Move your practice margins.
At first, John Horton, MD, thought talking with a consultant about renegotiating his telecommunications services might be a waste of time.
Today, he says, he’s saving more than $500 a month in long-distance charges after switching his carrier. The move was complex, involving a switch to fiber optic communication lines, but Horton didn’t waste his own or staff time on the project because he hired a telecommunications consultant to explore the options and take a fee from the savings.
In medical practices, as in life, it’s often the little things that can add up big. After years of margin squeeze, many practices already have plucked the lowest-hanging fruit from the overhead tree, but experts say there are still plenty of small cost cuts that can add up to big dollars saved over time.
From encouraging patients to bring their own bathrobes for appointments to disputing a property tax bill, Horton and other Medical Economics readers answered our call for tips on cutting overhead costs.
The Leawood, Kansas, primary care physician has many patients who live out of state and was incurring large long-distance charges, he says. By working with a third-party agent, his practice bundled local, long distance and data lines through a fiber optic cable installation.
The savings allowed him to add live television service for the patient waiting room, as well as additional outside telephone lines so patients could contact certain practice employees directly rather than routing them through an automated voice system. Both additions were a hit with patients, an example of a cost-cutting move that actually enhanced services. “The telecom savings was a big surprise to me. I had no idea it would turn out so well,” Horton says.
In addition, a few years ago the practice hired an attorney to contest a property tax assessment. The attorney took his fee from the first-year savings, so the practice didn’t incur any risk with the move, Horton says.
1 Expand purchasing power
Other costs are easier to cut, experts say.
Buying supplies in bulk and as part of large purchasing groups can deliver substantial savings. For his 45-physician practice based in Boca Raton, Florida, Todd Blum, MHA, could score large-scale pricing deals just by buying for his own group. But by joining with other practices to create an even larger purchasing organization, the savings are substantially greater, says Blum, chief executive of Ear, Nose and Throat Associates of South Florida.
Also be aware that many specialty associations, even on the state level, offer member discounts on purchasing, experts say.
Smaller physician groups might do best by joining several large group purchasing programs, where membership is typically free and members aren’t required to meet purchasing minimums, says Kathleen McCarry, senior healthcare consultant at Anders CPAs + Advisors in St. Louis, Missouri.
“From your accounting software, generate a list of the vendors you are doing business with frequently. Then call several group purchasing organizations and see which ones have contracts with those vendors and they can tell you how much you’ll save by joining,” she says.
Join several of the groups to increase your chances of keeping your preferred vendors, she says. Another bonus: Many offer practice employees discounts on everything from office supplies to travel.
2 Preemptively renegotiate
Practices locked into long-term technology deals should try to renegotiate those as tech prices fall, Blum says. Midway through a five-year contract, for example, a practice might contact the vendor and offer to extend the agreement for lower prices.
Stay on top of benefit cost hikes by shopping out contracts for health, disability and malpractice insurance every year, he says, and work toward a near-zero tolerance for unauthorized staff overtime. Also shop around for the best phone and data rates.
As for real estate costs, he says, practices should annually check whether their cost-per-square-foot is at or below current market rates, and if not, renegotiate those leases by offering to extend them.
Though an insurance carrier or telecommunications provider may change frequently using these methods, developing a long-term relationship with a third-party vendor for those services pays off in consistently lower costs, Blum says. Vendors typically earn a piece of each telecommunications contract, so in theory there is an incentive to accept higher rates. By committing to a single vendor over several years, the vendor is incentivized to keep delivering competitive contracts
3 Evolve payroll
Payroll administrative costs have been plummeting as technology advances. Donna Johns, MHA, practice administrator for Little Flower Family Practice in Canton, Ohio, says she cut her payroll costs by 75% by switching from a dedicated payroll company to a local bank that offers small-business discounts. “Until the bank brought this up I didn’t know we had a lot of other options,” she says.
Since then the practice has switched payroll vendors again, to a software company that charges about the same as the bank. The tradeoff from the days of the full-service payroll company is some reporting functions, but it is something her two-provider, 12-employee practice can live without.
“You have to look constantly at what you can do” to lower costs, Johns says. She shops for deals among credit card vendors, and also regularly checks for online deals on supplies to ensure her buying-group prices are superior.
McCarry, too, shops around for credit card deals. When cards with embedded chips began appearing, for example, she noticed they often defaulted to an expensive processing system. “A lot of practices aren’t realizing they have a choice when the network is set up. There’s often a less-expensive payment processing network that would save money and make no difference to the patient at the point of service,” she says. So talk with the processing company to make sure the software encourages the least expensive network, she says.
Sandra Robben-Weber, CMM, practice administrator for Colorado Springs Pulmonary Consultants, banked nearly $6,000 in savings the first year when she started paying many practice bills with a business rewards credit card that pays 2% cash back. “We put everything on that card, from office birthday parties to our EHR service fees,” says Robben-Weber, who is also a chapter president of the Professional Association of Health Care Office Management.
4 Save on staffing
Robben-Weber’s practice also formed relationships with local community colleges looking for externships for its students.
For relatively little cost, the students shadowed physicians and entered chart information directly into an EHR system so the provider would not have to dictate later, she says. It also frees providers from having to do their own data entry, making them more efficient, she says.
In some markets, experts say, schools offer student labor free of charge in exchange for experience in the practice.
Another way to trim staffing costs is through creative scheduling. Lisa Maciejewski-West, MCS-P, president of Gold Star Medical Business Services in San Angelo, Texas, counsels clients to bundle appointments requiring more ancillary staff together, keeping blocks of time when fewer staff members are needed.
“If you schedule high-volume procedures early and late in the day, then in the middle of the day you don’t need as many practitioners,” she says. She has a dermatologist client who schedules all biopsies and lesion removals on Tuesdays and Thursdays. She does these herself, then schedules acne patients on the other days when she has two physician assistants.
Likewise, practices are increasingly replacing full-time workers with part-timers to reduce benefits costs. But this strategy can backfire if hiring only the lowest-cost labor is a priority. And for the sake of continuity, make sure there is at least a 30-minute overlap between two part-timers sharing a job, she adds.
5 Save on space
A way to trim another big overhead cost–real estate–is to move staff functions that don’t interact with patients to less-expensive office space. “Some clinics have rooms dedicated to the business office right in prime space in the clinic, when they could be taking billing offices down the street where they are paying less in rent and then they can open that previous space up to treat more patients,” Maciejewski-West says.
For a dental practice, for example, she advised retaining one employee at the main site to handle financial consultations with patients, and move the rest off site. Almost by definition, solo practices might not have in-house staff functions that don’t interact directly with patients, but they could see if there are some inventory or office items that could be stored inexpensively off site, she says.
6 Patient freebies
To help patient satisfaction scores, try obtaining low-cost and donated items for patients, says Rita Genovese, CPC, director of revenue cycle for MD Anderson Cancer Center at Cooper in Camden, New Jersey.
At a previous job, her team solicited donated hand lotions for chemotherapy patients and printed out online word games and puzzles for use by patients staying for long hours of therapy, rather than purchasing game books.
“When patients are receiving chemotherapy for six or eight hours, trying to help them get through that with a little less hassle is so appreciated,” she says. She found local businesses were often eager to donate items for patients. “We tried to come up with patient satisfaction items that aren’t costly or to work discounts from providers,” she says. The team also worked with massage therapists and musicians who donated their services, she says.
7 Billing-free payments
Maciejewski-West says practices that have instituted a billing-free payment system are seeing significant savings in productivity and direct costs.
“Having a ‘no-statement’ policy – requiring patients to leave a credit card on file or a held check is almost the norm in dermatology, plastic surgery and dental practices, and is starting to gain momentum in others,” she says. “I think it’s a huge way to keep overhead costs down.”
The big picture
Trimming expenses should begin with a big-picture analysis of the practice’s workflow says Alan Whiteman, Ph.D., who teaches healthcare administration courses at Florida Atlantic University’s College of Business in Boca Raton, Florida. “Use a systematic approach and look at the way the practice does things,” he advises. “Then consider how patients could be moved through the practice more efficiently.”
Smoother, faster operations save on staff time and translate into more time to see more patients at lower costs, he says. Some practices, for example, have patients perform their own data entry when they come into the office, scanning their insurance cards and logging health questionnaires and driver’s license data directly into the practice’s data management system.
Similarly, he recommends practices go through each clinical service offering annually to evaluate whether outsourcing it makes more sense. Compare that with the outright cost of outsourcing, as well as the associated cost of any time delays as the physician waits for results.
Performing a cost accounting exercise is another good way to identify areas where expenses are running ahead of profits, he says. For each payer, for example, he suggests tallying what it costs the practice to see that payer’s members. “It’s natural for doctors to sign every [payer] contract they are offered, but they need to assess what it costs to deliver the service and whether it makes sense financially,” he says.