Cost Control

Debbie Preite knows all too well the importance of keeping overhead costs low.

As office manager of Greenhouse Internists in Philadelphia, her primary-care practice receives a fixed monthly reimbursement from third-party payers regardless of how many patients walk through the door, leaving little room to boost revenue in a rising cost environment.

At the same time, her practice incurs higher staffing expenses than most because of its extended hours - treating patients from 7 a.m. to 7 p.m. on Monday and Tuesday, from 7 a.m. to 8 p.m. on Wednesday and Thursday, from 7 a.m. to 6 p.m. on Friday, and every Saturday morning.

“Because we’re open such long days we really require two full-time staffs, one that arrives in the morning and the other that comes in to overlap during lunch and close,” says Preite. “It doesn’t make sense to close for lunch and leave at 5 p.m. or we’d never grow. We just have to be very tight about our budget and very practical about overhead costs.”

Her weapon of choice in the war against rising expenses? The Internet. “When I first got here nine years ago people were really stuck in a pattern of ‘we always do it this way.’ Why? Times have changed. With the Internet it’s so easy to get the best price that it’s worth the time it takes to comparison shop. I won’t buy a battery without going online to get the best price,” she says.

Medical practices have long explored ways to keep overhead down, of course, but Cindy Dunn, a consultant for MGMA Healthcare Consulting Group, says practices these days are redoubling efforts to operate lean amid the economic collapse. “I think managers and administrators are paying more attention to cost control these days,” she says. “They don’t always know what pieces to pay more attention to, but they are paying attention.”

First stop

Perhaps the biggest opportunities to save stem from vendor and supplier fees. If you haven’t done so in the last year, start shopping around for lower health insurance premiums, bundled phone and Internet service, laundry and cleaning services - even bookkeeping and accounting costs. Indeed, says Dunn, this is where the lackluster economy can work to your advantage. “Some of your contracts are longer term and may be difficult to break, but it’s not unheard of to let your landlord know your lease is nearly up and you’re going to be looking,” says Dunn. “Look at all your contracts to find out when they’re up for things like copiers, printers and fax machines. Keep a spreadsheet and start talking to your network of peers to find out who they use and what they pay.”

Check, too, with your professional association or trade group to find out if there are any purchasing cooperatives available, which offer group discounts on office and medical supplies. The American Academy of Orthopaedic Surgeons, for example, offers its purchasing group free to members and estimates it can save most practices 15 percent or more.

Above all, says Preite, don’t be afraid to play hardball. “There’s a lot of competition out there now and you have to take advantage of it,” she says. “We won’t buy a flu vaccine until we shop around and get the best price. I’ll get one company to give me their price, then I call up their competitor and say, ‘I’m getting it for $12. What can you do for me?’ They’ll give it to me for $11 and then I call back the first company, which lowers their price to $10. You have to wheel and deal a little, but it works. And you only have to do it once. Once you’ve got that price it’s locked in.”

No stone unturned

Less obvious opportunities for savings abound and collectively they can help insulate your practice against rising costs.

For her part, Susan Miller, RN, FACMPE, administrator for Family Practice Associates of Lexington, Ky., says her office eliminated the cost of maintaining several storage facilities by destroying old charts, and began offering employees the choice of a high deductible health plan with a tax-advantaged health savings account (HSA), which saves everyone money.

Preite says she stopped paying high school kids to shred paper documents when she found out a recycling service will come to her office, shred the paperwork on site, and haul it away for less. She also switched from bottled water to a filter that taps into their regular water line, which saves her practice $120 a month. And she installed a programmable thermostat to lower the heat and air conditioning after hours to conserve energy. According to ENERGY STAR, a joint program of the Environmental Protection Agency and Energy Department, the most energy-efficient organizations in America use about 30 percent less energy than their competitors. For-profit medical offices, it reports, can boost earnings per share by a penny by reducing energy costs just 5 percent, it reports. “You have to be willing to change and look where you didn’t look before,” says Preite. “It all adds up.”

Short-term gain, long-term loss

For most practices, of course, staff payroll ranks among the highest overhead expense. When times are tight, it’s tempting to freeze salaries, postpone new hires, or slash your training budget in the interest of short-term savings, but that’s a mistake, says Dunn. “This is the time to make sure you have the strongest practice you can have,” she says. “When patient volume is down, that’s a prime opportunity to do patient satisfaction surveys or survey your referring doctors to make your practice what you want it to be. Your people need to be prepared for when things get busy again and it will get busy again.”

Miller agrees. “We really don’t see cutting staff or salaries as a viable solution,” she says. “We still have as much work to do as we always have and we still have to hold up to the same standard of care, which is even more important now.”

Instead, work smarter. Review your staffing schedule to be sure you’re using your employees cost effectively, with most in their seats during the busiest parts of the day. Be sure to cross-train your staff to perform multiple job functions, which reduces the need to hire temporary help when you find yourself shorthanded. And scrutinize overtime costs particularly hard. If you’re paying someone time-and-a-half too often, it may be cheaper to hire another full-time employee. Conversely, if you’re able to make do with fewer man-hours, you might consider asking your staff if anyone wants to work a shorter week - say Fridays off. Those with kids might jump at the chance, saving your office a bundle.

Rather than looking to layoffs when workload is down, Miller says practices should use all available down time to boost patient volume by putting out calls for routine appointments. “For the first time ever, we have information through our EHR about our patients, their disease state, and health prevention needs at our fingertips and we take advantage of it,” she says. “For example, we can pull out all our patients who are women and over age 60 who haven’t had a bone density test during the last two years and we have our staff send out reminder mailers. Or, when one of those patients comes in for an unrelated issue, like a sinus infection, we can run her chart and determine that she’s overdue for a bone density test and schedule an appointment for her right there.”

There’s one other way your staff can assist in your cost-cutting campaign as well. “You have to partner with your employees, share any economic concerns you have and ask for their help,” says Dunn. “A lot of times they know of ways money can be saved on supplies, but don’t say anything because they feel their input is not valued.” Be sure to recognize those workers who bring good ideas to the table by praising them in front of their peers. Better yet, give them a much-deserved day off, showing them they’re an important part of the team.

After all, cost control initiatives aren’t just about profit. “We want to be generous with our staff and we can’t do that with a large overhead,” says Preite. “We like to treat them well and keep our employees happy so that’s really our focus.”

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for 12 years. Her work has appeared on CNNMoney.com, Bankrate.com, and Healthy Family magazine. She can be reached via physicianspractice@cmpmedica.com.

This article originally appeared in the July/August 2009 issue of Physicians Practice.