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Practice Management:
Continuing Patient Care After the Office Visit

The Opportunity for Improving Patient Experiences & Practice Growth

In-office Retail Product Sales and Physician Dispensed Products

Today's difficult economic environment has affected many aspects of how medical practices conduct business. Podiatrists have weathered the storm a little better than most businesses; however, it has still been a challenging period in which to practice. Most DPM's experienced a slight net income decrease while seeing more patients. The revenue decline was due largely to increased operating expenses. This has created a scenario in which physicians are working more for decreased earnings. Working more for less is not traditionally a desirable business growth tactic and this article will focus upon one way to grow a practice, while enhancing patient outcomes.

Many physicians are discouraged by the fact that stagnant to negative revenue growth has become the norm over the last several years. A large number of these physicians have recognized this as an opportunity to make changes in the way they do business. They have achieved success in positive revenue growth as a result, while at the same time improving their patient's experience. Others have decided to make changes only in the area of expenses by reducing the size of their staffs and cutting other budget categories. These physicians have often succeeded in maintaining their current income level but rarely grow their businesses. A third group of physicians have decided to take a "wait and see" approach. In essence, they have done nothing and expected the situation to resolve itself. This approach rarely succeeds and often leads to disappointment.

Throughout history, times of economic difficulty have given birth to innovation in the form of new ideas, business processes, and medical practice initiatives. It is important to recognize this opportunity and take action. Lynda M. Applegate and J. Bruce Harreld of the Harvard Business School provide excellent guidance in their Working Paper 09-127 titled "Don't Just Survive—Thrive." They state, "Entrepreneurial leaders must relentlessly—but not recklessly—pursue opportunity. They must look beyond the resources currently controlled to harness the power, resources, and reach of their organizations and networks."i

The Opportunity

One of the single biggest opportunities for the podiatric practice lies in continuing the patient treatment regimen after the office visit in the form of retail product sales. The Podiatry Management's 27th Annual Survey reported that the average expenditure on products for sale was $2,389ii accounting for approximately $4778 in sales. There are approximately 253 work days in any given year in the United States (less holidays and weekends). This averages out to be $18.89 sales per day. This is the equivalent of one or two products sold per day. The average number of patients treated per week is 92.6iii or 19 patients per day. For the sake of argument, let's assume that the practice sells 1.5 products per day. If this is the case, then the practice is only selling a product to approximately 8% of their patients. This is definitely an area of opportunity to improve patient outcomes and a business opportunity worthy of further consideration.

Product Sales Growth Example

Simply selling one extra product per day (product A with a retail price of $15.00) will almost double the practice's yearly profit while simultaneously enhancing the patient's experience and treatment.

  • Selling one additional patient treatment regimen per day with product A (SRP $15.00) = $3,795 in additional sales or $1,898 additional profit.
  • Selling two additional patient treatment regimens per day with product A (SRP $15.00) + B (SRP $25.00) = $10,120 in additional sales or $5,060 additional profit over the current profit.

Market Comparison

The podiatric retail sales market bears many similarities to the Dermatology retails sales market of the late 90's and early 2000's. At that point in time, many dermatologists were very hesitant to offer retail products or elective procedures. One of the major turning points in the dermatology market was when physicians began looking for new revenue streams to combat decreasing reimbursement rates and to maintain positive revenue growth. At this same time, the FDA approval of BOTOX® for the use in treating brow furrow acted as a catalyst for practice growth by increasing awareness of aesthetic procedures, improving the acceptance of, and opening the doors to complementary treatment options. Many dermatologists recognized this opportunity and broadened their scope of offerings which resulted in a boom of elective procedure and retail product growth.

According to the 2009 cosmeceutical market overview published by Kline & Company, the total cosmeceutical market volume for 2008 was $1,055,700,000. The market grew by 7.54% in 2008 over 2007. Medical care providers generated 26.4% or $279,200,000 of this volume, which represents an 11.5% growth change from 2007. Spas and salons continued to hold the lead position in the market share at 50.7% or $535,700,000 but experienced the slowest growth over 2007 at 5.4%. Retail stores had the lowest volume at $240,800,000 and were in second place with a growth of 8% over 2007.

The median retail sales volume per dermatology office in 2009 was $176,286iv according to the 2009 Allergan Practice Consulting Financial Benchmarking database.

Why should I carry products in my office?

The patients will benefit from having easily accessible products at the physician's office. These benefits are realized in several ways.

Benefit to the Patient
  1. Products purchased from the medical practice are physician recommended based on personnel experience of clinical success and positive patient outcomes. They are often only available through a physician because they were tailor designed for a specific specialty and the patients that physician treats.
  2. Cost Savings. The physician is able to pass on cost saving to the patient that retailers cannot, such as distribution and shipping costs.
  3. Convenience. Purchasing products at a medical practice often reduces the number of trips or places the patient has to go during the day. This is especially important for patients that have mobility issues due to foot or ankle problems.
  4. The Right Product. The patient will receive the exact product that you recommend without fear of substitution made by the pharmacy.

The practice will benefit from offering retail products in several ways also.

Benefit to the Practice
  1. Increased growth to the practice. As reimbursement rates decline, these products help cover the gap. Retail products can be classified as a passive revenue source which means that after the physician recommends continuing the patient treatment, the physician does not have to be directly involved any further. This allows the physician to focus upon treating patients while the staff educates the patients regarding the products.
  2. Patient Retention. By meeting all of the patient's foot care needs, the patient retention rate will continue to grow. If you don't offer a specific product and your patient goes to another medical practice for a specific product, the other practice has an opportunity to lure your patient away.
  3. The patient will receive the exact treatment recommendation you have made without fear of substitution.
  4. Patient Contact. The patient will come to the practice more as a result of continuing their treatment. It gives the patient another "reason" to be in the practice, which will increase your opportunity to educate them on all of the practice's podiatric offerings.
What's the financial risk?

Many physicians make the decision not to bring retail products into the office because they assume that there will be a large financial outlay. They also assume that if the products don't sell, they will be stuck with them and lose the investment capital. It is true that some companies require a large initial order and don't offer any type of money back guarantee. However, one benefit of a tough economy is that these companies are changing their approach to customer service in an effort to grow their sales and are much more willing to work with you. If the financial risk is a concern for you, talk to the company sales representative when they call on your office and find out what their policy is. If they don't have a policy with which you are comfortable, then speak with their competitor. The chances are they have a better return policy.

It is important to recommend and use products from companies that are willing to help create a growth environment. Many sales reps and companies seem to be concerned with just selling the product and not helping you grow your business. A practice is often left with products that they don't know what to do with in this situation and become disillusioned with product sales. Try to pick a company with which to partner that is genuinely interested in training your staff on patient education and the benefits of the products. This will lead to success from which the practice and patients will benefit.



i Don't Just Survive—Thrive: Leading Innovation in Good Times and Bad by Lynda M. Applegate
  and J. Bruce Harreld. Harvard Business School, Working Paper 09-127
ii PM's 27th Annual Survey: Practicing Amidst the Economic Crisis by Stephanie Kloos Donoghue.
iii PM's 27th Annual Survey: Practicing Amidst the Economic Crisis by Stephanie Kloos Donoghue.
iv 2008 Allergan Practice Consulting Financial Benchmarking database


About the Author: Page S. Piland is the founder and president of Core Healthcare Consulting. He has more than 20 years of management and operations experience. He has been a featured speaker and has lectured on the subject of Healthcare Practice Management at multiple national medical society meetings.

He is an Eagle Scout and a graduate of the University of Alabama. He is also proud to have served in the U.S. Army and Army National Guard for 12 years as a Cavalry Scout. Mr. Piland currently resides in Windermere, FL with his wife and two daughters.

He can be contacted at PSPiland@CoreHC.com.
Additional support information is available at www.CoreHC.com.

 
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