Practices everywhere are being squeezed by the faltering economy and the need to provide top dollar for top-notch physicians. At the same time, overhead costs seem to be climbing higher and higher. So what’s the answer to this dilemma? It’s simple: Do all you can to contain your practice’s costs.
Compare prices and negotiate
Practices generally spend more than necessary on office and medical supplies. Instead of simply reordering supplies from your regular vendor, go online and shop prices with various suppliers. It’s also wise to investigate buying groups. They can often provide bountiful cost savings. Finally, make sure you negotiate prices for even the most mundane products. After all, small savings on individual items can add up.
To avoid wasteful duplication of orders, assign one person in your office to be responsible for comparing prices, negotiating discounts with vendors and ordering supplies. In addition, make it a practice to check every invoice for any service charges or late fees and ask that they be removed from your bill. Negotiate everything. And end every vendor conversation by asking, “Is this the best you can do?”
What about prescriptions? If your practice relies on a nearby pharmacy in a pinch, it’s time to stop. You can be sure that the pharmacy has already paid the wholesale price and then added a markup or a service charge. So plan ahead and order from a wholesaler with which you have negotiated fixed pricing.
Obviously, you’ll find the most significant cost savings in high-expense areas. To uncover these higher dollar expenses, review your financial statements for large line items, and then check the accounting system ledger for detail on those expenses. Look for areas of opportunity and negotiate savings or see if you can eliminate the expense.
Look at staffing
Salaries likely make up your highest overhead expense. One of the best ways to reduce those costs is to review the practice’s overtime expenses.
Make sure that all overtime is preapproved by an office manager or physician. Allow only necessary staff to work more than 40 hours per week, and limit overtime by staggering staff hours. Consider rearranging schedules so that some staff arrive an hour later than others and then stay an hour later.
If your practice stays open more than 81/2 hours each day, you can cut staff expenses by scheduling some staff to work four 10-hour days rather than incurring overtime. Work with a labor law attorney to ensure your practice isn’t violating any employment laws.
Also review staff salaries. Ask your office manager to develop a spreadsheet that lists all employees and each one’s job title, start date, date of last raise and current salary (hourly rate). Consult this list before increasing salaries or hiring additional staff.
Another way to save money is to use part-time staff. Doing so will help the practice save on benefits costs.
Re-evaluate health insurance
Speaking of benefits costs: As you know, health insurance constitutes a huge chunk of your practice’s monthly expenses. If you haven’t recently reviewed optional increases in deductibles and copayments, take the time to obtain bids from multiple insurers with multiple coverage options.
Most practices pass some of the cost of health insurance premiums to their staff. You can do this rather painlessly by setting up a Flexible Spending Account (FSA) plan or, if you offer a high-deductible health plan, a Health Savings Account (HSA) plan for your employees. There are alternatives to group coverage that could be explored and have produced substantial savings for our clients.
Make it count
As the economy continues to limp along, it’s critical that your physician practice remain lean and mean. This requires evaluating every expense, whether it be equipment purchases, staff raises or insurance coverage. It also means taking advantage of certain tax breaks, such as bonus depreciation and Section 179 expensing. Our firm can provide the assistance you need to help keep your expenses down and your revenue high.
For more information contact Darrin Spitzer at [email protected].