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The economics of change


Meeting the cost of converting a small practice to electronic health records requires a close examination of all other practice expenses.

With the rapid economic changes taking place and still to come in primary care, standing still is not an option if our practices are to survive.  Any discussion involving the economics of private practice in 2013 must begin with the relative merits of the switch to an electronic health record (EHR) system.

Our two-physician practice has successfully made the move and received the government’s financial bonus for doing so. To the plus side went $45,000, but that’s not so impressive when weighed against the expense of the conversion.

Let’s look at where the dollars are flowing. We are Web-based and pay  for our system at an annual cost of $14,000.  In addition, our information technology support person seems to have taken up almost permanent residency in our office, and I count his monthly check as a fixed expense. Still, there are positives to the experience.

The embedded billing system in the EHR is more efficient than my previous system, and we have been able to reduce staffing in the billing department by one full-time employee (who left to work for the EHR firm) at an annual savings of $30,000.

Additionally, we now have little use for dictation services and this brings an annual savings of around $9,000. In all, bonuses aside, the switch to the EHR probably will result in an annual $15,000 improvement in our bottom line.


Aside from the EHR, the economic climate has forced further change on us. One midlevel has left to work for a local hospital and this did present a challenge. We decided not to lay off any clinical staff, but rather to find ways to use them more effectively. This has worked quite well and allows me to see 30 patients per day and my remaining midlevel to see 25 patients, with two clinical support staff to each  do intake histories and reviews of systems,  as well as all the previously delegated duties of medication refills, etc.

Obviously, there has been a decline in productivity, but savings on the payroll side offsets this. Whether these changes will be positive or negative remains to be seen, but so far after 7 months we are seeing a positive trend.

Further analysis of the expense side revealed that we were losing money providing phlebotomy services. In order to limit this loss, we initially discontinued this service-with a net annual savings of $20,000-but found that to be a very unpopular solution with our patients. However, we made arrangements with a local lab to staff our office lab so long as patient volumes remained strong.  Thus we retained the savings without serious inconvenience to our patients. 

Our efforts to limit costs did not stop there. For example, we bundled our telephone service with our Internet provider and could potentially save $9,000 annually. In addition, we are reaping the rewards of renegotiating our hazardous waste disposal contract at an annual savings of $10,000.


We can’t continue to “cut the fat” forever, so we have made some initiatives on the revenue side. Our practice does a good deal of pain medicine and we perform drug screenings partially in- house with just the confirmation going to the reference lab. This returns between $100 and $180 for each test with a cost of $5 to $10 for materials plus minimal labor costs.  Net revenue for this service is about $15,000 a year. 

Our in-house pharmacy looks promising.  Revenue gains so far are not robust,  but we net a yearly profit of $5000 to $10,000  when combined with our efforts to provide patients with dietary supplements and vitamins.  One reason for the modest return lies in our commitment to provide medications at a cost that our rural patient base can afford. However, we are seeing solid growth potential with each passing month.


No doubt the future will throw to us more curve balls and challenges.  Still, we remain committed to improvement.  Each challenge seems to bring with it an opportunity to be better in some way and the trick seems to lie in being open minded and flexible enough to make it through.

In the final analysis, it has been a year of change not brought on by a desire for more, but a desire for survival.  Adapting to this brave new world has led me on a personal journey of discovery.  I have found that my reward comes in that 15-minute time spent with the patient. God put that inside of me and I seem to need that. Everything else is just business.

  The author specializes in general practice in Ridgeville, Indiana.


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Jennifer N. Lee, MD, FAAFP
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