COMMON SCENARIOS THAT WILL INCREASE REVENUES AND NET
Add Medical Model
An older practice may be doing little or no medical. Can you add Medicare? Can you get on the local medical panels? If so, what is your estimate of the potential increase to gross revenues? Now re-compute net cash flow.
Consolidate Office Procedures
Consolidating billing and coding in one office and utilizing a common EHR/practice management system can yield cost savings and staff/time savings, once the transition is completed.
Lower Cost of Goods
If you can vault from being a $600,000 practice to one grossing over $1 million, you should be able to claim greater volume savings on optical goods. If the acquired practice is not in an alliance, joining one can lower COGS.
Add and Update Instrumentation / Higher Utilization of Existing Equipment. Having some of the latest diagnostic equipment should provide for a better exam and new billings. It may also position you to participate in Affordable Care Organizations and other aspects of health care reform. But major purchases, when financed, require debt service. A quick and easy return on investment (ROI) analysis is needed to compare expected incremental revenue for the new procedures v. debt service. Determine projected incremental
revenues from both practices if you do not currently own the instrument. Don’t “over buy,” as it will cost you. In many cases, the instrument may be shared by both practices.
Roll It Up
You can purchase the practice for its patients and assets--then close it and combine patients and assets into your main location. You can save on some staff costs, rent and other expenses. In many situations it is best to operate in both locations for a year or so until the patients are committed to you, and then merge locations.
Adjust the Sale Price, Debt Service
If the numbers do not work but are close, you may be able to negotiate a lower sales price with a motivated seller. Alternately, you could put more cash into the down payment and lower your debt service to bridge the cash flow gap.