Jarrod Shapiro, DPM
Practice Perfect Editor
Assistant Professor,
Dept. of Podiatric Medicine,
Surgery & Biomechanics
College of Podiatric Medicine
Western University of
Health Sciences,
St, Pomona, CA

Decreasing the Costs of Practice
by Optimizing Controllables

It's becoming ever more difficult to practice medicine and still make a reasonable profit in today's environment, and the long term survival of the sole proprietor practice is anyone's guess. According to the Medical Group Practice Association (MGMA), the costs of doing business for physicians have increased 52% since 2001.¹ How is it possible for physicians to stay in practice today? It's no wonder so many younger physicians are opting to work for large group and healthcare organizations like Kaiser Permanente. Practicing as an employee of a larger organization has its benefits (principally in blunting the financial practice costs), but what other methods are currently available to physicians who wish to remain in practice?

The first step to decreasing costs of any business, including a medical practice, is to ask what are the "controllable" and "uncontrollable" costs. Controllable costs are those expenses in which the businessman has a high level of influence. For example, staff costs is one of the most significant controllables. This is in contradistinction to those uncontrollable costs such as the cost of electricity. Of course, if you consider it carefully, almost all uncontrollable costs are actually controllable to some extent. For example, you might install automatic light switches in your exam rooms that turn off after a set time, thereby decreasing your energy expenses. This is good considering the fact that the one thing physicians seem to have little control over is declining reimbursement rate.

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So, what are a few ways in which to improve the bottom line and increase your practice's chance of survival?

Part Time Employees

Part time employees are generally cheaper than full time ones, principally because of lower wages and avoiding paying for benefits such as healthcare. In this economy, it should be quite easy for most medical practices to hire reasonably well qualified individuals. However, the downside is a potential lack of commitment to the practice and generally greater transience of workers. This will likely require multiple retraining episodes for new staff that, in itself, is a draw on your time and money. One way to minimize the damage is to create a standard training method that eliminates the physician from the process. Additionally, consider cross-training your staff to perform all office functions (both back and front office). This will mitigate the office flow disturbances if one of your staff quits while allowing the experienced staff to train any new employees.

Create Protocols for Greater Efficiency

Along the same vein, consider utilizing protocols for all of your most common pathologies and procedures. This will increase patient care efficiency, allowing you to see more patients in the same time period. Additionally, protocols will allow you to better track the supplies you use. For example, let's take one of your postop patients. Your staff knows to take radiographs before you see the patient (you're seeing two other patients while they're radiographing, rooming, and taking vitals on your postop patient). Once you've seen the patient, you walk out and your staff enters, dresses the foot with your standardized dressing method (no wasting extra dressing supplies, the expenses of which you are able to track) and dispenses a fracture boot. All the while, you're on to seeing more patients.

Do What You Do Best and Outsource the Rest

Consider that your best asset is likely yourself. You've spent many years training to become a physician, and time with patients is usually the best use of your time. Consider outsourcing those parts of the practice in which you have either less training or less inclination. For example, accounting may not be your strong suit. You may be better served having an outside accountant run your numbers. In this way, you can focus on building volume and maximizing practice efficiency and patient care. Similarly, you may be too busy to keep current with all of the billing and coding changes. This might be another place in which to outsource. Keep in mind, though, you should take some time to keep close track of the money flow in your practice. Periodically audit any consultants you employ. The last thing you want is a surprise Medicare audit because your billing company made errors.

Additionally, you should periodically compare the cost of your consultants with the money they're saving. If you cannot see a clear cost savings to using the outsourced service, then you need to either renegotiate or end the relationship.

Go Used

What's the point in buying a $5000 Midmark chair if you can buy a used one at 2/3rd the cost? When I was in practice in Oregon, I was able to find two reasonably priced professionally upholstered chairs for the price of one. It takes a little shopping around, but it's well worth the effort. The same is true for most medical office equipment. Beware, though, used equipment might not come with a warranty. If the item breaks, you may be on the hook for repair costs.

Examine Your Practice with a Jaundiced Eye

Take a step back and analyze your practice with a critical eye. Is your practice running as efficiently as it could? Is it possible to run a more lean, efficient, and profitable practice? Create for yourself some standard self-auditing method that you can use periodically to assess your practice's cost effectiveness. Be sure to include business and patient reports so you can compare this data over time. The caveat to this is to avoid becoming cheap. Frugality is a useful trait until it becomes miserly. Consider comparing your practice with that of a trusted colleague or a national benchmark by companies such as the MGMA. This will provide some perspective.

Whether the sole provider practice survives the near future of health care reform is anyone's guess. However, by focusing on controllable items, efficiency is optimized and should translate to greater profitability and practice survival. What methods do you employ to decrease the costs of practice? Write in with your comments.