Emerging practice models focus on lowering overhead

When Chrissie Ott, MD, left a multispeciality clinic and went out on her own in 2008, she knew she wanted to go small. Real small. So she slid right down the scale past "micro" to "nano."

Now it's her, two rooms, and a teapot, and she couldn't be happier.

Overhead is a concern of every medical operation-from the largest hospital system to solo practices. And every practitioner, practice manager, and bookkeeper who's examined the monthly accounts has had the same thought: "There has to be some way to reduce costs."

And there almost always is. Lowering overhead sometimes means making changes within the existing framework of a practice, and sometimes it's more radical, like Ott's move. Whether it's a micropractice, a cash-only practice, a housecall-only practice, or a traditional setup, however, overhead can be shrunk, but it never will disappear.

In a time of declining reimbursements and rising costs, the temptation to cut, cut, and then cut some more is powerful. In fact, reducing overhead should be done carefully because trimming too much or trimming the wrong things can be counterproductive.

In fact, although practice consultants target waste and inefficiency, that's not the first place they look to increase a practice's bottom line. Doctors tend to blame overhead for a poor bottom line when the problems are more likely to be inefficiency or poor coding, says Borglum, a Medical Economics editorial consultant.

"Most practices are underprofitable rather than overexpensed," he says. "They're dealing with the symptoms rather than the cause. They may not be adequately trained to do so."

In addition, most major overhead expenses can't be quickly or easily cut. The lease dictates rent, insurers set the malpractice insurance premiums, and staff members expect to be paid.

But a smart practitioner or manager can find ways to shrink overhead.