My chapter is titled The Enhanced Process of Selling A Healthcare Services Company. The clear message is that by utilizing specific positioning and other sale strategies you will get more for your business than simply finding a buyer and selling your business. Below are some highlights on why this is the case.

• Buyers in the rehabilitation industry are “pros” at buying companies, you as a business owner are not. They buy multiple companies per year; you will do this once in a lifetime.
• Price is not nearly as important as structure. This is where an enhanced process will assist you to objectively choose the best structure, and get you more money in the end.
• A normal process will contemplate one or maybe two acquirers, an enhanced process contemplates ALL potential acquirers, creating a bidding process and gives you leverage against the buyers.
• In a normal process the acquirer is typically in control of the process, timing, etc. in an enhanced process, you as the seller are in control.

The business “sale” process is extremely complex and is filled with major decisions and roadblocks. I firmly believe that you as the business owner need professional guidance. Feel free to download my chapter now. If you have any questions, give us a call at 800-711-7716.

At what point should an owner stop treating patients and truly become the leader and CEO?
Most rehabilitation owners wait entirely too long to make the transition to a leadership role. When a business grows to multiple clinics, it is probably time to develop your skills as a leader and CEO, especially if you want to continue to grow your company. A growth company requires systems in the areas of operations and finance, referral generation, administration, clinical development, and service. Someone needs to be leading and managing these systems. The owner is usually the best person to take on that responsibility.

What is the best timing and financial strategy for moving from clinician to CEO?
One would think that a gradual move from clinician to manager would make the most sense. In our experience, that strategy simply does not work. If you truly want to grow your company, one of your current therapists or a new hire needs to be trained and formally named the Clinical Director and you need to remove yourself from the office. Trying to do this gradually only impedes the new director’s ability to be successful managing the clinic. But if given proper training, systems, and management they will be successful.

From a financial aspect, you need to make sure that the company can afford the expense of your replacement. Next your challenge will be to develop strategies that grow the company both internally and externally in order to drive the revenues to replace your previous clinical contributions and build the company for the future. In short, you now are working “on” the business as opposed to working “in” the business. That is how businesses generate significant value.

We have seen many successful rehabilitation business owners take themselves out of a clinical schedule and build successful rehabilitation companies. Many of these owners will treat patients from time to time in order to maintain their clinical skills and we advocate that practice. Building your business will grant you these options.

The Psychology of Selling a Company
In every deal there is a major financial decision that needs to be made. And yes, a critical aspect to any deal is agreement on purchase price and terms. But what we find is most business owners also have strong emotional connections with their companies. It is critically important to understand that connection to get to the visceral aspect of a business sale.

The best way for you, the business owner, to fully prepare for a sale process is to have a discussion with an Advisor that goes beyond the financial terms and gains. Below are some questions that need to be pondered when considering the sale of your business.

Why do you want to sell? It’s the most obvious, yet often most difficult question to answer. Many times we find that the first response is not always the “real” reason, so you really have to dig to get this question answered from the heart! There’s no perfect answer, only the answer that’s true for you.

What is the biggest reason you would NOT sell? This is really important as it may lead to some of the reasons that a deal may not be the right decision. For example, “I would not sell my business because I could never work for someone else.” In the rehabilitation world, most former owners will be heavily involved in the company post-sale, so this is critical to know and understand.

What concerns do you have about the future of the business? For example, you might want to see it continue to grow, or you’re concerned that it will evolve into obscurity.

What do you like most about the business? Sometimes, answering this question leads the business owner to conclude that he or she would rather keep the business.

What do you like least about the business? This gives clues into other reasons you might want to sell your business.

Preparing for the Inevitable
We spend a lot of time preparing a client for what to expect during the process of selling their company. Road blocks will come up in the process. While we do everything we can to minimize them, sellers who understand there is a strong probability that problems will occur are much better prepared to manage the ups and downs as a typical part of an M&A process.

The best thing a seller can do during the sale process is to remain objective. Take the emotion out of the problem (usually extremely hard for a business owner) and tackle the critical issues with facts and objective data to support your case. Work to create solutions that can be a win-win with you and the acquirer.

Utilizing the above preparation and process steps can significantly minimize the risk of a deal unnecessarily not closing. Focus on the big picture. Although you may not get everything that you want out of a deal, overall the completed transaction will be a victory!

Do the Basics Better
As the leader of your company you have to be able to navigate uncertainty and turn risks into opportunity. Regardless of the ACA or therapy caps or sequestration or hurricanes and blizzards, you must have a clear vision for the future of your company. And that means doing the basics better: budgets and targets, productivity levels, collections, service, referral generation etc.

Do Your Analysis
Know your numbers inside and out. A cut in Medicare reimbursement will affect both your top and bottom line. You need to analyze your current Medicare reimbursement and factor in the 2% cut. What is the actual dollar figure? How will you make up that revenue if there is a drop in reimbursement? The answer is always by driving efficiencies and volume.

Find The Revenue
Our advice is not to take your therapists in a room and give them all a pay cut. Be honest about the financial stability of the business. Review the link between operations performance and financial results. Challenge them to see one more patient a day. Make sure the Front Desk staff is setting next appointments when the patients leave. Make sure your AR is current.

Good business is good business. It your company has what it takes to be great on February 28, it’s going to do just fine on March 1 and after.

Start Your Own Plan Today
What I am asking you to do is to create a plan that will be purely about what YOU can control and act upon to improve your life, business, and relationships. Think about abundance, not poverty; of opportunity and not impediment; of control and not victimization. As you are creating YOUR plan to improve on areas of your life and business, visualize yourself already at your goal. What does it feel like? Who is around you? What is your day like? Really try to experience every detail.

An effective planning technique is to visualize yourself at your goal and ask yourself how you got there. For example:

Q. How did my business prosper in a declining reimbursement environment?
A. I developed and monitored operations and financial metrics on a weekly basis and modeled productivity for my staff.

Q. Why was I able to retain my staff through difficult times?
A. I focused on leadership and building a culture based on accountability, trust and teamwork.

Q. How did I grow my business from two to five clinics?
A. I committed to a strategic plan three years ago and was disciplined about following it.

Q. Why am I financially secure in my retirement?
A. Every decision I made focused on building value in my business so I was able to sell when there were buyers not because I had to.

Keep a Narrow Focus
I will guarantee you that you will be much better prepared to handle the changes that are coming our way if you take the time to focus planning on things that you can control. By no means am I telling you to stick your head in the sand and ignore what is happening around you. But before you are able to nimbly react to our ever-changing industry and world, make sure that you are riding into the future with YOUR plan in focus.

1.   Think strategically. Next year brings pivotal changes for healthcare services businesses. Have a plan and be disciplined about following it.

2.   Think value. The economic success of your company is measured by value not revenue or number of clinics. Make 2013 the year to minimize risk in your business by doing a full business assessment and identifying weaknesses and opportunities for growth.

3.   Think Mobile. By 2015, more people will access the Internet through their mobile devices than through PCs. According to Google, 1 in 3 mobile searches have a local intent. Make sure your business has a local listing on key search engines: Google Places, Bing maps, and Yahoo maps.

4.   Know your A/R. It’s not unusual for us to see 10%+ of total A/R in more than 121 days outstanding. Cash flow is the lifeblood of your business and a key value driver. Clean up your books. Your chances for collections drop significantly after Day 60.

5.   Know Your Payers. A diverse payer mix will be absolutely critical for 2013. Do an analysis of your reimbursements by payer to gain a better understanding of how to structure therapists’ time.

6.   Know Your Staff. Therapist recruitment and retention will continue to be a challenge going forward. Understand what motivates your staff. Many times it is not money. It’s the culture.

7.   Know Your Key Physician Leaders. We believe that building relationships and alliances with key healthcare leaders will pay dividends in the emerging healthcare environment. Sharpen up your networking skills and get out there.

8.   Build Targets. Closely examine key performance indicators and establish budgets and targets to meet and exceed these metrics in 2013. Remember, strong operations performance WILL result in strong financial performance.

9.   Build Market Share. One way to counteract declining reimbursements is an active and strategic referral generation program. This program needs to be staffed properly, trained and armed with tools to bring in continued revenue.

10.   Build Leaders. Very few clinicians have any training, background, or experience in management. Engage promising clinical staff early and expose them to training in leadership skills, management, operations and financial, customer service, compliance, and human resources. That way they will be ready to step up when you’re ready to expand the business.

Happy New Year from all of us at Martin Healthcare Advisors.

For most small business owners, their trusted advisors are their attorney, accountant, financial planner and some sort of consultant.  The first three have probably earned your trust because they are professional, objective and fact-driven. But they are usually generalists without specific knowledge of your industry and cannot offer the advice you need from time to time. It’s likely that your consultant is the one who offers you the in-depth industry knowledge that you do not have in-house. If you do not have an industry specific advisor, get one. Don’t wait until there is an employee situation or Medicare shows up at your door. Build the relationship now.

The value of being able to pick up a phone and get advice on business related questions, concerns and ideas from a trusted advisor who knows you and your company cannot be understated. We would be happy to be part of your team. Call us at 800-711-7716 and ask about our Mentor Program today.

As practices grow from one to two, three or more clinics, most will begin to centralize certain functions of the business such as billing and collections, accounts payable, human resources, marketing, business development, accounting, etc. These functions then serve the business as a whole. That overall expense is called corporate overhead.

Who Works for Whom?

I believe that success of a corporate overhead system starts with a basic understanding of its purpose, which must be to serve all the clinics. Therefore, the people providing these functions must have a mindset of service, accountability, and results. They also need to clearly understand that corporate overhead functions do not generate any income; all of that happens at the clinic level. But, a strong committed group of people working in these corporate functions can have an enormous impact on the efficiency and results that the providers and clinical team achieve.

Developing a Corporate Overhead Structure

Below are some quick points and tips on how to develop and sustain a strong centralized structure:

1. Allocate overhead cost based on each clinic’s percent of revenue or salary expense as compared to the whole.
2. Establish regular meetings and work groups that routinely (at least monthly) force communication between the clinical front line and corporate functions.
3. As a general guideline, corporate overhead as a percentage of revenue should run somewhere between 8-16%, largely dependent upon your size (smaller businesses percent will be higher) and how well managed the functions are.
4. You as the business owner need to allocate time to managing these functions, or hire someone with a skill level to manage these functions.

Our experience is that a centralized services function is more efficient when it is housed outside of a clinic. We believe that with this mindset corporate overhead can be a strong asset to your business. Contact us at 800-711-7716to see if your company is ready for this structure.

Essentially, the rehab community is bracing to see what impact the Affordable Care Act will have on the industry and what will it mean to the rehabilitation business owner.

We talk a lot about how important it will become to “streamline” your operations and create a professional staff that is both efficient and outcome driven. And we continue to believe that a strategy of improved productivity of your professional staff is imperative. But what else will come with the Affordable Care Act?

Consolidation
We have noticed a significant increase in the number of strategic and financial acquirers seeking a consolidation strategy in the rehabilitation industry. Although the financial acquirers are still facing challenges in the debt market, the strategic acquirers (who are “backed” by large financial partners) have become extremely aggressive in their strategy to execute on acquisitions.

As reimbursement continues to trend downward, we would expect consolidation activity to increase. Larger businesses are able to get more leverage out of their centralized services and traditionally have been able to operate at an overall lower cost. So, this is a great time to consider joining forces in the form of a partnership with a large company but make sure you that you execute a comprehensive search and sale process prior to entering into a commitment to sell all or a portion of your company.

Alternative Providers
With the demand for physicians continuing to become greater, there has been an increase of alternative providers, for example Nurse Practitioners and Physician Assistants. These professionals will be a great source of referrals as they tend to be easier to communicate with and more available to share ideas, programs, etc. So when you or your marketing personnel are out in physician offices, don’t forget about the “other” practitioners that will be great referral sources.

Focus on Outcomes
Practices have to be able to prove their value within the payer community. Yet there will be more patients and a greater number of services for these patients, which could result in a high level of non-compliance. It is very difficult to get a positive outcome from a non-compliant patient so this could have a negative impact on a practice’s reimbursement.

Your professional staff must have the confidence to demand compliance from their patients and be responsible for positive outcomes. This could create major changes in a lot of organizations and must be communicated clearly and strongly.

We are advocates of designing a future strategy with all of the potential changes in mind, but not believers that you should completely change the focus of your business based on what “might be coming.” Remember to stay focused on what you do best and do not get caught in the trap of drastic change strategies. I recall a conversation with the owner of a Physical Therapy network back in 1995 who tried to convince me that if you were not in a network, you would completely lose all access to patients. You get my point!

Getting to the Starting Line
The first step to getting a handle on your operations performance is to determine what measurements and metrics really drive profitability. In our experience, there are 13 key indicators within the operations of an outpatient rehabilitation business that will drive financial success:

Volume measurements
Charges, Visits, Referrals, Units, Collections

Metrics
Charge/Visit, Charge/Unit, Unit/Visit, Visits/Referral, Cash/Visit

 Productivity
Visits/Prof/Hour, Units/Prof.Hour, Visits/Prof./Day

Keep Your Eyes on Your Business
First you must establish budgets and targets for these key indicators. Then you need to measure your performance against the targets on a weekly basis. Yes, a weekly basis. Our profitability success rate with clients that establish and stick to this discipline is 100%.

Introducing… the Martin Metrics Dashboard, a state-of-the-art tool that provides you with the ability to establish your targets and view performance in a single view to drive your business to success.

Then call us at 800-711-7716 to see how you can change course to drive your business with precision and profitability.