The Private Practice Success Podcast

75. Why '100% Utilisation' Is Actually a Red Flag

• Gerda Muller • Episode 75

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In Episode 75, Gerda unpacks one of the most commonly used (and most commonly misunderstood) terms in private practice, being utilisation rates. If you’ve ever heard this concept mentioned and thought, "hang on… are we actually all talking about the same thing?”, then this episode is for you.

Across allied health, the definition of utilisation rates can vary depending on your discipline, business model, and even how your team uses the term internally (and yes… this is often where confusion starts). In this episode, Gerda breaks down why those differences exist, how they shape expectations around productivity and performance, and why getting clear on what “utilisation” actually means is so important.

In this episode, you will learn:

  • Why utilisation rates are defined differently across allied health practices.
  • The difference between utilisation as a percentage-based target VS a fixed requirement.
  • How utilisation rates link to KPIs and shapes expectations around team productivity.
  • Why unclear definitions can lead to misalignment in expectations, and what clear utilisation actually looks like in a sustainable practice.

Who this episode is for:

  • Group practice owners wanting clearer team productivity expectations.
  • Allied health business owners unsure what “good utilisation” looks like.
  • Leaders wanting a more realistic and sustainable approach to KPIs and billable expectations.

If you’ve ever been unsure whether your team is underperforming, overperforming, or just working off a different definition of “utilisation,” then this episode will help clear the confusion and reset expectations.

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Well, hello there spectacular private practice owner. My name is Gerda Muller, and you are listening to the Private Practice Success Podcast, and this is episode number 75. 

Today I want to talk to you about Utilisation Rates. Now, how did I land on this topic? Well, cast your mind back to episode number 71. In that episode, we spoke about The Difference between 'Contributions to Operating Expenses' and 'Profit' and Why understanding that difference Matters. Now, if you've not listened to that one, it's really important one to go and listen to. Well, between me and you, each and every episode is important for you to listen to if you are a group practice owner. 

You cannot miss even one episode, irrespective of how big your practice is, whether you're level one, two, three, four, or five, okay? And don't be one of those level five practice owners that goes, "Ugh, I'm big. I know all these things." I can tell you now because I've learned this the hard way as a twice, level five practice owner. I've got two locations at level five, you can still learn something because I wouldn't be talking about it if you don't know it, and it's sometimes my level five people - and I love you so much - but it's sometimes you that are stifling your own growth because you think you know it all. I'm sorry that I'm just, like, getting in there with the tough love, but I've been seeing this a lot lately. Never get too big for your boots in business.  Even if you've been in business a freaking 20 years like I have. A lot of the times we need to go back to basics for the next level of growth. So let me get off my little soapbox and, you know, I'm a parent and I'm a clinical psychologist, I know the importance of tough love, so please accept it in the way that it is meant. 

And if you are a baby group practice, and that's not my word, that's how when I talk to people, they refer to themselves when they're, like, level one, just about to go into group practice or just have one or two clinicians, all of this stuff applies. And every time, irrespective of your size of business, you're going to be listening to these episodes and these topics of conversation through a different filter. So even if you've listened to an episode a year ago and you're going to listen to it again today, you're going to get something different from it. I know this because I listen to podcast episodes myself. I go back and listen to my own podcast and I go, ‘Hey, are we still doing this? Hey, do we still have our, our finger on the pulse when it comes to this topic? Let me speak to Ash about this in our meeting on Monday.’ Anyway, I digress. 

As I was saying, I did episode 71 really highlighting the difference between those two topics. It really got me thinking, what other topics or, not really topics, what other terms or concepts are there within the industry and within our private practice community that I know that people often confuse, or where they have different understandings of it, and it went ping in my brain - utilisation rates, because I have often heard people talk about it. I've seen people in conversations and Facebook groups around it, and I go, ‘People have got different understandings of what a utilisation rate is.’ I often find that it is different based on their allied health discipline. So I thought, hang on, I'm going to do a podcast episode on this to really bring this to the fore so that you can determine what is your definition of utilisation rates, and also for you to understand then when you talk to other people, maybe even to your own team, they might be coming with a different understanding and or definition of utilisation rates. It's very often the biggest challenges in business is when there's miscommunication or misunderstandings. So it's really an easy thing to fix, if we actually get on the same page as to what does this term actually mean. So that is what we're going to be talking about today. 

What is YOUR Current Understanding of Utilisation Rates 

Now, before we get stuck into this topic, I really want you to reflect on - right now, what is your understanding of utilisation rates? If I had to ask you, ‘Tell me, how do you define utilisation rates within your business?’ What would you say? If I went to one of your admin team members or to one of your clinician team members and I asked them, ‘What is the definition of utilisation rates within your business?’ or, ‘What do you think is the definition of utilisation rates within the allied health industry?’ What would they tell me? And you might need to pause this and really think about this for a moment, because this is really important. Would they tell me the exact same thing? Would they be on the same page than you? Would they even know that there is such a thing, yes or no? 

The answers to all of these reflective questions will be giving you a lot of information around where your business is at, and it might even inform the situation that you might be finding yourself in. So honestly, when you engage with my podcast, I want this to really be helpful. I don't want my podcast to be something that you listen to in the one ear, you go, ‘Yeah, yeah, that sounds great,’ and then out the other ear. No. Okay? That's not how this works. I want my podcast to be of value. So honestly, reflect on it. Press pause and really give yourself, even if it's 10 seconds, to just go, ‘Hmm, what's the answer to this question within my business?’

Key Performance Indicators (KPIs) 

I think for many of us, when we hear the words utilisation rates, it sounds like something that is a key performance indicator, that it probably sits somewhere in somebody's job description as a KPI, like, this is something that needs to be achieved or needs to be done.  Now, key performance indicators, AKA KPIs, are really important. It is incredibly important for you to know what is those key performance indicators within your business. And if you've been a long-time listener, you would know that I always like to start big picture with you. I like to give you context. I'm not somebody that's going to give you one little piece of the puzzle and not tell you what the overall image is all about, because It's going to be really tricky to build that puzzle if you only have a few little pieces, so I always like to paint the bigger picture for you, which is why I'm talking about KPIs. Because I think in a lot of our brains, it's like utilisation rates, probably that - that's a KPI, right, Gerda? And if you're thinking that, you're probably thinking the same as 99% of other people out there in the industry. 

Now, as I said, KPI is incredibly important, and I can give you a freaking laundry list as long as my two arms of potential KPIs that you can set for yourself and for your respective teams within your business. Sometimes what I find is practice owners have got too many freaking KPIs, they try and do too much at the one time, and they just overwhelm themselves and their team. And if you were to ask me, ‘Well, Gerda, what is the, you know, the main KPIs that I should have for the bare minimum?’ I can tell you there's three for your admin team, there's three for your clinician team, and guess what? There's four for you as the business owner. Mm-hmm. You've got the most KPIs. You might be top dog, but you've got the most KPIs, because ultimately the buck stops with you. Now, that being said, that's a total of 10 KPIs, which is my essential, let's call it my KPI kit, if I was forced to list essential KPIs that you can't live without. 

Now I want to say that those 10 KPIs is not just team, clinician, and business owner KPIs. Ultimately, KPIs all linked together, and as a whole team, we all play a part in helping and supporting one another to achieve our individual and team KPIs, because it's all interlinked. As a team within an allied health business, we're not operating in isolation, and if you are at a practice where it feels that way, that's a little red flag. I'm not saying resign and move on. Go and talk to your practice owner. Go and talk to your line manager. Because, we need to start talking about these things rather than just going elsewhere. You should never be working in isolation to achieve your KPIs. Now, that being said, you - whether you're an admin team member, clinical team member, or the practice owner - there's going to be those KPIs that ultimately sits with you, that belongs to you, and that you are first and foremost responsible for.  And interesting thing, utilisation rates is not on that list. Yep, utilisation rate is not on my list of essential KPIs. That does not mean it's not important. And I'm hoping that by the end of this, it will start to make sense for you why it's actually not on there. 

Definition of Utilisation Rates 

As I said at the start, I find that there's different definitions of it. Anecdotally, I have found that the difference in definition is generally between the psychology mental health side of allied health, versus what I would call the physical therapies side of allied health. I find that there's generally a difference between how those two sides of allied health define it. And obviously, my business and my background and on-the-ground experience is predominantly within the psychology and mental health side of allied health, I am working more and more also with particularly occupational therapists - quite a lot of them actually - speech pathologists, social workers, dieticians and more and more also physios, which is why I've become more and more aware of the difference in how utilisation rates is defined across the allied health industry. 

Now, again, if you do it differently at your practice, even maybe there's a third way, that's perfectly fine, I’m just highlighting to you so you can become aware of the fact that there is these differences and how this could potentially be impacting you, your business, and your team. It's been interesting because I often hear the physical therapy side of allied health talk about the percentages attached to it, and when I heard it the first time, I went, ‘Oh, this does not make freaking sense to me.’ And that's when I went down the rabbit hole of utilisation rates. 

Let’s talk about two examples here. So in, let's say, the physio world, and if a physiotherapist and you go, ‘That's not how we do it, Gerda,’ perfectly fine. Remember I said anecdotally as a general rule. So a lot of physios and other physical therapies, I'm not picking here on the physiotherapists, I love the physiotherapists, I’ve worked with quite a few of them by now. But in the physical therapies world, let me say that, utilisation rates is generally determined as follows. So they would go - the business owner has said that in an average working week that has 38 working hours in, that the therapist needs to do - and I'm just using round numbers here to make my maths easy - needs to do 25 billable hours. And if you have seen 15 clients within those 25 required billable hours, that means that you have a utilisation rate of 60%. If you saw 20 clients in those 25 billable hours, you would have an 80% utilisation rate. And if you had 25 appointments out of 25 appointments, you would have 100% utilisation rate. And it's when I would hear people talk about 80% utilisation rate, 100% utilisation rate that I would go, ‘How the hell are you doing this?’ Your people should not be billing 80% or 100% of the time, and then I realised, oh no, we're defining it differently, because in the mental health psychology side of the industry, we look at it differently.  And this is where the difference comes in. Because in our side of the industry, it's actually not a utilisation rate. Well, at least not the way that I look at it. It's not a utilisation target even, it is a utilisation requirement. 

The way that we look at it is one set consistent percentage. So if my clinicians are full-time employed, which is 38 hours in a working week according to our award, I know our utilisation requirement for a full-time equivalent clinician is 63.1%. I know, it's very specific, So it's a requirement, it's a very important word, language is very important in business. We require any full-time equivalent clinician to deliver a minimum of 24 billable hours in their work week. 24 divided by 38 - which is the working hours in the full-time equivalent work week - is 63.1%. So that is our utilisation requirement. It's not a rate. That doesn't mean that we don't look at are people actually meeting this requirement. We most certainly do, and we do that through our productivity reports. So that's really in terms of, what level of productivity is our people operating at. I don't particularly like the word utilisation, because it sounds like I'm using my team, which they're getting paid for right. So I look at it as our productivity reports that we look at. 

So as I said earlier, utilisation rates is not on my KPI essentials list, because just has to happen, it's a requirement. So if you get employed, this is what you need to do. Those are the amount of billable appointments within your diary that is opened up when you get started. And I know that if the admin team meets those essential three KPIs that's on the list, I know if the clinical team meets their three essential KPIs that's on the list, and if as the business owner I meet my four essential KPIs, that we will automatically meet the utilisation requirement. And it would be easy. 63.1% Is a minimum number. People can do more, but they can't do less, because if they do less, we can't pay the bills. But also, we want to look after our team, particularly in mental health. It is a high burnout career that people enter. Not only in mental health, but I think, allied health in general because we are helpers, and there's a lot of emotional work within our jobs on a day-to-day basis. Even if you are a physio, even if you are a podiatrist, even if you are - insert whatever type of allied health professional you are - there is going to be emotions attached to it. Because health, whether it's physical or mental, is important to people.  And when your health is not what it should be, there's going to be an emotional component to it. So we most certainly need to be aware of the impact on our team, and of course, more so when you work in the mental health corner of allied health. 

So for us, at my practice, and also for all the psychology practices and mental health practices that I work with, when we say 63.1% utilisation requirement, I can set that requirement really feeling good about it, knowing that I think that is a great balance between going, we are a professional service business, we get paid when we provide a service. So we have to do the work. We don't get government funding. There's no, you know, NGO behind us or government coffers. Every freaking dollar we spend, we need to earn. So it's like, you can't deny the fact that you need to do billable work. If you don't want to do it, you shouldn't be in the industry. So we have to do the billable work. But again, like I said, it's really well-balanced because there is then 14 hours of non-billable work time. I think that is really generous if you think about it. So if, as a business owner, I'm paying somebody for 38 hours in their week, they're doing 24 billable hours, giving them 14 hours, that's almost two days for non-billable work. 

Now good luck finding another professional services firm that will allow their billing team to do two days of non-billable work. It will give the freaking lawyers, engineers, architects, and all the other professional service business owners a heart attack, to think that their team is allowed to do two days worth of non-billable work. Now, their work is different to ours. They have their own stresses. I can tell you those industries aren't stress-free. It's just a different type of stress to what we have, but we are allied health, and I'm okay giving my team two days of non-billable client work as long as they meet the utilisation requirement. Then it's fine, right? Because there's a lot of other stuff and levers that we can pull in order to ensure that we still achieve the margins required to allow the team to have two days of non-billable work - so that they can look after themselves, so they can have non-face-to-face time, so that they can have that downtime from billable work, while still being productive so that they don't burn out, so that they keep on having the joy that's going to keep them within the industry. Because if our team burns out, how are we going to help people? So it's really about that balance that needs to be achieved. 

Let's summarise. I want you to think about and reflect on what is your current definition of utilisation rates. Should you even call it utilisation rates? Do you and your team know what the utilisation requirement is within your practice? Are your team meeting that requirement? If not, how far off are they? What are their actual productivity like? What is contributing to them not getting there? How is that impacting your business, your cash flow, your ability to sleep at night? Having a clear utilisation requirement that looks after the business as well as the team is incredibly important. This is that thing that's going to sustain your business and your team over the long term, so you need to know what that number is. 

Like I said, at my practice it's 63.1%. And remember I said language is important. That is a minimum.  People can do more, but they shouldn't be doing less. If they are, you need to be tracking productivity rates. You need to know what that is. You need to know why is it the way it is. What other KPI isn't being met by which team that might be contributing to it, because it's not just the fault of the clinician if they're not getting to that number. Ultimately, each and every person within the business contributes to one another's KPIs, contributes to achieving that utilisation requirement. So what is happening? What is allowing your business right now to achieve it if you're getting there? Because if you can tell me, ‘Yes, Gerda, we are smashing it week in, week out, we are achieving our utilisation requirement,’ you need to ask yourself why. What is in place allowing me to get there? 

Because unfortunately in business, when you let your eye off the ball, that's when the ball falls. Have you put in measures, systems, processes, procedures to ensure that it continues to happen into the future to ensure that if there's a deviation of it, that it can get picked up and immediately rectified? And if you're not meeting your utilisation requirement, what's going wrong? What are you not seeing? What are you not doing? What do you need to put in place in order to make sure that you get there week in, week out? That's the stuff that helps you sleep at night - you and your team, that creates a sustainable business, that creates that sense of security, that irrespective of what's happening in the world, what's happening in our industry - that we're going to be okay. And that is how team members stick around instead of panicking and leaving - and we don't want that. Remember, what you want right now in the current state of the industry and the world is stability. Stability and sustainability, and knowing your utilisation requirement, and what you're doing to ensure that your team meets it week in and week out is absolutely essential. 

Okay, I’m going to leave it there. I know that today's episode was shorter than my usual episodes, but this was a very specific topic of conversation. It's this one term that I really wanted to delve into today, because I know that this will make a big difference to you and your practice. Thank you so very much for tuning in, for listening and engaging in this conversation, and remember that I am here to help you build a practice you can't stop smiling about. 😊

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Gerda Muller

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