Ways to increase sales and profitability for manufacturing

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foreign Jan is with us in Delaware hey Jen what's up hi Dave thanks for taking my call sure how can I help my husband and I are doctors of physical therapy with 17 years experience and we opened Our Own Private Practice in July of 2019. we started with one location with just the two of us and we now have two locations seven full-time employees and a couple part-time college student employees wow our plan is to grow to four Clinic locations but since we are an insurance-based company it's been very difficult for us to save money to move forward with that because it seems that reimbursements continue to decrease so I was curious if you had any suggestions on how we could maybe budget better for growth when our reimbursement is unpredictable seems to always decrease and can be delayed sometimes weeks or months from the time of service decreased you mean they're paid you less yes well at what point do they pay you little enough that you no longer deal with them well unfortunately UH 60 of our patients are Medicare and we don't have a lot of um bargaining power with the government on that no you don't but the only bargaining power you have is get out of that part of the business if they make it unprofitable and I know lots of docs that have right that's why I'm asking at what point do they lower this so far the insurance claim or the Medicare claim they lower it so far that it makes it not worth doing well I guess if we got below that at least break even number we're probably about 10 percent margin with them yeah Healthcare is tough yeah no it's not just Healthcare stuff it's business model stuff so um this is what's driving stuff like concierge medicine you know that right right because and we have we do have some people in our area that do do a cash-based service um I just don't know in the area that we live in if that would be something that we could live off of well you can't live off of uh no margin I mean if you're losing 20 cents a watermelon you don't want to get a bigger truck right so I mean we've gotta we gotta think this through I'm not saying you're there today but um but you what you're describing is you're you're trying to get more and more of the kind of customers that you don't like right um we have dropped some of the lower insurances the private insurances okay we're starting to pay us less than what it cost us to treat a patients so we have dropped those yeah you have to um because yeah we just can't treat them and luckily for us it was a very low percentage of those patients that we did have on our caseload exactly and we offer them for out of network benefits so that is an option that we've gone to um unfortunately a lot of Medicare people are on a fixed income so they don't have that option I understand they'll just go somewhere else exactly and that's the government's problem it's not yours you have a business model problem okay you're not you're not running a non-profit and so you don't have a choice in this I mean I love you I love your compassion and it makes your heart sad makes mine sad too but you can't you can't destroy your ability to stay open because we're sad over this group of people over here on the side and so yeah you have to drop those when they're unprofitable it reaches a point and Medicare May reach that point it has in other parts of your world not necessarily PT but but where you are but other parts of the medical world people are just abandoning it because it's not worth screwing with and again if if the margins get so tight it's not healthy growth let's say that your your mix went to 80 Medicare instead of 60. but you could grow six stores instead of two right you don't want that you don't want that because now you're done you've built a whole network of stores that are dependent upon a dying profit margin does that make sense yes absolutely and so the more I can move if I'm you if I grow the store slower but I can get move my mix to less and less of the low margin mix then the better off you're gonna the more stable you're gonna be the more you're controlling your own destiny um and so I would rather have three stores than six uh that are that are highly profitable and and that uh you know we're doing good volume in them but the mix is not the mix might be 60 might be 40 Medicare and and sixty percent the other rather than the other way around because you're moving in a direction then that that allows you to do that so that's what I would do if I woke up in your shoes I because what you're describing here is a a revenue variable that you can't control sure and really have zero impact on and so they can come along and just change it unilaterally and and just and then you're just screwed you know and we're finding that even with private insurance exactly and they've got high deductibles and you know people just can't afford you know they kind of look at PT sometimes as a luxury yeah well maybe I could just get by without it so they don't because they can't afford to come in and pay cash yep yep and and so yeah you know hey you that creates a different marketing thing where you say okay we have to convince you that this is important to get your money you know right and because it is important it's a valid service I'm not I'm not being sarcastic about it but you know instead of uh I'm coming over here because it's free and my doctor told me to come it's free to me but my insurance company's paying for it now I gotta actually have some skin in the game no pun intended and um you know and now I gotta actually decide if PT is valuable now you've got a different uh client interaction that involves a value proposition you have to show them that you're valuable not just oh they come in and it's it's no it's a no-brainer doc told me to come what do I do okay do that do that okay and you walk through you know your process so you know you may be moving more of a privatized thing so an example of that I again I referred to it earlier I've got several doc friends that have gone to concierge and you know they have to have a value proposition I personally have a concierge Doc and the value proposition is obvious for me it's convenience um you know and it's instant service and thorough service and I can afford the I'm a you know a high income earner I can afford to do that and uh but the value proposition can't simply be uh you're going to sit in a waiting room for six hours and wish I knew how to do my scheduling you know right uh I'm not playing that not for any amount as a customer I'm not so it's a different world and then you've got a different discussion with your customer at that point so yeah I I think the uh what this is forcing you to do is is that volume might not be your answer on stores as much as addressing your product mix on the stores that might be the way you go um that just looking in it from the outside I'm almost looking at it from a customer's perspective I mean I've done some PT from time to time and uh I do value what you guys do personally so you know I yeah you're a hero appreciate what you do and appreciate the way you guys are looking at it but it could be that the shifting private insurance market and the shifting Medicare Market is telling you less volume higher margin is a better model than high volume low margin that you can't control the revenue stream and that's your mix that's a philosophical product mix decision you've got to make and then what are the unintended consequences of that and it could be one of those is you have to learn to sell PT rather than just do pt you have to teach the client that why it's valuable in other words so they do give you their money because otherwise they're giving you the government's money or the insurance company's money and they don't give a rip that's a different transaction so what are the other unintended consequences I don't know what they are I think one of the positive ones is you're going to have increased cash flow because you're not all your payments aren't delayed they're cash on the barrel head and that's the direction that you go so really really good stuff