Manage staffing needs and inefficiencies
Employee costs are the largest expense family medicine practices have to endure. It is also the first place you should look when determining where to cut costs. Staff salaries can account for up to 25% of practice revenues, and if your payroll is higher than that or if you’re overpaying your employees, you will need to reevaluate your staffing needs. Unfortunately this may involve cutting back on raises and hiring new staff members, proposing demotions, and other unfavorable actions.
You will need to make the tough decision and figure out where there are operational inefficiencies, if responsibilities have been delegated to the best employee for the job, and if certain tasks are worth your staff’s time and effort. You will also need to look at your staff’s workload. Can some staff members take on additional work? Can you convert a full time job into a part-time position? Is it possible to combine tasks that will save time, money or staff members? These are questions you will need to ask when assessing your staffing needs.
Choose your vendors wisely
One of the beautiful parts about owning your own practice or being a partner in a group practice is that you get to decide who your vendors are. With that being said, choose your vendors wisely if you want to save money in the long run. Don’t feel pressured into choosing a name brand vendor that has a lot of street cred. While they may be the best in the business and provide quality service, they can charge you an arm and a leg for services and supplies that can be easily obtained elsewhere. As the buyer, you need to make purchases that are in the best interest of your practice. So before you sign any contracts, you must comparison shop.
However, if you are satisfied with your current vendors, don’t renew a contract or lease without researching other options. Marketplaces can change dramatically over a short period of time. What may have been a reasonable price three years ago may seem unacceptable today. Discounts, features, services and warranties change as well. Try getting proposals from your top three vendors and calculate the projected savings of switching to a different vendor.
Review health insurance and retirement plans
Health insurance and retirement plans account for 3-6 % of practice revenues. Since health care reform went into effect, small businesses will need to rethink how they provide health care coverage to their employees – if they choose to offer it at all. Before you ditch employee health benefits, consider your options under health care reform. Small businesses that have fewer than 25 employees and average $50,000 or less in annual wages may qualify for special tax credits if they provide group health insurance coverage and pay at least 50% of employee premiums. If you manage a small medical practice, find out if this credit applies to you.
You will also want to review your current health insurance coverage and ask yourself if you can afford the coverage you’re offering. After you’ve narrowed down your needs and options, comparison shop and get as many quotes as possible. You can easily do this on health care exchanges. You can also go straight to an agent or broker to help you make sense of plans and pricing. Be sure to explore all of your options before outright cancelling your practice’s health insurance.
In addition to health insurance, you may want to revisit your private practice’s retirement offering. Is your retirement plan cost-efficient? Does it meet the needs of your staff? A defined-contribution plan may not serve your needs because of the contribution requirements, whereas a profit-sharing plan may provide more discretion and flexibility. Assess your current retirement plan in the context of other plans and switch to the most attractive option.
Upgrade your technology
For practices to become profitable, they need the right technology to help with some of the heavy lifting, especially when it comes to organizing and maintaining patients’ health records. With recent advancements in electronic health records (EHRs) and practice management systems, it makes sense for practices to upgrade their systems to reduce coding inaccuracies, increase coordinated care and improve patient outcomes.
These systems may also eliminate the need for a full time employee, saving you even more money. It is estimated that EHRs will save the federal government more than $12 billion over the next 10 years. And a study by the RAND Corporation in 2005 estimated savings of about $81 billion a year for the health care sector as they continue to use paperless medical records. There will be a bit of a learning curve in the beginning if you are implementing a brand new system, but the cost of implementation outweighs the long-term benefits, so be patient.
As you grow your family medicine practice and become more familiar with the financial nuances of running your own business, you will discover new and exciting ways to reduce costs and increase efficiencies while providing quality patient care.