In dealing with rising operating expenses and deciding how to mitigate against large increases, evaluate costs in these areas:
According to the MGMA Cost Survey for Multispecialty Practices: 2014 Report Based on 2013 Data, multispecialty practices report spending a median of $8,090 per full-time-equivalent physician on administrative supplies and services. Administrative services include expenses such as postage, printing and subscriptions to magazines and other publications. One simple way to control costs in this category is to look at each individual expense to see how it is being used and determine if it is still an expense for which the practice should budget. Are staff members printing items that they could share electronically? Have staff contacted printing vendors recently for price comparisons? Are reminders being mailed to patients that could be sent via a patient portal or automated phone call? Does the practice have 15 different magazine subscriptions instead of just a few? I have worked with practices that often don't realize these expenses have crept up because they don't monitor them closely.
This category is typically broken down into two categories: medical and office. Practices can control both medical and office supply costs with some minor monitoring. Keeping an eye on what is ordered and how fast certain supplies are used is a great way to ensure that all supplies are used only for business purposes. It is a best practice to stock exam rooms at the end of each day with medical supplies needed for the next day but avoid overstocking.
These expenses include transcription, consulting and legal fees, and billing/collection fees. Often these are services that practices contract for and then file away. It's important to revisit these expenses on at least a yearly basis. For instance, transcription service costs may decrease once an electronic health record is implemented. Make a note if these costs remain high, or if there are still providers using transcription, and determine if there is a way to convert them to a system where they dictate directly into the EHR. Take the time to renegotiate or price-shop with billing/collection companies. Consider bringing those functions in-house if it makes more financial sense for the practice.
It's also important for practices to review staff expenses. It's vital to remember that cutting staff is not always the answer to solving financial concerns. Take a look at staffing numbers and make some observations and determinations. Is the practice fully staffed? Are patient wait times affected because there is not enough staff? Are staff members working to the top of their licensure and abilities? Compare your staffing numbers to national industry benchmarks using data such as findings from the MGMA cost survey report. Determine the ramifications of decreasing staff and think beyond the initial savings. Will cutting staff members affect the patient experience or the number of appointments a provider can accommodate?
Medical practice administrators and executives can manage practice operating costs by becoming aware of even the smallest of expenses. Too often, practices renew their magazine subscriptions or sign a lease extension without evaluating other options. Even incremental adjustments can result in substantial savings over time that can eventually be reinvested in the practice to help better serve patients.
Joan Hablutzel is an MGMA senior industry analyst.