5 Recommendations for Physicians to Cut Operating Costs

Jonathan Burroughs, MD, an emergency physician and healthcare consultant at the Glen, N.H.-based Burroughs Healthcare Consulting Network believes practices around the country are missing out on opportunities that could cut their operating costs in half.

"Doctors spend 60 percent of their time doing non-revenue generating work through data entry and electronic medical records. From a business perspective, that is crazy. Why would you want high-cost professionals spending all of this time doing work that generates no revenue or cost savings to the organization?" says Burroughs.

At this year’s Medical Group Management Association (MGMA) Annual Conference in Anaheim, Calif., Burroughs is scheduled to present “Five Proven Ways for Physicians to Reduce Operating Costs.” His session is scheduled for Tuesday, October 10, from 1 to 2 p.m.

Physicians Practice spoke with Burroughs to learn more about his keys to saving practices money.

Physicians Practice: What will your presentation at MGMA focus on?     

Jonathan Burroughs: There's a significant need in the healthcare industry to cut costs. Everyone's looking for cost-cutting opportunities and sometimes the most obvious opportunities are staring us right in the face. I'm going to go through what I consider to be the five greatest opportunities for executives, doctors, and managers to cut operating costs across the board so that healthcare organizations can be competitive. This [cost cutting] has to happen without sacrificing-and if possible optimizing-quality of care.

PP:How significant is the need for cost cutting?

Burroughs: What people don't realize is the United States’ cost per capita are twice that of every other industrialized nation in the world. Americans spend on average $10,000 per-capita, where almost every other industrialized world spends anywhere from $2,500 to $6,000 per-capita. Frankly, we don't get the quality to justify the costs. The United States, whether it knows it or not, is in an international competition for cost-effective care. All of our healthcare organizations have to cut their costs and I personally feel, [it should be] by over 50 percent.

PP:Fifty percent seems really dubious, doesn't it?

Burroughs: We need to get into different business models to be able to [cut costs] effectively. We also need to change the way we incentivize healthcare providers and executives. Fifty percent is beyond the ken of most managers, who are typically looking at a 5 percent, 10 percent, or 15 percent cost reduction. That's not going to be enough for the long haul.

PP:What are the major opportunities for cost cutting?

Burroughs: Labor, cost reduction, non-labor supply chain cost reduction, alignment cost reductions from aligning contracts, process simplifications and redesign, and customer service. Those are the things that make up what I feel are your greatest opportunities for reducing significant costs. These ways are not always intuitively obvious to people. Particularly customer service. People will say, 'What does that have to do with operating cost?' It's the number one cause of legal costs, outcomes measured, and market share. When you look at those things combined, [customer service] has a huge impact on your margins.

Another opportunity that practices miss is aligning contracts. I bet you can count on a couple of hands the number of docs whose compensation arrangements say they have anything to do with operating costs. What's ironic about that is almost every manager or executive has operating cost as some component of their compensation plan. Physicians control 100 percent of operating revenue and over 80 percent of operating costs. Why you wouldn't want to align with them and management to work on operating costs beats me.

PP: Do these opportunities apply to all practice sizes and structures?

Burroughs: Any practice. Inpatient, outpatient, large, small, academic, and non-academic. All of these principles apply, regardless of what the care delivery system looks like.