As inflation, decreased reimbursement, rising labor costs, and staffing shortages hit physician practices, we are increasingly seeing physicians on our online physician communities ask about ways to keep their private practices sustainable amidst increasing overhead percentages. There are two big ways to do this: reduce practice overhead or increase practice revenue. This article focuses on decreasing overhead and cutting costs, and we have another article on increasing revenue within your private practice.
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How to address increasing overhead in your practice by reducing or cutting costs
This is a great time to look at where you are spending your money as a practice. When money is flowing freely, we all tend to put less thought into saying yes to an idea or something that can make our lives easier.
Some major expenses that all private practices tend to have are staffing (usually the largest), benefits, rent, and EMR and other technology, so many of our suggestions focus on related items, but make sure you sit down with your own practice expense statements and take a highlighter to all of the expenses you’re questioning.
Reevaluate your need for and/or renegotiate expensive services
Over the years, practices will bring on additional vendors and services to reflect a need that they have at the time, but then forget that they had signed up for them. Meanwhile, whoever cuts the checks in the practice keeps paying for them. For example, you may have paid a lot to a marketing company or a website company to get a service off the ground, but your needs may have shifted from more active engagement to maintenance.
Other times, the cost of certain services may have decreased over the years, but you may not have bothered to look for cheaper packages. This often happens with things like telecommunications services, security systems, and other services which technology has significantly advanced in.
Are your physicians and staff using the memberships, subscriptions, and other perks that you are paying for? Are you still paying for paper subscriptions of a journal that everyone in the group is looking up online? Are you using all the features that you paid extra for in things like your EMR, your HR training resources, CME tracking, etc.?
Did your new EMR bring in features that overlap with other services that you previously held subscriptions for?
Has the gig economy made it easier to find help for certain problems, thus eliminating the need to pay a retainer for a service that you use sparingly?
Finding alternative vendor options for cleaning services and lab services can also save a ton of money in aggregate for the practice.
Look at fees that you’re paying to accountants, consultants, marketing agencies, recruiters, lawyers, and more. Is your practice manager just paying the bills that are submitted, or are they auditing for correct billing, negotiating down rates instead of accepting automatic increases, or actively looking for other options if expenses seem higher than the norm?
Eliminate things or people that are not bringing in revenue
This could include staff, technology, inventory, or equipment that you’ve invested in hopes of developing out revenue streams. As business owners, private practice groups often identify opportunities for extra income streams or scale. Not all of these decisions pan out. Make sure you look at what the ROI is on that new ultrasound machine you bought but is sitting unused in a corner, that product you stocked but often have to throw out because of expiration, or that expensive hire you invested in to optimize operations, offer a new service, or otherwise who has been given time and resources but hasn’t been able to produce results that offset their salary.
When an employee leaves, are you automatically replacing them, or are you assessing whether their tasks can be completed by others? Do you have a checklist in place that has metrics for when new hiring makes sense?
Utilize virtual employees or fractional employees
The pandemic taught us that so much work that we thought needed to be done in person at the practice actually does not. Are there positions in your practice that don’t need to be done by an in-house employee that requires office space and/or benefits? Are there valuable roles in your practice like a social media manager or a prior authorization manager that are well worth spending money on specialized expertise, but whom you don’t need 40 hours a week from?
Consider using a virtual assistant, virtual employee, or fractional employee that also works for another practice in the same capacity.
Related PSG Perks:
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Edge Health provides college educated remote employees that work full time for your practice. They perform tasks such as primary or secondary phone support, billing, claims, insurance verifications, scribing, social media, and other tasks. To learn more about Edge's services and schedule a demo, and receive $500 off each of your first 3 months, connect through our affiliate link.
Examine your benefits package and make switches as necessary
Although all of us want our employees to have excellent benefits and this is an important part of employee retention, you will want to keep a close eye on expenses related to benefits packages, as these are a major expense. Look at your benefits packages and ensure that you are negotiating them with those vendors on a regular basis. See what aspects of the plan you’re spending the most on and if your employees are really using those benefits or if you need to change plans to better reflect the needs of the employees. Shop around and find other options to utilize as leverage, and make switches if necessary.
Reevaluate your marketing budget
This is a place where lots of practices spend money without examining the return on investment (ROI) because they just assume they have to have the best website package, buy the upgraded thicker t-shirts, or print out new business cards every year without seeing how many are left over from the previous year.
Remember that billboard that you thought was a great idea and that you’re paying thousands of dollars a month for? Do you have proof that it works? Examine the data on ROI.
Depending on your personality and preferences, social media could be a very cheap way to bring in new patients rather than paying that online listing service that takes a fee every time a patient books with you (regardless of whether they no show to the appointment). Could spending money on a successful social media campaign yield better results than taking out ads in the newspaper or sponsoring that community event?
Make sure you are supporting the efforts that are really converting and taking out the ones that don’t.
Learn more about marketing your private practice.
Decrease how much you are spending on credit card processing costs
Most physicians are shocked to see how much they pay in fees over the course of a year. Physician practices take a lot of payments between copays, deductibles, and co-insurance. While credit cards are convenient for patients, they can add up to very significant expenses for practices. Even reducing a fraction of a percentage point in fees can result in huge savings.
If you have substantial spend, call up your credit card processing company and see if you can negotiate down the fee. Many credit card processing companies can offer lower rates if you transact above a certain amount. For example, our partners at Square often offer lower processing fees for practices that have heavier volumes.
PSG Perk: PSG members get a hardware discount and an opportunity to explore lower processing fees with Square through our group affiliate link.
If that doesn’t work, look into alternative options for collecting payments. Some practices offer the ability for patients to Zelle their payments without any fees.
Consider bringing outsourced services in house
We mentioned outsourced services such as accountants, consultants, marketing agencies, recruiters, lawyers, billing services, and more. Run a proforma for how much it would cost to employ someone within the practice to do the same job, and consider whether they could do it as well.
An in-house COO could cost your group much less than having a consulting agency regularly run numbers for you, with the added benefit that they’d be in house 40 hours a week and exclusively focusing on your practice.
Having an in house billing team or laboratory service could also cut down on middleman fees - and if you get efficient enough at them, you could even scale them to outsource those services to other practices, thus creating another ancillary income stream for your own practice!
Related PSG Perk: We have partnered with Ulta Lab Tests to help physicians provide affordable and high-quality lab testing for their self-pay patients while improving revenue streams for their practice. Ulta Lab Tests offers access to 2,000+ tests and panels at wholesale prices, with testing available at over 2,100 patient service centers, through mobile phlebotomy, or via in-house specimen collection. As a perk to PSG members, they are giving away 50,000 free CMPs to offer your patients. Registration is free and there are no subscription fees or minimum orders, helping keep overhead costs low while providing added services to patients. Learn more and sign up through our PSG affiliate link. By charging a fixed consultation fee for reviewing lab results or offering patient consultations, you can generate additional revenue while maintaining patient care quality.
Consider outsourcing services you currently do in house
Similarly, run the numbers on how much it’s costing you to do things in house, especially if you are a small practice. Instead of paying for dedicated employees and their benefits package, it may make sense to outsource things like billing and coding and revenue cycle management or sending patients to the practice down the street for their imaging instead of maintaining a machine in house.
Related PSG Perk: Our partner Cosentus has been highly reviewed by several physician clients and has helped several of our physician members' private practices with their credentialing, billing and coding, revenue cycle management, and accounts receivable services. As part of a perk for PSG members, they offer a free professional billing and coding review as well as 5% off services through our affiliate link with the code PSG5OFF.
Join a group purchasing organization (GPO), accountable care organization (ACO), independent physician association (IPA), or management service organization (MSO)
Especially if you’re a smaller practice, it may make sense to group negotiate for your services through a larger umbrella organization. This can best be done by finding similar other practices such as yours and working together as one MSO. The practices do not need to be in the same specialty, but rather should have similar purchases of products and supplies. his approach has pros and cons, so definitely run the math and talk to a lawyer, but being part of a group like these could give you access to group negotiated contracts and discounts and perks. This could help reduce the cost of things like furniture, technology and EMR, and more.
Look for ways to reduce insurance costs
While everyone needs things like malpractice insurance, health insurance, and other business insurances, see if there are ways to reduce premiums by some ‘give me’ type discounts.
For example, with malpractice, you could be able to reduce your premiums by having your practice manager attend a seminar or by implementing audits or completing risk management surveys.
You could reduce health insurance costs by implementing wellness initiatives in your workplace. If you're a large enough group, you may want to look at self-insuring for your healthcare benefits.
You could also look into group discounts available through local and national medical societies.
Compare policy options with our insurance brokers for physicians.
Use technology to your advantage
Technology has opened up the possibility of doing things more efficiently and effectively, or at scale, which can allow you to cut down on some costs. For example, using an AI scribe to eliminate costly transcription services or scribing services could be a great idea. You could also use a tech enabled system to optimize patient scheduling and the patient experience including systems for reminders to schedule and call backs, as well as the ability to text with patients in between other workflow instead of having someone whose sole job is to answer the phone immediately. Offering patients easy online scheduling can reduce some front desk needs. Reducing the costs associated with paper by moving to electronic systems could also result in substantial savings. There are new tools coming out every day, so keep an eye on the market!
Related PSG Perk: We have a partnership with Abridge, founded by one of our physician members, where members can get 50% off AI scribing services, bringing the price down to only $99 dollars per month. You can try this free for one month without inputting payment information through our affiliate link with code PSG50, after which you will receive the 50% off price.
Manage inventory carefully
There have been several studies showing that there is a lot of waste in medical practices that can result from overordering or overstocking. This could be in regards to medical supplies, drugs, and other items that have a shelf life. Making sure that you don’t overstock inventory and have a good sense of how much is actually used on a monthly basis and ordering accordingly, finding vendors that can quickly supply you with materials if you do happen to need more, and shopping multiple vendors for the best prices or group discounts could help.
Conclusion
There’s a lot more, but you get the idea. It’s always easier to save money than make more money, so take a look at the cashflow out of the practice and make sure that your current strategies make sense.
Additional private practice resources for doctors
Explore related resources on PSG: