This post was written by Gary H. Hoffman, MD, a colon and rectal surgeon with more than 35 years of experience in Beverly Hills, CA. Dr. Hoffman is the Clinical Chief of the Division of Colon and Rectal Surgery at Cedars Sinai Medical Center and a surgical instructor in the divisions of Colon and Rectal Surgery and General Surgery. Dr. Hoffman is board certified. You can learn more about him at lacolon.com.
Overhead is often the greatest cost on a medical office. In fact, according to surveys conducted by many research firms, internal medicine practices typically spend between 50 and 65 percent of their collections on overhead operating costs. Surgical practices, although somewhat less, are not far behind.
These are times of increasing overhead and fixed or declining reimbursements. Although you may have little control over contracted reimbursement rates, you can control costs somewhat. How you do it depends on your creativity and ability to think with originality and bravery.
Here are the 7 ways we cut our overhead in 2016.
Combined vendors where possible
In 2012, we were looking at our bills and saw that we were ordering huge volumes of copy paper from one vendor while ordering most of our other supplies from a different vendor. We immediately called the primary vendor and found that they sold the exact same type of paper at the same price as the paper vendor. They were willing to reduce our costs by 10% across the board if we would begin ordering paper along with our other supplies. We immediately cancelled our orders with the paper vendor. The actual dollar savings was large.
You may be surprised at how many of your vendors have overlapping products. Contact your vendor rep and see what deals they may have this month.
Held office meetings for suggestions to minimize waste
Not only did our staff have some great suggestions to minimize waste and spending, asking their opinion also gave them a buy-in. When staff has a role in creating the solution, they are much more likely to be committed to the outcome. Having everyone in the office on board is key to the execution of minimizing waste.
Start with inventory control. Take inventory of your materials -- including both medical and office supplies. You may want to keep only one or two items in each exam room or office, and store the rest in a supply closet or other location. This should help you keep track of inventory. Assigning specific staff members the duty of keeping supplies stocked to the optimum level is also important in ensuring accountability.
Welcome to the 21st Century. Our patients are online.
Although we spent additional money upfront to design lacolon.com to be user friendly, we discovered an added benefit. We built the latest features into our site. For example, all of our new patient forms can be submitted electronically and securely online. Voila! Our paper bill dropped quickly.
We also noticed that our overtime employee payroll dropped as the workflow was streamlined and employees are able to leave on time. Voila! Our payroll costs dropped.
As an added benefit, patients are usually seen at their appointment times. No more paper or forms to fill out in our waiting rooms (except for the few digital stragglers who insist on doing it the “old way”). Voila! Increased efficiencies.
Is your practice online? Is your website user friendly and gives patients multiple ways to get in touch with you? Do what you can to be accessible to the newest generation of patients.
Renegotiate supply contracts
It pays to take a look at our supply and services contracts every year, and price check against competitors. We renegotiate any contract we can, and consider all of the alternatives. Most medical offices still use medical supply companies to stock their shelves, although this is often the most expensive option.
Our office manager routinely assigns comparison shopping to one of the junior staff. These days, cost checking can be done relatively quickly thanks to the internet. There are two advantages to this approach. First, prices are held in check as each item is purchased at the best price. Secondly, believe it or not, the staff member who performs the check gets a real sense of accomplishment for having contributed to the overall health of the office.
Although painful (for our office manager), it is worth it to cross check individual supplies for prices from at least 3 vendors. It is painful, because it is time consuming, taking away from time spent doing other important tasks.
Powered down unnecessary devices.
Many people find it surprising to learn that the amount of power consumed by computers and other electronic devices is not insignificant. According to computer magazines, a computer uses between 20W and 30W when on but not in use. Monitors -- even when the screensaver is on -- use about 80W. Turn off your computers and monitors to save energy costs over the long run.
The U.S. Department of Energy takes it a step further. They recommend unplugging electronics when not in use, or using power strips that can be turned off. This is because computers, monitors, medical devices and even phone chargers consume electricity even when they are powered off.
Switched to generic products where appropriate
Many medical offices simply accept name brand products without question. But how much are you spending just so these companies can further afford to market their products? Generic consumables are often very similar in quality to name brands, so don’t be afraid to switch from your preferred brands and try out a cheaper product. Pens, paper and other office supplies are a good place to start. We also do not allow any vendors to buy lunch for our staff or otherwise fraternize with the staff unless approved by the office manager who has cleared this with a managing physician.
Bulk purchasing
Bulk purchasing cuts costs because you’re paying less per item for some of your most frequently used supplies. This is much easier for established medical offices or large practices, but not impossible for smaller offices.
Try negotiating a contract that allows you to order a bulk amount of supplies to be delivered over a longer duration of time. It is important to include a termination clause into these contracts, but many companies will allow you to order a year’s worth of supplies -- or even three year’s worth -- and spread out payments and delivery as necessary over that period.
Another option is to partner with other practices who may need some of the same supplies. As an example, buying vaccines at volume-discount prices saves medical offices an average of 25 to 35 percent. The same is true of many other medical supplies, medications and even office supplies.
Whatever you decide to do, always keep an eye on areas where you can save money. Within the last few years we’ve saved thousands just by paying attention to our overhead. You can as well with a hand from your office staff.