Establish a policy for purchases over $1,000 in group practices

March 25, 2012

Group practices need to set limits on spending. Find out an effective way to achieve this and cut down on unnecessary costs.

A: A lack of equally shared discipline in spending is fairly common in group practices. Many physicians in group practices order supplies or equipment, authorize hiring, or approve other expenditures because they assume someone else is monitoring the overhead. The problem is that partners who own equal shares of a practice are equally responsible for the decisions made, but usually not more than equally responsible. It's an important distinction. Without a strong leader or managing partner, each doctor thinks someone else is in charge. Usually the practice manager is tasked with the responsibility, but it's easy to see why that's a problem.

Managers learn early in their careers that there is little advancement potential in telling a doctor "no" when he or she wants to order something, award a raise, or change vendors. If that doctor is one of the equal bosses, his word is law. What you need to do first is establish a mechanism for all expenditure authorizations over a certain amount-say $1,000-to be approved at the physician level.

Either way, a once-a-month meeting is usually enough for the manager or administrator to deal with such issues and be protected from the wrath of a partner who doesn't get his or her way.

Next, establish a mechanism that ties the cost of various items to the physicians who benefit from them. This mechanism involves fair allocation of fixed and variable overhead, which requires detailed instruction in and of itself. Suffice it to say, partners are almost never equal, and allocating the costs of doing business as if they are is a big mistake.

Answers to readers' questions were provided by Judy Bee, Practice Performance Group, La Jolla, California. She is an editorial consultant for Medical Economics. Send your practice management questions to medec@advanstar.comAlso engage at and