March 8, 2021

Small-Business Guide: Medical Practices Keep Eye on the Business Side

“Overhead continues to go up, but your ability to raise prices is very limited,” said Dr. J. Fred Ralston Jr., past president of the American College of Physicians and an internist with Fayetteville Medical Associates, a group practice in Tennessee that recently marked its 100th anniversary. “Never in that time — which included the 1918 flu epidemic, two world wars and at least one depression — have we been as challenged as we are now in the changing world of health care.”

Given fixed Medicare payments and non-negotiable managed care contracts, it is difficult to move the dial on revenue. So physicians looking to maintain profits often turn to controlling costs. Based on interviews with business-minded doctors, a medical practice can become a cost-efficient machine if managers control human resource expenses, spread out fixed costs as much as possible, exploit information technology and carefully track business metrics.

LIMIT STAFF COSTS “Personnel is clearly the biggest place you can save,” said Dr. Jack Flyer, a physician with CardioCare L.L.C. in Chevy Chase, Md. In two years, the practice of 10 cardiologists cut its support staff in half, to 20 workers, by cross-training employees and working more efficiently. At the same time, patient encounters actually climbed 20 percent.

“The days of having multiple medical assistants help you with every task is over. I do almost everything myself,” said Dr. Flyer, who prescribes and takes notes electronically and greets his waiting patients before personally escorting them to an examination room.

When the practice’s echocardiographers or nuclear technologists are done with their technical duties, they phone patients with reminders or to set up appointments. This also pays off when a staff member calls in sick or takes vacation. “We don’t have to hire a temp to be a medical assistant or secretary,” he said. “We can just take one of our billers or medical records people and slide them into a different position. Everyone in the office has a list of things to do if they’re not busy doing their primary job.”

Some medical practices rely heavily on part-time personnel to avoid paying benefits. But Dr. Ralston advised against getting too cheap with loyal employees whose expertise enables doctors to do their jobs. “We have low office turnover,” he said, “and we really feel that is helpful in running an office efficiently.”

SPREAD OUT FIXED EXPENSES Another quick fix for bloated budgets is to stretch your fixed costs across more physicians or expanded office hours. Practices with multiple doctors enjoy efficiencies that solo practitioners cannot obtain, as well as greater power in negotiating discounts with insurance companies, paper suppliers, vaccine makers and even credit card processors.

At Hopewell Dental Care outside Columbus, Ohio, for instance, the four partners see patients most evenings until 7 p.m. and on Saturdays, to spread the cost of office space over as much time as possible. “We make the most out of our physical building,” said Dr. Steve Krendl. “Compared with the single practitioner who’s only able to use his building clinically 36 hours a week, we’re using it 60 hours.”

The practice recently purchased equipment to mill crowns while patients wait, which cut costs to about $45 for materials, not including staff time; the nonmaterials cost to mill a crown off site had been $190. The $150,000 price tag for the equipment is affordable because it is spread over four dentists. “Once that equipment is paid for, that’s a pretty dramatic financial benefit for us and the patient as well, if they don’t have to come back a second time,” Dr. Krendl said.

Big is better for Shady Grove Fertility, one of the largest fertility practices in the United States, with 13 locations around the Washington-Baltimore area, more than 400 employees and 24 physicians. “The administration is more centralized, and you’re spreading it over a larger base,” said Mark Segal, the practice’s chief executive. “You’re able to get volume purchasing discounts on supplies. That makes it very difficult for a small, one- or two-physician practice to compete. We’re seeing more and more practices consolidating.”

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