Physical Therapy Software Return on Investment

DPAblog1-bestPTThe Numbers Game

Learning to distinguish between expenses and investments

Does ROI apply to Shannon’s PT practice?

Theresa stared blankly at Shannon. “I just don’t understand the question,” she said.

“I’m asking about the ROI — the return on investment. Like, which of our patients are most profitable. What kind of merchandise gives us the best return on our investment. When we do marketing, what return do we get for each kind of promotion or campaign.’

Theresa looked doubtfully at her computer screen. “I know what we spend and I know what we take in, and any time we spend less than we take in, I know I’m happy about it. I don’t think I can break things down the way you’re asking, though.”

“Say I wanted to hire a new technician. We’d have to think about all the costs of that new technician, compared with the amount of revenue we’d be able to get from being able to handle more patients, right?”

Theresa warily agreed.

“So we’d have to know exactly how much more money we’d make by bringing in those new patients and exactly how much it would cost to bring on the new technician. Like, if we could bring in another technician for a total of $4,000 a month counting benefits and extra coffee and toilet paper, and we could bring in $5,000 in new revenue by having one more technician on board, our ROI would be $1,000.”

“I know what ROI means,” Theresa objected. “I just don’t think we have the information to break it down like that. I can tell you what we pay one of our technicians now, but I don’t think I know how many new patients one new technician would allow us to bring in.”

“Not to mention the extra cost of coffee and toilet paper.”

Theresa laughed. “Exactly. The amount of time a client takes isn’t consistent — even with one client over time. Even if we imagine that each client pays exactly the same amount each time, we can’t really say that 10 new clients will bring in X amount of revenue, because it depends.”

“That’s true,” Shannon nodded. “Plus, just bringing in a new technician doesn’t automatically bring in 10 new clients, even if he or she increases our capacity by that amount.”

“Very true.” Theresa frowned at the screen some more. “Some of our cases bring in a lot more revenue than others, and some of our technicians have more patients but actually bring in less money. And we also sell a lot of merchandise now, and that income doesn’t necessarily line up with any of the technicians.”

“Or,” Shannon suggested, “we don’t keep track of things in a way that shows how it lines up.”  She leaned over the counter to look at the screen, too, but she couldn’t really get any information from the numbers she saw.”

“It’s also hard to figure out how to divvy up the costs,” said Theresa. “That’s a big part of ROI, but we don’t really know what the investment is. We can’t just divide up the cost of the coffee among all the technicians. We can say one pound of coffee lasts a week and costs five dollars, and if we have ten people on staff, that’s 50 cents per person, but really if we only have seven people on staff, we’re probably still going to finish that coffee in a week.”

Shannon’s head was beginning to hurt. “And I guess we can’t really divide the cost of coffee among all the clients, because we’ll drink the coffee no matter how many clients we have that week. I’m confused about this, really. I understand that it’s important, but I don’t know how to figure it out. People talk about fixed costs and variable costs, but where does coffee fit in?”

Theresa nodded. “I know how much it costs to keep the doors open and the lights on every month, and I can use that to figure out how many patients we have to see. But it doesn’t seem to work out in real life. The cost per hour per client always looks like it would be right, but even when we’re busy and have no unusual expenses, I never feel like things are just the way I expect them to be.”

“This stuff makes me feel like my head is about to explode,” Shannon confessed. “It seems as though we ought to be able to say the fixed costs are X number of dollars no matter how many clients we have.”

“I guess that’s true. The rent, the utilities, and the coffee really don’t depend on how many appointments we have.”

“But some of our costs must depend on the number of people we see.”

Shannon and Theresa were both staring at the screen. They fell silent, as though inspiration were about to descend on them.

At last, Theresa shook her head. “As long as I get all the bills paid and payroll covered, I’m happy.”

“Yeah, okay,” said Shannon ruefully, “but that doesn’t answer my questions about ROI.”

“Maybe ROI doesn’t apply to us,” suggested Theresa. “Maybe it works if you’re making widgets in a factory, but once you bring people into the mix, it doesn’t work any more.”

Does ROI apply to Shannon’s PT practice?

Disclaimer: For HIPAA compliance, all characters appearing in this post are fictitious. Any resemblance to actual persons or actual events is purely coincidental.

9 replies
  1. David
    David says:

    As with any kind of purchase, you want to make sure you’re getting the most bang for your buck — whether it’s full use out of a piece of equipment, or increased revenue. While the return on investment can be viewed in different ways, ultimately, it should be kept in mind every time Shannon pulls out the checkbook.

  2. Christine
    Christine says:

    Shannon & Theresa are lost & confused. Of course ROI applies to Shannon’s practice, she just needs to find the right strategies that will help her make good investments to grow her practice.

  3. George Konold
    George Konold says:

    ROI definitely applies to Shannon’s PT Practice. To find out how, she should attend the webinar, 5 Ways to Grow Your Practice and by the end of it she’ll know if her software is just an expense or a long term investment to grow her practice. Shannon, click the button above to register!

  4. Josh Wolf
    Josh Wolf says:

    If you don’t understand ROI you won’t be able to keep your doors open and continue to help those patients you love to help so much. Completing a Dream Practice Analysis is painless and in the end will lead you down the road to happiness.

  5. Amy
    Amy says:

    ROI is extremely important with any large investment and applies to all practices, all specialties. By doing research and asking experts about the more difficult questions can assist with making the best decisions for the growth and health of your practice.

  6. Charles Pritchard
    Charles Pritchard says:

    ROI applies to every practice. The practice will not grow without the right investments. Spend the time necessary and bring in as many resources as needed to make the best decision for the future of the practice.

  7. Heather Miller
    Heather Miller says:

    ROI applies to every business no matter the type. Shannon needs to work with someone who can help her answer the different questions she has about ROI.

  8. Robin Kortman
    Robin Kortman says:

    When making large purchases providers (owners) need to
    understand his or her Return on Investment (ROI) consulting the right
    professional to assist with understanding a practice ROI will be key to
    financial success.

Comments are closed.