made by default but by design.
Instead of flying to every destination, they deliberately offer only point-to-point flights. Opting out of inflight meals and first class seats to trim costs are all examples of their trade-offs. The courage to accept trade-offs is one of the key factors that have made them profitable.
When your clinic accepts Medicare payments there are always trade-offs. More regulations, more documentation automatically comes with Medicare. There is no free lunch when it comes to Medicare. The choice to receive payments from Medicare is probably one of the most important decisions your clinic’s leadership will make. This decision needs to be deliberate and strategic and account for Medicare trade-offs.
In his book Essentialism: The Disciplined Pursuit of Less; Greg McKeown contrasts the thinking of the nonessentialist with the essentialist by the questions they ask. The nonessentialist asks, “How can I do it all?” The essentialist sees trade-offs as an inherent part of life and doesn’t ask, “What do I have to give up? Or “How can I do both?” The essentialist asks the more important question, “What do I want to go big on?” To help you think through your long-term business strategy with Medicare and what you might want to go big on,
3 Essentials When
Considering Medicare Trade-Offs
1. You can try to ignore the reality of Medicare trade-offs but you can’t escape them.
Medicare is a federally funded and managed health insurance plan for older adults over the age of 65, people under 65 with disabilities or have end-stage renal disease. Most practices have a large percentage of their patients that are Medicare beneficiaries. There is a tremendous need for therapy services in this population, and the need is growing.
By the year 2020, approximately one billion people will be over the age of 60. Another one million will turn 65 every week. There is a significant shift of the number and dollars spent on healthcare in older adults. You should carefully consider the cost and benefit of treating Medicare beneficiaries in your practice.
It is an economic reality that most therapists in private practice can’t live without Medicare. But it comes at a price.
The Medicare insurance system is one of the most complex, regulated systems in the world. The onslaught of regulations can be at times overwhelming. Every new change seems to decrease reimbursement and increase expenses, which is what regulations do.
If you choose to play in the Medicare game then you must play by their rules. Unfortunately there are lots of them, many that don’t make sense and don’t contribute one iota to quality care.
You will spend more time documenting your care, your billing will be more complicated and if you’re not diligent your practice will be shaped by Medicare rules even when it doesn’t apply to other insurance carriers.
It’s your decision whether you want to receive payment from Medicare or not. But don’t ignore the realities of your decision. Make a deliberate decision based upon the vision and ideal clients of your practice.
2. A trade-off by definition means you can’t have it both ways. You make the choice.
After a few years of observing Southwest’s success other airlines got into the act of trying to offer low cost fares. They offered a “lite” version of their regular flights. They no longer offered meals. They eliminated first class. But it proved to be a financial disaster because they didn’t fully embrace Southwest’s trade-off strategy and held onto the security of their previous business model.
The other airlines never achieved the operational efficiencies that allowed them to compete on price. To be competitive they began to cut corners and compromise on quality that led to customer dissatisfaction.
Michael Porter, a Harvard professor, describes the approach airlines took as “straddling”. Straddling means keeping your existing strategy while trying to add to it the new strategy of a competitor.
The cash therapy practice movement has come on the radar of many private practices as they face round after round of declining reimbursements. Being paid cash for therapy sounds like the way to go. Managers try to add cash services to their existing practice model while still holding on to the Medicare “cash cow”.
In most incidents ignoring the reality of trade-offs is a terrible strategy for business. A straddling strategy can be enormously expensive and time consuming. Therapy practices begin to make sacrifices around the edges on quality of care by seeing more patients and providing less personalized care through supportive staff.
A straddling strategy of trying to be an “insurance-based practice +cash” will not permit you to profit from the decreased administrative costs and time recovered from less documentation.
It is tempting to try to do it all and ignore the reality of trade-offs. A trade-off implies a choice between two good things. We want it both ways but the reality is we can’t do it all. We make a choice and live with the trade-offs.
3. Instead of focusing on what you have to give up. Focus on what will have the biggest payoff in the long run.
As painful as trade-offs can be, they are an opportunity to make a significant difference in your practice. Analyzing and weighing the options in order to make the best decision dramatically increases the possibilities of the best payoff.
Like Southwest, if you embrace trade-offs you will be doing business according to what is most important to you. No one can have it all nor do it all. Making decisions based upon priorities is an inherent part of life.
Instead of viewing this as a negative, see it as a way to spend your energy and time in your business on what matters most. If you decide that the patient population you’re called to serve includes Medicare beneficiaries then enroll in Medicare and operate as efficiently as you can within their rules.
If you feel called to a cash therapy practice outside the Medicare system then learn what the legal and proper way to offer cash services to older adults.
Instead of trying to do it all and have it all, make a choice on what you want to go big on. Be willing to let go of the good to grab on to the great.
Embracing this mindset can have a tremendous impact on your practice and your life. Trade-offs are not something to ignore or run away from. Trade-offs need to be embraced and made with careful thought and consistency.