An employer contract can bring in steady revenue and still lose money if the group uses more care than you priced for. Once a quarter, estimate each contract's direct costs and the time it takes, and compare them with its revenue. The answer tells you what to do at renewal.
Revenue by contract
If employer revenue is tagged by employer in your books, this part is easy. This post covers the setup. Include any employee-paid share and any extras billed under the contract.
Direct costs by contract
Some costs are tied to members: included labs, supplies, per-member software fees, card or ACH fees and any broker fee. Estimate each contract's share using its member count, or its actual use where you can see it.
Time by contract
Count visits and messages for the group, as totals, and compare them with the rest of your panel. This post covers tracking use. Add the admin time: billing, census checks and reporting.
An example
In a made-up example, a contract covers 60 members at $66, or $3,960 a month. Direct costs are $20 a member, or $1,200. A $5 broker fee is $300. That leaves $2,460 a month toward staff, rent and your pay.
The group averages 0.6 visits per member per month, while your panel averages 0.4. So these 60 members use about as much visit time as 90 average members would. If your regular members each leave $50 after direct costs, 90 of them would leave $4,500. The contract leaves $2,460 for the same time.
That doesn't mean drop it. It means the price or the terms need a look at renewal.
Keep it simple
You don't need exact costs for this. A quarterly estimate, done the same way each time, shows which contracts carry their weight and which ones are drifting.
What I'd do this week
- Pull last quarter's revenue for each employer.
- Estimate direct costs per member for each contract.
- Compare each group's visits per member with your panel average.
Common questions
Should I include my own time?
Yes. Use visits and messages as a stand-in for time, and compare the group with your other members.
What if a contract looks unprofitable?
Bring the numbers to renewal. Consider a price change, a cap on included extras or different terms.
How often should I do this?
Every quarter, and before every renewal meeting.
Want revenue and costs tagged by employer?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.