Viewpoint: When cutting expenses, look at staffing first

May 22, 2009

All members of your staff should have rewards for meeting expectations as well as consequences for falling short.

In today's climate, increasing revenue is hardly an option. Can you increase volume? If so, then do it and market it, but don't be surprised if you've compromised the quality of your care in the process.

So what do we have left? Cut expenses. Every other call we get in our office is "My overhead is too high. I can't make any money. I'm going broke. What can I do?"

Without these three documents, you can't run your practice. It is not acceptable any longer to guess or not know.

This scenario put you over your benchmark by $60,000.

And now for the most critical tip: Hold everyone accountable for getting the expected results and meeting the benchmarks-including your advisers. All members of your staff should have rewards for meeting expectations, as well as consequences for falling short. If you decide to pay a bonus, never base that bonus on total revenue or sales; base it on net profit. More sales don't always mean more profit.

In this new age of healthcare, we can no longer be only revenue-minded. Of course, any of these sample numbers could differ from practice to practice. Any of these numbers could be argued. I respect that, but the concept is valid. If you can increase revenue or care for a greater volume of patients, you should probably do it. But we are in an age when overhead must be controlled.

I recently saw a practice that had no profit and no owner compensation. There was one doctor, eight staff (full-time equivalents), one receptionist, one biller, one lab technician, and five nurses.

After one hour, I asked the doctor why he had five nurses. He responded that he needed five nurses around at all times (he really needed 1.5 nurses). His entire budget-the 20 percent allocated for staff salaries-was absorbed by just three of those nurses.

After spending the day with the doctor, it was obvious what the major problem was. It also became apparent during our meeting that he wasn't going to listen or take action. I cut my trip short and came home, but explained to him the importance of getting an adviser he would listen to. Today, that practice is in reorganization. The doctor still has no advisers, but he does have a bankruptcy judge. Which is not a good way to cut expenses.

The author is president of Health Care Economics LLC in Indianapolis and a consultant for Medical Economics. Send your feedback to meletters@advanstar.com
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