In June, the Medical Group Management Association released the results of a questionnaire that ranked members' most pressing practice-management challenges. In this edition of "Practice Makes Perfect," we'll tackle No. 3 on that list: dealing with rising operating costs.
Practice Makes Perfect: Diligence on costs can provide long-term gain
Physician practices that are feeling the crunch of rising operating costs and declining reimbursement need to examine all operating expenditures to determine the value they bring to the practice and whether they contribute to profits. Reviewing fixed costs can produce long-term gains while analyzing variable costs may quickly lower overhead. An organized, methodical analysis of every line item of an income statement or profit-loss statement, along with trend analysis (comparing last year's and last month's data to the present year's and month's data) will reveal the direction your practice needs to take to better manage costs.
When analyzing costs, consider the overall strategic plan of the organization. For example, establish expectations for staff production levels so that the tools and equipment necessary for them to complete their tasks efficiently and without frustration can be factored into the value-cost equation. The cheapest way is not always the most cost-effective method over the long term.
There are typically a number of areas in a practice's budgets where one can achieve savings. Some may pose greater challenges because of contracts or agreements, but even those areas can offer savings opportunities:
- Rent, lease or service agreements. Renegotiate all rental/lease agreements for space, especially if your lease agreement was negotiated before 2007. The market value of property has declined so much that significant savings can be gained over the long term. Renegotiate all equipment rental, lease and service agreements. Competition among equipment providers is more intense, as is competition among service companies. They might be willing to strike a deal to acquire or retain contracts.
- Inventory. Organize and label all storage areas for easy access and for determining inventory levels. Decide not only how many supplies can be kept on site, but how much of each item. Create an inventory purchase request system to control and approve all purchases. Establish a log that shows from where and in what volume purchases can be made and put one person or one person per department in charge of all purchases. Require all purchases to be prior approved on the log or have administrative approval before the controller pays the bill.
- Research and request bids for all purchases. Joining a group purchase organization may also help you reduce equipment and supply costs.
- Develop a master plan for IT growth and replacement. This plan should complement the practice's strategic plan. Consider the current and future needs, and create a replacement plan for equipment that is either obsolete now or will be soon. Make sure all equipment encourages optimum performance from staff. Research and adopt electronic solutions for challenges such as appointment reminders, claims submission, payment remittance, etc. Research cost-effective printing and scanning alternatives to maximize work flow and minimize costs.
- Use electronic storage. Update all forms and templates and store them in a shared file on a drive that can be accessed by everyone in the practice but not changed without permission. Store personnel handbooks, tests, policies, procedures, job expectations, regulatory information and other related paperwork electronically and securely. Store all patient registration forms on the practice website for easy access. Store payer contracts, reimbursement amounts, fee schedule information and billing policies in a shared file accessible only to staff members who require this information for their job duties. Assign a person or persons to keep all stored information current.
- Cost-effective staffing. Start with a very thorough hiring process. Background, reference and credit checks for employees who handle money are critical. Address bad behavior and/or job performance early, fairly and consistently. Create a sincere recognition program for going above and beyond and jobs well done. Minimize overtime for cost considerations and work/life balance for staff.
Donna KnappIndependent consultant MGMA Health Care Consulting Group Englewood, Colo.
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