A Simple Approach to Cutting Practice Costs

A bad economy and declining healthcare reimbursements are forcing many physicians to work harder for less. Now is the time to examine your practice for ways to cut costs. Here are a few of the most direct ways to find savings.

The combinations of the general economic crisis and the radical changes taking place in healthcare have had a negative impact on many medical practices. In many cases, physicians are working harder and earning less. With reimbursements down and patients delaying medical care, there are limited ways to impact revenue.

This perfect storm has created the ideal time to focus on the expense side of the medical practice. Physicians should take this opportunity to find cost savings.

A Critical Approach to StaffingThe largest expense for most medical practices is the cost of staff. Here are three things a physician business owner should examine:

1. Are current staffing levels in line with service needs for the practice? It is possible that overtime staffing has increased beyond the needs of the practice? In more lucrative times, staff may have been added that are not currently needed to provide service to patients.

2. Has change in practice operations made some positions obsolete? With the implementation of electronic medical records systems and electronic billing, it is possible that some billing and medical record personnel are no longer needed.

3. Can patient visits be scheduled or rescheduled to create blocks of time that allow overall staff hours to be reduced? Hours can often be reduced if better scheduling is done. The schedule should be addressed to eliminate hours at the end of the day, or perhaps to eliminate whole days.

If staff positions are to be eliminated, it is best to make all terminations at the same time and to do so at the beginning of a week rather than the end. By doing so, the remaining staff does not have a weekend to brood over the termination. Reduction in staff hours, while not welcome, is preferable to losing ones job. In either scenario, it is advisable to have a meeting with staff after the changes have been made to explain the need for the changes and reassure their remaining positions are secure. Workers are seldom surprised by layoffs or work-hour reductions, as they have observed the changes in the practice.

Re-Evaluate Your Space

The next largest expense in a medical practice is cost of occupancy. Many practices have space that is not being used in the practice. For example, you may have a “catchall room” that is has become a dumping ground for items that no longer have value. If this space is emptied it may be possible to return it to the landlord and receive a reduction in rent, or to move to a smaller, less expensive location entirely.

Reduction of supply and other operating costs require a different approach. Physicians must set an example by exhibiting their commitment to reducing costs. One example might be that a physician eliminates an expensive, annual out-of-town CME program or invests in the office building to make it more energy efficient.

Motivate Your Staff to Save Money

Offering rewards to staff for cost-saving ideas is also an excellent way to reap cost reductions. For example, offer a $25 gas card for every $500 in savings. A staff person would be asked to submit a written plan to that shows how the savings will be obtained. Once the plan is implemented and the savings obtained, the gift card is awarded.

By working together to reduce costs in the most painless way possible for everyone involved, you’ll shore up your practice’s finances while building a stronger relationship with your staff.

Hal A. Shoemaker, CPA, is managing director of Shoemaker & Co., CPA, PC, a proud member of the National CPA Health Care Advisors Association. HCAA is a nationwide network of CPA firms devoted to serving the healthcare industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at info@hcaa.com.