A Little Bit Goes a Long Way

False economy is costly. A group of physicians once called me in because their collections were falling and expenses were increasing. The doctors were highly specialized surgeons, each taking home incomes in the high six figures. However, they were not making as much money as they had before and thought they should. So they decided to stop supplying coffee, tea, and light refreshments for their staff. This saved them $600 per year.

In truth, their expenses were increasing because they had made a bad deal with the physicians from whom they were sharing space. Unable to change that arrangement, they decided to cut the costs they could. But the doctors didn’t take into consideration the value of the small perks to the staff. They didn’t compare their hourly take home pay to that of their employees. What percentage of their income was a cup of coffee, a bowl of instant soup, a soft drink or a snack? What percentage was it of their staffs’ hourly income?

The staff was so incensed that the biller stopped contesting reimbursements from third party payors. I was standing behind her one day when she posted a payment for a surgery. The insurance paid half the billed amount. She simply wrote off the rest!

“Look at that write-off,” I exclaimed. “Look at that fee,” she replied.

Lesson: How much did that $600 savings per year cost those doctors?