| Let Us Count The Ways To Cut Costs and Boost Income |
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Question: Over the past few years, though I continue to see
approximately the same number of patients, my bottom-line income
continues to decrease. My office manager has worked very hard to trim
all the fat from our expenses; however, costs continue to rise and
revenues are stagnant or dropping slightly. Do you have any suggestions? Answer:You are not alone in your frustration with rising costs and dropping income. Competition for qualified staff and increased costs of staff benefits have cut into practice profits. Technology represents significant costs that didn't exist for most practices five years ago. These, as well as the rising cost of general practice overhead, continue to chip away at your income. Sometimes it takes a fresh set of eyes to see opportunities to increase the bottom line. We regularly see a concentration on the expense side of the income statement, with little attention to the revenue side. Chances are, there is money being left on the table, or there are inefficiencies that are costing the practice money. For example, do you know what the average production is for a physician in your specialty in your area of the country? Do you know if you are under or over that number? If your production is higher or lower than average, do you know whether the difference is attributable to the number of patients you see per day, the fee schedule you are using, the documentation on the patient's charts or how your office is billing for your services? In most cases, we find the physician and the office manager don't know the answer to those questions and don't know how to find out. We often ask a practice what the average co-pay collection rate is for that group's office. The reply is usually around 100%. However, upon further investigation we find that the actual collection rate at the time of service could be as little as 75%. Billing for the co-pay after the time of service can cost the practice nearly as much as the co-pay itself. What would be the effect on the bottom line if your collection rate increased by 1%? If your production is $400,000, the increase is $4,000. What would it cost to increase your collection rate? If hiring a part-time person at $15,000 per year would increase your collections 10%, you would realize a net increase of $25,000, less the cost of benefits of adding that person. How many practices would consider hiring another staff person to increase the bottom line? Are you coding your services at the correct level? If you are undercoding your services, or not billing for all your services as allowed by your carriers, you could be leaving significant dollars on the table. For example, if you are coding your services at a level one, you are most likely undercoding whatever service you are providing. If the reimbursement difference for a level one and level two is $15, and your average collection rate is 70%, and you perform 150 level one services each year, you lost $1,575. Not a large number, but multiply that situation by 10 other similar situations and the number becomes more significant. Coding issues can be serious, and every practice should have a medical chart review. Finding undercoding or missed billing opportunities is a bonus. Improper documentation or overcoding could cost the practice thousands of dollars. Don't assume that because your billers and office manager have been with your practice for a long time, your billing is being done correctly. What would be the effect of your seeing one more patient per day without adding to the length of your day? Could you streamline the way you process patients through the office? If the average collection per patient is $45, and you see one more patient per 225 days, you would realize $10,125. Would your overhead increase by the same amount to add that patient? Probably not. Even when focusing on the revenue side of your practice, you don't want to ignore the cost side. However, focusing on the small dollars will not produce the impact that you would like. The most expensive cost in your office is personnel. Could you eliminate all or part of the cost of one employee? If one marginal person is replaced with a "star," could that person assume some of the responsibilities of another staff person? We find that offices tend to hire "cheap" to cut costs. If you could eliminate a $10-per-hour person and spread around $6 per hour to other positions to hire better talent, you would save $4 per hour, or $8,320 per year, plus benefits. Hiring a professional, whether it is your personal accountant or an outside consultant, could be the best money your practice spends. Most likely the cost of the consulting can be recovered by the results of the recommendations. However, don't hire that person only to identify the problem, but also to implement the solution to that problem. Too often we find practices spend the money to have a consultant identify the problem or an opportunity, and action is never taken. That money was wasted. The solution must be implemented and monitored to achieve the desired result. Written by: Rita M. Schwager |
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