After purchasing additional capital equipment to perform clinical testing in-house, this medical practice was experiencing a significant dip in profits. The business was a specialty medical practice with two principals, 6 employees, and $2 to $3 million in annual revenues.
Lagerquist Accounting & Advisory compared the revenues and expenses of the office to the mean of other similarly sized specialty practices as published in the Medical Group Management Association Cost Survey. H+L was able to report to the owners that their expenses were in line with other such practices, but their revenues were much less.
So, as part of their financial analysis services, Lagerquist Accounting & Advisory analyzed current expenses and revenues associated with the new equipment and determined the profitability of each test. While the capital equipment was being used, it was not near capacity. The analysis showed the practice that increases the number of tests performed would improve the overall profitability of the practice, and this in turn informed changes in the business strategy in order to capture this opportunity.