Medical Practice Cost-Cutting Strategies

How can physicians' practices make more money? That’s a key question attendees at the recent MGMA12 conference in San Antonio wanted answered during a session entitled, “Overhead and Cost Reduction Strategies.”

The packed room received some no-nonsense guidance from Daniel Friend, the sole presenter and a practice administrator who created a cost-savings spreadsheet for his surgical group, which he has since shared with numerous other medical groups and physician organizations.

“Just because you’ve been doing something for a long time doesn’t necessarily mean you’re doing it well,” he told attendees. Ask yourself, “What are you doing, [and] is it getting value for you?”

The spreadsheet includes a variety of cost-cutting measures from large items, such as downsizing staff, to smaller items, such as eliminating meals at physician meetings. It also includes revenue-boosting ideas such as adding new ancillary services and renegotiating payer contracts. “If you can go to the insurance company and get 1 percent more, that pays over the long term,” said Friend.
 
While you may have already considered many of the ideas included in the spreadsheet, it stands out as a valuable tool because it allows users to more easily identify, track, and monitor any revenue enhancement and cost containment strategies they decide to implement. “Use [this spreadsheet] for investigating the opportunities,” Friend told attendees.

Here’s how the tool works:

The first tab of the spreadsheet is broken down into three categories: Tier 1, Tier 2, and Tier 3.

Tier 1 includes cost-cutting and revenue-boosting measures that could result in savings of up to 1 percent. These items range from reducing contact with attorneys, consultants, and accountants to restricting website changes and reviewing energy purchasing.

Tier 2 includes measures that could result in savings between 1 percent and 4 percent. It includes items such as freezing capital expenses, reducing marketing expenses, instituting a hiring freeze, eliminating overtime, and reducing employee benefits.

Tier 3 includes measures that could result in savings of 5 percent and higher. It includes items such as refinancing existing loans, employee layoffs or salary freezes, and eliminating 401K matching for staff and physicians.

Essentially, the items found in the various tiers represent options for your practice to consider. The idea is to pick the measures that are most applicable to it. You can, of course, add your own ideas to the spreadsheet.

Once you determine what measures to institute at your practice, fill in the accompanying columns. For instance, determine the potential savings a particular measure offers and enter that amount in the “Savings Potential” column. The purple row at the end of bottom of each Tier (for instance: the “Total Tier 1” row), will automatically update to reflect the total potential cost savings you could experience as a result of each of the measures you choose to institute.

As you begin making changes, fill in your progress in the “Progress Status” column. Enter any notes or specific considerations in the “Considerations” column (replace Friend’s comments with your own). Also, enter a date in the “Follow-up Date” column so that you remember to routinely monitor and assess progress.

**Note: The spreadsheet also includes “case studies” in tabs located to the right of the cost-savings spreadsheet tab. These case studies are real examples used for the specific cost-saving measure noted in Row 30 and Row 64 in the first tab of the spreadsheet. These case studies also act as broad examples of how to conduct a case study to assess potential savings as a result of instituting certain cost-cutting or revenue-boosting measures (for instance, outsourcing medical record requests).**

What cost-saving or revenue-boosting measures have worked for your practice?