Practice Makes Perfect: Curb cost increases by examining expenses

Last June, MGMA-ACMPE 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. 4 on that list: Dealing with rising operating costs.

According to the MGMA Cost Survey report, costs for multispecialty, not-hospital owned medical practices increased 64% since 2001. This drastic increase has forced practices to carefully examine their businesses and evaluate ways to do more with less. To help curb the effects of cost increases, here are a few items to examine for potential savings to your practice.

Space costs are one of the highest fixed expenses on the general ledger. The chosen location must be efficient and aesthetically pleasing for patient flow, ergonomically comfortable for staff, operationally effective for the physicians and large enough to accommodate necessary medical equipment and ancillary office equipment. Hourly patient volume will define your necessary lobby size, the check-in and checkout structure and the space required for the appropriate number of exam rooms.

Based on my experiences, there seems to be an oversupply of commercial space available nationally and the competition to procure renters is fierce. Research the local commercial property market for the going rate in your preferred location. A long-term lease at current low rates will have a positive effect on the bottom line.

There also are opportunities for lowering the cost of your office space or renegotiating your rent or lease terms. I've also seen landlords make deals to keep current tenants and acquire new tenants for their empty space. Even if the term of the current lease is not near expiration, experience has shown that initiating the conversation now may be beneficial.

Managing facility maintenance costs in your practice may also yield a significant cost savings. One way to do this is to take care of your facility with regular maintenance. Perform monthly building inspections to look for potential issues. Fix trouble spots as soon as possible—before they become a more costly problem. Another way to evaluate your costs for potential savings is to seek bids for cost-effective and efficient utilities, if allowed by your lease to do so. Make sure to take care of office equipment that has the potential to use a lot of power. There may be power-saving modes that can be turned on.

Overall, attention to the maintenance needs of your facility can prevent costly repairs for larger problems.

Arrange staff within the space for efficiency and production flow. When the opportunity for a new space presents itself, visualize the optimum staff arrangement for practice efficiencies without the confinement of walls. Inventory all desks and chairs and budget for furniture upgrades until the right numbers are achieved for the right function. And consider uniform aesthetics from the whole practice point of view for trading furniture when needed for cross use and efficiency changes. Ensure that the space has adequate supply storage for those practice items common to all positions, such as IT equipment, office and medical supplies and kitchen needs. This should be centrally or easily accessible by all staff. Understanding the work flow for your supplies, equipment and staff will provide opportunities for potential cost savings in the long run.

As costs continue to rise for medical practices, spend time evaluating and understanding the items that have an overall impact. This understanding and re-examination of costs can help you save money that can be reallocated for other purposes.

Donna Knapp