Why High Revenue Doesn’t Equal High Value
Unpacking the Difference Between Gross Collections and True Profitability
In healthcare—especially in private practice—it’s easy to be fooled by the numbers. A practice may be bringing in millions in gross collections each year, but that doesn’t automatically translate into real profitability, financial freedom, or long-term value. High revenue looks impressive on paper, but without healthy margins and strong operational systems, it can be like pouring water into a leaky bucket.
This disconnect between gross revenue and true business value is one of the most common misconceptions I encounter when consulting with healthcare entrepreneurs. Owners equate “more patients” or “higher collections” with success. Yet time and again, I’ve seen practices chasing top-line growth while quietly eroding the very foundation that determines long-term value: profitability, scalability, and sustainability.
Gross Collections: A Misleading Metric
Gross collections are simply the total dollars billed or collected by a practice. They are often celebrated, used in marketing, or shared as proof of success. But gross collections do not account for the very real expenses that chip away at profit:
Rising staffing costs
Facility overhead and utilities
Insurance write-offs and denials
Marketing expenditures
Technology and compliance costs
Healthcare, particularly physical therapy, faces a unique challenge: reimbursement rates remain stagnant—or even shrink—while the cost of doing business steadily rises. That means the same level of gross collections today yields less profit than it did five years ago. Unless a practice is consistently increasing efficiency, tightening systems, and expanding strategically, those gross numbers create a false sense of security.
The Funnel Illusion: More Patients ≠ More Profit
Many practice owners fall into what I call the “funnel illusion.” They believe that if they just push more new patients into the top of the funnel, more money will come out the bottom. On the surface, this logic makes sense—more evaluations, more visits, more dollars.
But here’s the reality:
If patient retention is weak, new patients flow out as quickly as they come in.
If scheduling systems are inefficient, providers end up underutilized.
If marketing spend isn’t tracked against lifetime value, owners are simply buying volume without buying value.
Without strong management systems in place—clear communication, retention protocols, referral generation, and reputation building—a practice will constantly overspend on acquisition just to keep the lights on. This is why I teach owners to build what I call a marketing faucet: the ability to control patient flow, turning it up or down depending on operational capacity. Otherwise, revenue grows but margins collapse.
Profitability: The True Measure of Value
Profitability is not just what’s left over after expenses—it’s the key driver of valuation when practices are considered by investors, private equity, or strategic buyers. A business that produces $1 million in gross revenue with $100,000 in profit is far less valuable than a business producing $600,000 in revenue with $200,000 in profit.
Why? Because buyers, lenders, and even potential partners are looking for predictable, transferable profit streams—not vanity metrics. That means:
Net margins matter more than top-line growth.
EBITDA (earnings before interest, taxes, depreciation, and amortization) is the yardstick for value, not collections.
Operational efficiency—how well you convert gross into net—is what separates an average practice from a best-in-class one.
When I prepared my own company for private equity, I learned firsthand that strategics don’t pay for gross—they pay for EBITDA. That lesson reshaped how I coach clients today.
The Hidden Costs That Kill Value
Let’s break down some of the silent killers that make high-revenue practices low-value businesses:
Inefficient Staffing Models
Hiring more clinicians doesn’t always mean more profit. If utilization and productivity aren’t aligned with best-in-class standards, payroll eats up revenue faster than new visits generate it.Overhead Bloat
Multiple locations with low patient volume (like a clinic running at 13 visits per week) drain profitability. Owners often resist closures because of pride or sunk cost, but consolidation is often the fastest way to improve value.Weak Collections Systems
Delays in billing, high denial rates, or poor front-desk over-the-counter collections can cripple cash flow. Without strong revenue cycle management, a practice can appear busy while silently starving for cash.Marketing Without Measurement
Spending on ads or referral lunches without tracking ROI is a common trap. A practice must connect marketing spend directly to patient lifetime value and margin contribution.
Case in Point: Tru Physical Therapy
Tru PT, a client practice I’ve advised, illustrates the point. On paper, they had three clinics generating steady patient visits. But one location, Cooper, averaged only 13 visits per week. Maintaining that office inflated overhead and dragged down overall profitability. This was a part time office near a high school.
By consolidating operations into the two higher-performing sites, Tru could improve margins without chasing more top-line revenue. The strategy wasn’t about growing collections—it was about freeing trapped profit already sitting inside the business.
This is the type of decision that transforms a practice from a “busy clinic” into a valuable asset. While this decision can look like “common sense” from the outside there are many variables for an owner to take into consideration but a business coach gives advice based on the goals of the owner. Our choices are the cut out the noise and carve a path.
Building True Business Value
So, how do you shift from a revenue-obsessed practice to a value-driven one?
Track the Right Metrics
Move beyond gross collections. Monitor net margins, EBITDA, cost per new patient, patient retention rate, and provider utilization. Numbers don’t lie—they point directly to where value is leaking.Align Production Standards
Best-in-class practices establish clear productivity targets per provider and hold staff accountable. Without this, growth often leads to diluted margins.Control Patient Flow
Learn to manage demand through your marketing faucet. Don’t oversaturate your schedule with more evaluations than your team can ethically and effectively handle.Protect the Bottom Line First
Before chasing new locations, ensure each site is profitable. Close or fix underperforming sites rather than subsidizing them with stronger ones.
Think Like an Investor
Whether you plan to sell or not, build your practice as if you were preparing for a valuation tomorrow. Investors prize consistency, scalability, and margin strength over vanity growth.
Conclusion: Revenue is Vanity, Profit is Sanity, Value is Freedom
At the end of the day, the difference between high revenue and high value is the difference between working harder and working smarter. Revenue can make you feel successful today, but profitability and value are what give you options tomorrow—whether that’s selling your practice, scaling sustainably, or simply taking more time off without financial stress.
Private practice owners deserve more than a “busy clinic.” They deserve a profitable, high-value business that supports their lifestyle, protects their retirement, and leaves a lasting legacy in their community. That’s only possible when you stop chasing revenue for revenue’s sake and start building systems that convert collections into true, lasting value.
