Kats Chiropractic Consultants CHIROpulse

236 The Diminishing Law of Chiropractic

• Michael Perusich

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Welcome to the KC CHIROpulse Podcast.  

This week’s topic:  Are your practice profits diminishing?

The KC CHIROpulse Podcast is designed for Chiropractic professionals ready to elevate their practice to new heights.  This week, the show is hosted by Kats Consultants’ coaches Dr Michael Perusich and Dr Troy Fox, seasoned experts in Chiropractic business management.  This podcast provides invaluable insights and actionable strategies to help you create a flourishing and sustainable Chiropractic business.

In this episode, we discuss:

  • The danger of the “add” mentality
  • Why adding more services can create diminishing profits
  • Why additional staff can depress your revenue and profits
  • Why your treatment plans need to be systematized for profitability
  • …and so much more…

In each episode of KC CHIROpulse, we delve into crucial aspects of building a successful Chiropractic practice, covering topics such as establishing a strong foundation, adopting a patient-centric approach, mastering marketing techniques, achieving financial fitness, fostering effective team building and leadership, integrating technology and innovation, and navigating common challenges in the field.

Whether you're a seasoned chiropractor or just starting your practice, the KC CHIROpulse Podcast offers a wealth of knowledge and personalized practical advice to help you navigate the intricate world of Chiropractic business. Join us on this journey as we explore proven strategies, share success stories, and connect with industry experts to empower you in your pursuit of building a thriving Chiropractic practice.

Don't miss out on the latest insights and expert guidance. Subscribe now and unlock the secrets to taking your Chiropractic practice to the next level. Your success is our priority at Kats Chiropractic Business Advisors.


DISCLAIMER:  The information presented in this broadcast is for educational purposes only and is not intended to offer legal, investment, accounting, or medical advice, and represents the opinions of the speakers.  Seek the consultation of a professional for advice in those areas. And remember…your results using this information may be different than described.



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KC CHIROpulse Podcast. Helping Chiropractors keep their pulse on success. Thanks for listening.



Law of Diminishing Chiropractic

[00:00:00] 

Introduction to the Law of Diminishing Returns

Dr. Michael Perusich: Doctors, are you caught up in the law of diminishing returns? Hi everybody. Welcome to the KC ChiroPulse podcast, brought to podcast consultants and Chiro Health, USA. We're here bringing you cutting edge strategy to run your business, your practice more profitably. I'm Dr. Michael Perusich, and this is my my other host, Dr.

Troy Fox. Troy, you and I both know this law of diminishing return totally affects chiropractors. 

Dr. Troy Fox: Yeah, a hundred percent. And we see it all the time and it, sometimes we call it the shiny new object thing. We all go to seminars and you know, when you go to the big seminars, there's always the display boost with everything that's gonna help, double, triple, quadruple your practice.

You're gonna be able to charge X number of dollars for this. It's gonna help everyone in your practice. And we kind of get caught up in that. Yeah, and I, I know that there are a lot of you with some of those items that are gathering dust in a corner. And why is [00:01:00] that? Why do we have things sitting in the corner that we're supposedly gonna revolutionize our practices?

Dr. Michael Perusich: That's exactly right. 

Common Pitfalls in Chiropractic Practices

Dr. Michael Perusich: So before we unpack that just in case you're not familiar with what the law of diminishing returns is, it's actually an accounting principle that says that adding more doesn't necessarily equate to more profits. So. What does that mean? Well, adding more new patients, adding more staff, adding more profit centers like Tori was starting to talk about whatever.

Adding to your practice does not always equate to more profit. And so we have to, as we always say on the show, we have to think. Profitability with everything we do. Otherwise, we're running a free service. We're running a 5 0 1 C3 nonprofit organization. And I don't think any of you out there listening to this probably are that.

So Rey, you started to dive into it. You start, you go to a seminar, which is a great example. And you get all excited about this new service that you can add, this new shiny thing that you can add to [00:02:00] your practice. And it's promoted as it's gonna bring in all this money and all these new patients and it's gonna be the greatest thing since sliced cheese.

And so we go out and we spend 25,000, 50,000 or more sometimes trying to bring it in the door, and then we get it in and we realize. Oh my gosh. I need somebody to operate it, so I gotta add a staff person in. Huh? Not every patient wants to do it. So I, here I thought every patient was gonna, and it's not really bringing in new patients in the door, so it's not really what I thought it was gonna be.

And pretty soon it's sitting in a closet somewhere. 

Dr. Troy Fox: You're not making good money at that point with it because it's sitting in the closet, but you have increased overhead. So sometimes we make the other law of diminishing returns mistake, and there are several, but here's another one that we make. The next one that we make is.

I'll just expand my hours and I'll stay here longer. It's almost like you punish yourself after that, and you expand hours. You [00:03:00] end up spending more money for staff. You stay there longer. You reduce or diminish. Your home life as a result of that because you leave home at six in the morning and don't get home until six in the evening and you're not seeing any more patients.

Or if you are, it's just a few more. In a lot of cases, that one is interesting that you, if you actually work less hours, you end up generating more profit. In a lot of cases, see more patients, and a lot of it has to do with how your practice looks. If your practice looks empty and desolate. People aren't real excited to come in there.

So if you have everything gapped apart, where you're there for 12 hours a day and you see the same number of patients, it's a law of diminishing return. Again, because I'm working harder and longer. But I'm not making more money. I'm actually making less. I've got the lights on longer. Maybe I have staff there longer.

It just doesn't make sense. 

Dr. Michael Perusich: Yeah, it doesn't. So we're talking about the, [00:04:00] uh, law of diminishing returns and how it affects the ChiroPulse practice. And it's almost an epidemic, I think, in our profession in some ways. So we gotta take a quick break to hear a word from our sponsors, but we'll be right back.

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Strategies to Improve Profitability

Dr. Michael Perusich: Alright, we are back and we are talking about the law of diminishing returns and Troy, I think we've introduced this concept well and I think everybody can understand the concept, but I want to talk a little bit about how it affects our profit per patient visit. And so it's kind of a dilution factor if we keep.

Adding expenses, we begin to dilute profit. And that's a side of the practice that unfortunately a lot of doctors aren't looking at. They're looking at the more, more, more side and not thinking about the dilution, dilution, dilution side or the diminishing side. And pretty soon their profit per patient visit.

And we see this a lot, surprisingly, is negative, which [00:06:00] means they're giving money away basically every time a patient walks in the door.

Dr. Troy Fox: It's a little bit scary when we see that too, because in a lot of cases you docs that are, that are in that situation just don't understand why you're going backwards. Yeah. And it seems like it, it's almost like, you know, when I was a kid, I used to get into my grandmother, she had a little basket and it had a bunch of yarn in there.

And she'd have it all neatly wrapped up and rolled up like it should be. And us kids would get into it. Next thing you know, it looked like a rat's nest. Okay. And I think in a lot of cases with our practices, we get in that same position where we just don't know quite what to do. And so we grab at a thread, not realizing we're pulling on a knot, and we start in this downward spiral where we're, we're not sure how to affect the practice.

So we don't have a plan. We just kind of jump into it and, and start going [00:07:00] in a direction, which in a lot of cases does create diminishing returns because in a lot of cases, we're chasing our tails. We're really not looking at what causes that profit. Profit per patient visit to go down say that fucked up 

Dr. Michael Perusich: real fast.

And 

Dr. Troy Fox: all we're looking at is increased numbers. And I, I think that is something, and that's something that you and I have talked about many times over the years that we've seen where people chase new patients or they chase patient numbers and they're not really looking at what it actually costs to get those numbers.

And sometimes we use. Tools, I'm gonna call 'em tools. I don't know if they're great tools, but sometimes we use tools like discounted services 

Dr. Michael Perusich: mm-hmm. 

Dr. Troy Fox: To bring people in the door, which again cost us money. Um, it's 

Dr. Michael Perusich: another dilution factor. 

Dr. Troy Fox: It is, and sometimes you need to do it. We've always talked about this.

Sure, if you're new in practice, you may need to do a little bit of that, but if you're an established practice that's been around for a number of years, you really need to consider that before you start discounting services just [00:08:00] because you wanna see a few more patients in the office, or you feel like that you have a new tool that can help more people.

What if I discount it? People will aggressively go after it, and I see right. That in marketing? Yes. Do, do you see it when you look at your Verizon app? I look at it. They're always telling me, Hey, you qualify for a new phone and blah, blah, blah. And then I get in there and I realize once I get in there that it's not really that big of a benefit because I need to sign up for a new plan.

So they're not really discounting, they just make it look like a discount. In a lot of cases we could. Market in the same way and not diminish our returns, but we don't do it that way in a lot of cases. So I think there's a real struggle there with just trying to find our way out of the quagmire. And that's how we get stuck.

I don't think anybody wants diminishing returns 'cause I think it's a spiral that you can feel in your practice. Mm-hmm. But a lot of times we don't wanna put pencil to paper or computer to spreadsheet in [00:09:00] this day and age and actually look at it. 

Dr. Michael Perusich: Yeah. Bingo. Yeah, because we don't have a systematized process of really looking at the profitability of our practice.

So, you know, I'll challenge everybody out there. How much profit is, are your treatment plans bringing into you? And we never really look at it that way. We think we're just building a treatment plan based on patient need. Which is correct, but the flip side of that is how profitable is that? You know, are we building a, a treatment plan, for example, that's getting billed to insurance and insurance is bundling us on some things.

Is there a mechanism or a way we can swap out a service for an an uncovered service and make it a cash service, for example, and increase the profitability of our treatment plan? While still getting the same good outcomes for the patient. So we have to really find that balance in there and the challenge is to really look at every treatment plan you build and testing it against the [00:10:00] operational side of your practice, against the expense side of your practice, if you will.

And is that treatment plan gonna put me in the profit zone? And not every treatment plan will honestly, you know, we will have some that are a little bit of a loss leader at times, but we've gotta make sure that the whole picture is bringing in profitability. 

Dr. Troy Fox: Yeah. You've gotta average it out and it's not really one of those deals where you have to, manipulate it to do that. It's just one of those where you're gonna have some patients that need additional care. They need more care. Mm-hmm. And you coded it as such. I mean, that's the other big thing about that is, is you've gotta make sure your documentation supports what you do. And if you do, you're gonna end up with probably a, a case average that is in the range that you're looking for.

You don't have to manipulate it to do it. It's just a matter of making sure you do your, you do your due diligence on your end. And give appropriate treatment plans to [00:11:00] patients. 

Dr. Michael Perusich: Yep. That's the big one. And another area of diminishing returns are your dropouts. And if you're having people drop out of care too early in the care process, you may never really have gotten that patient to the profitability threshold, especially if you're doing promotional discounts.

You have to keep in mind that if you're doing a promo on your first day, it may take you five or six visits before that patient catches up to profitability, even if you're not doing promotions. Just because the time value factor in the practice, I'll come back to that in a second. It even takes a new patient at full price a lot of times, three or four visits sometimes to even be profitable.

So what do I mean by that? Well, the time, the time value factor is your time is worth money as a doctor and you. The, there is a point where you should have almost a set rate per hour as a [00:12:00] target that you wanna earn. We always say it's at least $400 per hour as a doctor, and so is your practice earning $400 per hour?

If it is great or more. If it is great. But let's back up then to your new patient, even a new patient at Full Price, who's in your clinic probably for close to an hour. Are they paying the representable value of that $400 per hour? Probably not. You know, most new patients are priced when we're at full price they're usually between 125 and $175.

So even a new patient full price doesn't really become profitable on day one. 

Dr. Troy Fox: And that's really why you've gotta look at that and, and that's something that you and I have talked about a lot that you do have to figure and you can look at what you do in a day's time and figure out what you're billing out per hour right now.

And that's a really good starting point to increase return on investment, right? So, okay. I'm only billing out. 125 an hour. Why [00:13:00] is that? Is it because I'm spending an hour with each patient and I'm charging $125 for that hour? Or is it that I have a substantial amount of dropouts in my practice because I am not adequately explaining care at the beginning of the care plan?

And I know there are those of you out there that do a fantastic job of it. Mm-hmm. And there are others that we've talked to that will say. I just don't know what's going on. My patients only want to come in for one or two visits. Okay, well, if you're telling me that your patients only want to come in for one or two visits, they're directing care, not you, and you haven't presented an adequate care plan for them or a reason why they should follow through with care.

So if I give adequate methodology and the patient reasons through it and says, I agree with you. It makes it much easier to get through care. I'm not trying to convince you every visit that you still need to be here. I'm saying, here's what we're gonna do. Here's the plan, and here's the expected outcome.

At the end of this, there's no [00:14:00] guarantees, but here's what we expect, and the patient goes, okay. Now they follow through with care. So getting, and I know I'll make that sound really simple, but if you nonchalantly go in there and you don't seem thirsty, in other words, you're, you're not seeming, and I know we love this word, salesy, right?

If you don't seem salesy and you are actually educating the patient as to what ChiroPulse Care does, how it works, and that time and repetition tend to do a lot for patients. You're gonna win every time I go in there pretty matter of factly and tell people that, and you know what? People get it. Yeah.

People understand when you start talking about time and repetition and how people heal and that it takes time for the body to produce. Now all of a sudden, where is the onus of responsibility? It's on the patient's body to produce. 

Dr. Michael Perusich: Exactly. And you know, we have to not only lead patients to good outcomes, and we do that with our doctor authority, but we also have to lead patients to being profitable for us.

And I, I [00:15:00] know some of you out there probably wanna throw stones at that idea. But that's how you run a business. So take your doctor hat off for a minute. Put your CEO hat on, and how are you driving profits for this business? Mr. Or Mrs. Or Miss CEO you've gotta, you've gotta think in those terms. And so if you're not, you're just pushing your business to fall into the negative aspect of the law of diminishing return.

Dr. Troy Fox: You're heading in the same direction as blockbuster. Yeah, and that's a problem. So here's the deal. You know, blockbuster didn't see what was coming. They didn't see what the future looked like. So that's a little bit different situation. But when you're in your practice, you have a product. So does Apple.

Some of you have, I know there's a big, you know, I'm not a big Apple guy. I used Apple as an example, but maybe I should use Samsung as an example. 'cause I like their phones. But Samsung has a problem. I'm an Apple guy. Okay? So either [00:16:00] Samsung or Apple. It's, it's, it's potato. Potato, right? So we have this smartphone and it does something for us, but it doesn't mean they're gonna give it away just because they can.

And that we have that ability to do that in our practice. We can give it away. But quite frankly, they value their product and because they value their product, they put a price tag on it. That is not only. Somewhat e equitable for us. They've challenged the market to see what the market will bear, and I think that's important, but at the same time, they're not gonna price it below what it costs them to produce the item.

Market the item, sell the item. In other words, that package that they put together has a dollar number on it. And for us, from a sales standpoint, why practice if you're gonna go broke? 

Dr. Michael Perusich: Yep, exactly. Exactly. So we gotta hear another word from our sponsors. So we're talking about the law of diminishing returns in ChiroPulse practice.

[00:17:00] Important concept. So we'll be right back to wrap up.

Kat's ChiroPulse Consultants, your partner in ChiroPulse Success. We are dedicated with one-on-one guidance to bring you all your practice management needs. Let's supercharge your practice. Give us a call today.

Final Thoughts and Takeaways

Dr. Michael Perusich: Okay, we are back talking about the law of diminishing returns again. And you know, Troy, I think everybody's gotta really think about this. I think this is a really important topic 'cause you gotta really think about this when you're managing your practice. And you know, if, if your expectation is that you're gonna bring a bunch of new patients in the door and it overloads your capacity and you can't hang on to 'em all, then that's a diminishing return.

If you're gonna bring a new piece of equipment in and you, you have no way to integrate it into your practice. In other words, you can't get patients to utilize it and get a [00:18:00] good return on it, then that's the law of diminishing return. Or you think you're busy and you need to add staff. Maybe you don't.

But how is that staff going to create a positive ROI for you? If it doesn't law diminish your return? So I think we've gotta think about everything we do in our practice. Otherwise we're gonna just multiply inefficiency and lack of profitability. 

Dr. Troy Fox: That folks is business 1 0 1. I mean, that's what we talk about a lot and I, and I get probably sometimes you guys get tired of hearing us talk about that.

But the truth of the matter is, is we see so many docs that are fantastic. Oh my gosh, there's so many good chiropractors out there. And I love you guys and I love talking to you guys when we come in contact with each other and finding out what you're doing uniquely in your practice. 'cause we're all such unique individuals.

Oh, I do this in my practice. Oh, I do this. In my practice, and sometimes there's overlap, but we've got so many unique types of [00:19:00] practices, uh, everything from adjustments only to people that are doing functional medicine, genetic mapping. I mean, oh my gosh, shockwave whatever you wanna throw in there.

So you guys are all unique individuals. You just have to find a way to take that uniqueness that you have and turn it into profit and business. And you can't force a square peg in a round hole. So in other words, you can't just show up day one and go, well, I have an undesirable product that sucks and I don't have very good customer service, and my office is horrible and it looks horrible.

So what do we have to do if we want to do that? We have to look at where we're at in business. We have to make overhauls or you know, it's kinda like one of those house flipping shows. Sometimes you take something that doesn't look so good and man, it looks, I was watching one yesterday in Hawaii of all places and it was Uhhuh super expensive just to buy this heap of junk and the floor was falling through and a half hour later in [00:20:00] the show.

Oh my gosh, I wanted to buy this place. 

Dr. Michael Perusich: It was beautiful. I saw that episode too. 

Dr. Troy Fox: Yeah. And, and all of a sudden you go from an $800,000 house to 1.5 million, and so the difference was the perception. And so when people are into your practice from a business standpoint, if you've got every facet of your business put together, you stand a much greater chance to have the ability to bill out what you are worth.

Yep. That's what's really important. We're not asking you to shoot for the sky and then go, well, um, I don't even think I'm worth that. You need to shoot for what you're worth. I think every one of us that is in practice looks at the services and the type of service that we provide, and we say to ourselves, you know what, I'm worth more.

If you haven't said that, you need to do a deep dive into your psyche because I do that. I look at it and I go, I'm worth more. And so as a result, I'm willing to charge what I feel [00:21:00] like that I'm worth. We're at least close to, you know, sometimes the market won't bear, you know, I feel like I'm worth a million dollars in adjustment.

But yeah, that one probably wouldn't fly very far. I probably wouldn't have very many patients coming in the door every morning, but. If I can find a happy number that the patients like, and I like, that's what Apple does. That's what Samsung does. That's why phones cost what they do. You always go, oh, that's kind of expensive.

But you know what, it's worth it. Yes. That's what people need to be saying in your practice for you to not have diminishing returns. 

Dr. Michael Perusich: Exactly. And so you've gotta, we're, we're all thinking about how do we scale our practices? How do we grow our practices? And, and really what we mean by that hopefully is how do we grow our profit?

And I, if you're not imploring some of these things that Troy and I have been talking about, then all you're doing is creating chaos, which is nothing more than expense in motion. And so. We don't wanna just move in [00:22:00] our practices faster. We don't wanna just create more work. We don't wanna just see more new patients.

We don't want to just have more services to offer. We need to create profitability. And we do that by making sure that we're putting pen to paper, calculator to spreadsheet and making sure that we're creating that profitability and not falling to the chaos of the law of diminishing returns. So Corey, anything to add?

Dr. Troy Fox: No, I think that's fantastic and I think if you, if you look at your practice in that way and you spend a little bit of time this week, I bet you can find one or two things that you can change that will reverse that diminishing return if you have that going on in your practice right now. 

Dr. Michael Perusich: And I know if we're looking at your practice, we can find that for you too.

We can go to Cat's Consultants and check out everything that we're doing to help doctors increase their profitability. Some free downloads on there. And, uh, thanks for tuning into the, the podcast. We appreciate everybody who listens Every week. We've grown like crazy, so keep surprise surprising. Keep [00:23:00] subscribing, keep surprising us, keep surprising us.

Keep subscribing. I can't even talk. And, uh, make sure you share the podcast with everybody else out there. So on behalf of all of us from Kats Consultants and we appreciate Chiro Health USA for being one of our sponsors as well. We'll see you guys next time. See you all later.