Managing a Multi-Location Practice: Challenges and Best Practices

When is a practice ready to open a second location? 

When your practice is profitable, efficient, and operating at a healthy capacity, you are ready to open a second location. It’s also important that you have adequate cash flow and reserves to support expansion. 

If you’ve decided to pursue opening a second location, here are the key challenges and best practices of managing a multi-location practice that you need to know. 

7 KPIs to Determine Expansion Feasibility

The decision to open a second practice often comes down to the finances. The American Dental Association outlines seven KPIs that can help you determine if opening a second location is a feasible option.

1. Practice Production – Is your production per patient and case acceptance levels high?
2. Active Patient Count – What is your active patient count (patients who have visited the practice in the past 12 to 18 months) and how much do they contribute to cash flow? 
3. New Patients – How often are you recruiting new patients? 
4. Collections – What is your collection rate compared to overall billed totals?
5. Overhead – How does your overhead influence your overall profitability? 
6. Profit – How profitable is your first practice location? 
7. Expansion Cost – How much will it cost to open a second location, including staffing, overhead, and marketing? 

If your first practice location is running efficiently and profitably, it might be time for a second location. 

3 Operational Challenges of a Multi-Location Practice

Running a multi-location practice can seem like a great idea on paper; however, there are three main operational challenges to consider before pursuing a second location. 

1. Staffing – It’s impossible for a dentist or doctor to be in two places at once, which is why it’s important to have the right staff to run operations. Healthcare hiring can take time and money. If you are already having turnover issues in your first practice, it might not be the best time to expand. Check out this blog for more information on staff compensation. 
2. Oversight – Who will run the second location when you aren’t around? This could be hiring an associate dentist or a manager. Ensuring you have the proper leaders to run your second location in line with your expectations is important. 
3. Consistency of Care – How will you maintain the same care standards at the second location? Part of the reason your first practice is so successful may be the way you run operations. It’s important to keep these same standards across both locations to build patient loyalty and trust. 

Comparing Centralized vs. Decentralized Management Structures

There are two main management styles when it comes to running a multi-location practice: centralized and decentralized. A centralized management structure has one leader who makes decisions across locations. Oftentimes, this is the practice owner. On the contrary, a decentralized management structure uses teams or departments to make decisions. For example, each practice location would have a dedicated manager who has decision-making power. 

There’s no right or wrong management style for multi-location healthcare practices. In fact, the decision often comes down to your personal preferences and vision for your practice locations. For example, if you want to retain control over both locations, a centralized management structure would be best. However, if you don’t want to take on the burden of managing two locations, a decentralized structure that involves managers would work better. 

How to Track Financial Performance Across Locations

When reviewing the financial performance of your practice, it’s important to look at the practice as a whole and each practice individually. Use the KPI list above as a starting point to evaluate financial performance and cash flow management. Also, consider non-financial metrics such as patient satisfaction, churn, and average wait time. It can also be beneficial to have an independent review of your multi-location practices by an accountant.

Key Technology and Systems to Support Multi-Location Management

Many of your core technology systems will likely already have the capabilities to support a second location; however, there will be additional configuration and upgrades needed. For example, your accounting software will need to be reconfigured to track operations between two locations. Check your patient management software, accounting software, billing software, and any other programs used to ensure they can support multiple locations. If not, it might be time to transition to a different provider. 

5 Common Mistakes When Opening a Second Practice 

Here are five common mistakes when opening a second practice, and how to avoid them: 

1. Choosing a Location Saturated With Competitors – There will almost always be competition, but can the city you’re targeting handle another one? Consider the market size and growth rate first.
2. Not Considering Acquisitions – Sometimes, acquiring an existing practice is much easier than opening a new location from scratch. Consider your acquisition options first. 
3. Not Maximizing Your First Location – Before opening a second location, your first practice should be fully optimized. This means there is no room for growth, both physically and provider-wise. 
4. Failing to Consider Time and Stress – Opening a second location can be stressful and time-consuming for you and your staff. Consider this additional burden and the impact on overall well-being. 
5. Having Low Cash Reserves – There is a high upfront cost when opening a second location. Without the proper cash reserves, you could put your financial stability at risk. 
6. Forgetting About Compliance – Healthcare practices are bound by various legal and compliance requirements. Proper protocols need to be in place when handling patient information between practices. 

Summary

Opening and managing a second practice location takes dozens of considerations, from the upfront costs to the long-term financial impact. If you’re considering pursuing a second location, reach out to one of our experts for Practice Operations Consulting. We can walk you through the challenges and best practices to help you make informed decisions. If you have questions about managing a multi-location practice, please contact us.