3 ways overhead expenses can generate more revenue

May 23, 2014

Physician practices may have limited means to reduce their fixed costs, but strategies exist to leverage those costs into more revenue

When medical practices are struggling financially, a common reaction is to cut overhead expenses. While this strategy may work in other businesses, experts who spoke with Medical Economics say that it’s not the way to go for physician offices. Instead, there are strategies practice managers can use to put overhead expenses to work generating more revenue.

To start with, at least 85% of a practice’s expenses, such as compensation and benefits, rent, and utilities are essentially fixed expenses, notes Marc D. Halley, MBA, president and chief executive officer of Ohio-based interim-management and consulting firm Halley Consulting Group.

“So if you’re looking to save the world or save a practice by cutting costs, pretty soon you’re cutting muscle, and then you’re reducing productivity,” Halley says. “Where you win or lose the game in a medical practice is on the revenue side of the balance sheet.”

Therefore, instead of looking at overhead as a pure cost, consultants recommend focusing on overhead as a ratio of operating costs to revenue. The goal is to put your overhead expenses to work in helping you generate more revenue, explains Kenneth T. Hertz, FACMPE, principal with the MGMA Healthcare Consulting Group in Alexandria, Louisiana.

“If you start looking at large ways to cut overhead, that’s eliminating people,” Hertz says. “And I’m just never sure that eliminating people is a good thing.”

Next: Maximizing your staff

 

1/ Maximize your people
In general, this means ensuring the highest and best use of all personnel, says Halley. But when it comes to creating efficiencies, using skilled, effective appointment schedulers is of particular importance. (There are also numerous technological solutions that can help streamline your practice, discussed later in this article.)

“Some people use online services and love them. We at our office use humans,” says Craig M. Wax, DO, a family physician in New Jersey and member of the Medical Economics advisory board. “In our view, although it seems like it would be nice for patients to go online and point and click and pick an appointment, we have appointment-timing issues that patients wouldn’t likely understand.”

A big part of the scheduler’s role, therefore, is to glean enough information from the patient over the phone to determine how long of an appointment is needed. New patients, those with complicated medical conditions, and patients in for a yearly physicals will need more time, says Wax.

Schedulers should also factor in physician preferences, patient preferences, and whether scheduling a patient to see a midlevel provider is sufficient. Schedulers should be empowered to make decisions with minimal calls to the back office, notes Hertz.

“From an operational standpoint, if every time a new patient calls and I have to call back, talk to a nurse, talk to a manager or administrator, and so on, that wastes time and money. Spending seven minutes on the phone trying to get a new patient scheduled is not using your overhead very well,” Hertz says.
High-performing practices, on the other hand, emphasize communication, education, flexibility, and understanding of the practice’s need to provide access.

 

Next: Extended hours

 

2/ Grow revenue through extended hours
With a growing emphasis on patient-centeredness and convenience, many primary care practices are adding office hours during  early mornings, evenings, weekends, or some combination thereof. The idea of expanding office hours has tremendous merit, Halley says-with a couple of caveats.

First, make sure you have or can build enough volume to fill the extra slots. “If we’re just taking our 20 patients today and spreading them over nine hours instead of six, we’re not doing ourselves a whole lot of good,” Halley says. “But if you want to talk about cost control, getting more patients per square foot by adding another three hours in the day is a good strategy.”

One of the common reasons practices fail to make extended hours work, notes Hertz, is that they neglect to promote their new offerings. “If you open for extra hours and nobody knows you did that, it’s going to be hard to succeed,” he says. No-cost ways to spread the word include office signage, website updates, posts to Facebook and Twitter, press releases, or patient email.

Another frequent mistake practices make is giving up on the endeavor too early. “You can’t try for a month and give up,” Hertz says. Rather, determine your goals and how much time you will allow to reach them.

Finally, if you’re not going to commit to adding hours most days of the week, don’t bother, Halley says. “Patients always forget that they’re supposed to only get sick on Thursday evenings.” He recommends adding hours at least four days per week, plus some weekend time, because having just one or two days with extended hours leads to patient confusion and frustration.

Next: Choosing technology

 


3/ Choose technology wisely

As noted previously, growing numbers of practices are leveraging technology to enhance office efficiency. For Marla W. Deibler, Psy.D., founder and executive director of the Center for Emotional Health of Greater Philadelphia, LLC, allowing patients to schedule and change their own appointments online via a patient portal has been of tremendous benefit.

“The electronic scheduler is wonderful,” Deibler says. “It makes things very efficient for us, allows us to save time and money in returning phone calls for people who want to reschedule appointments, and makes things convenient for patients.”

It’s important to note, however, that although patients select the type of therapy they’re seeking, all appointment slots are for 45-minutes, eliminating the primary care problem of variable appointment times.

In addition to using EHRs, electronic billing, and computer tablets in her practice, Deibler uses social media tools to keep the office running smoothly. “I don’t know if it streamlines it, but it certainly contributes to the business and makes us more accessible to people,” she says. Through a practice Facebook and Twitter account, plus a monthly email newsletter, Deibler keeps patients abreast of practice events, support groups, and relevant research articles.

By investing just a few minutes “here and there,” via her iPhone, Deibler says she has both cut down on calls to the practice and kept patients better engaged.
As part of the practice-streamlining discussion, Medical Economics also asked experts for their thoughts on medical practices installing check-in kiosks.

There certainly can be value in this technology, says Halley, as kiosks streamline the process of verifying patient data and collecting payments all with the swipe of a patient’s insurance and credit cards. “But if I have a choice between investing in a kiosk and enhancing my EHR, I’m going to go with the EHR because it will leverage my productivity of my most expensive resource, the physician.”

If you have the capital to invest in a kiosk (and a patient population comfortable with technology), don’t slack on the customer service, Halley says. “Just make sure you still see that smiling receptionist at the counter, because that’s the first impression the patient gets walking into your office. Don’t lose the relationship-management side of your practice.”