In earlier posts, I discussed pressures on private practice, such as rising compliance costs, fewer younger doctors entering the profession, and larger, hospital-based health systems flourishing. The most important pressure (which comes by way of government mandate) I believe is the productivity loss of using an EMR.
Through anecdotal research and observation, this productivity loss appears to be as much as 10 to 15 percent. In this post I’ll attempt to outline my company’s, (MedExec Executive Management Corporation and Affiliated Companies “MedExec”) unique approach to these pressures. Regardless of the practice type, there are three general strategies that small physician practices can use to increase profitability and productivity.
A Little Background
First, it might make sense to give you a little background about MedExec. MedExec began roughly 33 years ago to provide consulting services to medical practices. In the initial stages of our business, we were planning on evaluation and recommendation as the primary products we would deliver. Soon, it became apparent that services to implement our recommendations were also needed.
Little did we know that implementation would get us involved in so many innovative projects such as real estate, surgery centers, and skilled nursing facility development. We had found a way to not just inform but to seriously impact the future profitability of our clients.
I once had a business consultant ask me if I were in an elevator with the person who I really wanted to deliver my company’s message to, and only one floor to explain it… what would I say? I gave a lot of thought to that question. And the best I came up with was that MedExec’s tagline would be “keeping private practice profitable.” But this is especially tricky when it comes to primary care.
General Strategy One: Make Your Data Work For You
In working with primary care, you have to be more resourceful. We found a common problem to be a lack of accurate and useful accounting and productivity data. Think about the service you get from your CPA; you should be receiving the added benefit of medical business consultants (essentially fulfilling the role of an outsourced CFO) in addition to your basic accounting.
This is one way to achieve cost efficiencies for PCPs. When the people putting together your financial statement numbers are working to also analyze the rest of your practice data, you and your consultants can better spot opportunities for cost savings, growth, and profitability.
So there you have it. One basic strategy for added efficiency is to get the financial statement data and analysis support from one source. The plan would be for you to receive this additional support for the same price as just a compiled financial statement.
General Strategy Two: Targeted Expense Control – the Reality
What’s also common to all types of medical practices is thinking differently about what costs have the most impact on the practice’s financial outlook and how to make changes to control them. Targeted expense control is the ability to look at a medical practice’s expense line items differently and ask questions about why are things the way they are.
Someone needs to mind the store and make good decisions, as it were. Good decisions tend to be those that start from scratch and not because “that’s how it’s always been done.”
The four largest cost categories are typically staffing costs, medical office space lease, insurances of all types, and medical supplies. These costs typically represent roughly 80 percent of general overhead (other than expenses directly attributable to a provider).
We see too many times that a manager will focus on the wrong thing (subscriptions, internet or cable cost, etc.) or “the 20 percent”.
With a lot of effort they might get a 10 percent improvement, but that is still just 2 percent better. Target the big four in unique ways , ask the big, consultant-level questions, like Can you band together with a competitor and get per physician staff FTE numbers down? for example. Maybe joining a PEO will save on insurance.
What about joining a purchasing co-op for supplies? Or, consider combining with other groups (either with or without a merger) to create a real estate project and pay yourself the rent. One advantage of working with a consultant who works strictly in the medical community is the connections that person can see that would be useful to band physicians and physician groups together.
For example, we began looking at the stream of rental payments as something that could build a real estate asset. This can work if there are a sufficient number of physicians or physician groups that could join together.
In a later post I’ll discuss two examples: a large, physician-owned and occupied medical office campus (with a purpose); and a “Super” Skilled Nursing Facility that is also partially physician-owned but NOT occupied i.e. this is a business unrelated to our client’s primary practices in any direct way.
General Strategy Three: Listen to your Staff
One of the dirty little secrets of medical consulting is so simple I sometimes can’t believe it is such a blind spot for physicians. The one thing I cannot stress enough for physician owners is to listen to your staff. Let me give you an example. About 20 years ago, I was working with a primary care practice that had three providers and ten staff members. Most of the staff didn’t know what the Office Administrator did, except delegate most of her work to others and get paid three to four times more than the Medical Assistants.
(and yes even given your best efforts somehow everyone knows what others are paid, sorry to burst that bubble) Understandably, this caused resentment among the staff and discord in the office. I was brought in when the physicians planned to fire and replace this person. I asked to talk to the staff first; simple, right? While we did end up letting this person go, we decided not to replace the position. Instead, I took on some of the consulting work, and delegated some of the HR and accounts payable duties to other staff members.
We increased their compensation because they’d be doing more work – which they were fine with. One of the back-office coordinators became a part-time office manager, and we saved this medical practice in excess of $100,000 annually. Plus, the remaining staff were happier and more motivated. All because I essentially told the doctors what the staff already knew.
Like I said: simple. What other measures have you taken to save on costs or take advantage of revenue-generating opportunities? In the next series of posts, we’re going to talk about ancillary revenue options, real estate as a revenue generator, and the two examples I mentioned above, the medical campus and skilled nursing facility. I look forward to your comments at sean@medexec.com.
