Your best location is lying to you
If you run two or more clinic locations and look at one consolidated P&L every month, you are making decisions with blurred vision.
A consolidated P&L tells you what the whole business made. It does not tell you what each location made. And when one location is doing well enough to cover for another that is bleeding cash, the consolidated numbers look fine. You feel good. You keep going.
Until the profitable location has a bad quarter and suddenly the whole business is underwater.
I see this constantly. It is one of the most common blind spots in multi-location practices.
A real example: three locations, one problem nobody saw
We started working with a physical therapy group last year (anonymized Sorso client, Northeast, three locations, $6.2M in combined revenue, 14 providers). The consolidated P&L showed $420K in annual profit. Not amazing, but healthy enough.
The owner was planning to open a fourth location.
When we built location-level P&Ls for the first time, the picture changed completely.
Location 1 (the original clinic, established 8 years ago) was generating $3.1M in revenue and $310K in profit. Strong payer mix, high patient volume, experienced providers.
Location 3 (opened 2 years ago) was doing $1.8M in revenue and $205K in profit. Smaller but growing, good trajectory.
Location 2 was the problem. It was generating $1.3M in revenue and losing $95K per year. Not $95K less than the other locations. Losing $95K. Negative profit.
For two years, nobody knew. The consolidated P&L showed $420K in profit, so everything looked fine. Location 1 and Location 3 were subsidizing Location 2's losses, and the owner had no idea.
Opening a fourth location on top of this would have spread management even thinner and probably made Location 2's problems worse. Instead, we focused on fixing Location 2. Within six months, it went from negative $95K to positive $48K annually. Still the weakest location, but no longer a drain on the business.
What a consolidated P&L hides
A consolidated P&L adds everything together. Revenue from all locations. Expenses from all locations. One bottom line.
This hides four things that matter.
Rent and occupancy costs per location. Your newest location might have a lease that is $4 per square foot more than your original one. On a 3,000 square foot clinic, that is $12,000 more per year just in rent. If that location also has lower patient volume, the cost per visit is dramatically higher than you think.
Staffing costs per location. You might have an overstaffed front desk at one location and an understaffed one at another. The consolidated P&L shows total payroll. It does not show that Location 2 has two front desk staff for 25 patients per day while Location 1 has two front desk staff for 45 patients per day.
Revenue per provider per location. Provider productivity varies by location. The same provider might generate $380K at one location and $290K at another, depending on patient volume, payer mix, scheduling efficiency, and support staff. Without location-level data, you cannot see these differences.
Overhead per visit. When you divide all expenses by all visits, you get an average cost per visit that applies to no actual location. Your original clinic with a paid-off buildout and established patient base has a very different cost structure than a new location still ramping up. One number for the whole business is meaningless for operational decisions.
How to build a location-level P&L
Building location-level P&Ls is not complicated, but it does require discipline. Here is how we do it.
Direct costs are easy
Some expenses clearly belong to one location. Rent, utilities, location-specific staff, location-specific supplies, location-specific equipment leases. These get assigned directly to the location. No allocation needed.
If your chart of accounts is not already tagging expenses by location, that is the first change. In QuickBooks, you can use classes or locations. In Xero, tracking categories. It takes some setup, but once it is in place, direct costs flow automatically.
Shared costs need allocation
This is where most people stall. Some costs are shared across locations: your office manager who oversees all three clinics, your billing company, your EHR subscription, your marketing spend, your accounting fees, your malpractice insurance.
These need to be allocated. The question is how.
There is no perfect allocation method, but there are reasonable ones. Here is what we typically use:
- Administrative staff: Allocate by number of providers or number of patient encounters per location.
- Billing costs: Allocate by number of claims submitted per location.
- Marketing: Allocate by location if campaigns are location-specific, otherwise by revenue.
- EHR and software: Allocate by number of users or number of providers per location.
- Malpractice insurance: Allocate by provider, assigned to the location where they primarily work.
- Owner compensation: This is a corporate-level expense. Keep it out of location P&Ls unless the owner works primarily at one location.
The exact method matters less than being consistent. Pick a method, document it, and use the same one every month. The trends over time are what drive decisions.
Track provider production by location
If providers split time across locations, you need to track their production by location. Most practice management systems can report revenue by provider by location. Pull this data monthly and use it in your location P&Ls.
A provider who works three days at Location 1 and two days at Location 2 should have their compensation allocated 60/40 (or based on actual revenue production, which is more accurate).
Separate payer mix by location
This one often gets overlooked. Payer mix varies by location more than most owners realize. Your location in a higher-income area might have 70% commercial insurance and 10% Medicaid. Your location across town might be 40% commercial and 35% Medicaid. That difference in payer mix means dramatically different reimbursement rates for the same services.
When we pull billing data by location, payer mix differences are usually the first thing that jumps out. And they explain a lot about why one location's revenue per visit is $30-$50 higher than another's.
What changes when you can see location-level data
Once you have location-level P&Ls, the decisions you make change.
Staffing decisions get specific. Instead of "we need to hire another front desk person," it becomes "Location 2 needs a front desk person and Location 3 has one too many for its volume." You move resources instead of just adding them.
Provider scheduling gets smarter. If one location has excess demand and another has open slots, you can shift provider hours. You stop adding providers at the busy location and start filling the slow one.
Marketing spend gets targeted. Instead of running one campaign for the whole practice, you can invest where the return is highest. If Location 3 has capacity and Location 1 is already at peak, you put the ad dollars into Location 3's zip codes.
Lease negotiations get informed. When you know the true profitability of each location, you can negotiate leases with actual data. If a location barely breaks even, you have real numbers to support asking for a rent reduction or deciding not to renew.
Expansion decisions get grounded. Opening a fourth location when your second location is losing money is a mistake. But you cannot know that if you only have a consolidated P&L. Location-level data turns "we should grow" from a feeling into a financial decision.
Compensation conversations get easier. When you can show a provider their production at each location, compensation conversations become data-driven rather than subjective. This is especially useful for groups with productivity-based compensation models.
The cost of not knowing
The owner of that PT group was three months away from signing a lease on a fourth location. If he had, he would have added $180K per year in fixed costs (rent, buildout amortization, staff) on top of a business that was already carrying a losing location.
Instead, he spent six months fixing Location 2. The changes were not dramatic: adjusted provider schedules to match patient demand patterns, moved one front desk staff member to Location 1 where volume justified it, and ran targeted marketing in Location 2's catchment area.
The $95K annual loss turned into a $48K annual profit. That is a $143K swing from one location getting attention it never had.
You cannot fix what you cannot see. And you cannot see location-level problems with a consolidated P&L.
If you run multiple locations and have never looked at a location-level P&L, schedule a free assessment. We will build one for you and show you what your consolidated numbers have been hiding.
