Five Ways to Cut Costs by the End of the Year

October 8, 2014
David Doyle

Simple strategies to trim expenses can pay big dividends for your practice.

Cutting costs in a physician's practice can mean making some tough decisions. But there are lots of little things you can do that will make a big difference without inflicting too much pain.

Before you take any drastic cost-cutting measures - and risk realizing later on that you took it too far - start out with a few small steps. Sure, some of these ideas may seem like penny-pinching at first. But over the course of a year, the savings will add up. There are several things you can do right away to boost your bottom line, and some are simple solutions you may have overlooked before now.

1. Implement green practices. Going green can require a big financial investment if you're talking about doing something major like installing solar panels on the building. But you can start with some simple conservation measures that offer the added benefit of saving you money. Commit to cut your electric bill by 2 percent to 5 percent this month, and enlist your staff's help to do it. Efforts might include turning off lights when no one is in the room; shutting down computers or other electronics at the end of each day; or turning down the thermostat at night and on weekends during colder months (turn it up during the warmer ones). Keep track of these efforts, though. Over the next several months, pay close attention to the section of your electricity bill that indicates how much electricity you're actually using.

2. Conserve/reuse office supplies. Copier paper, envelopes, and stamps are necessary when running any small business. But don't blindly spend money on something just because it's necessary. Look for areas of possible waste and set a goal to reduce it. Strategies could include reducing the number of copies the staff makes and reusing office supplies. For instance, the opposite side of a printout can be used for scratch paper - just as long as that printout doesn't contain any patient information that's protected under the HIPAA Privacy Rule. Other efforts might include canceling the office's magazine subscriptions and asking the staff to bring in their own magazines for the waiting room (once they've finished reading them, of course). Better yet, replace the magazines with health literature, which various healthcare organizations make available for free. Combined mailings can also save money spent on stamps and envelopes. Instead of sending a bill and a monthly newsletter to a patient in two separate envelopes, find a way to send both pieces of mail in the same one.

3. Reduce janitorial expenses. Some practices pay up to $15,000 a year for a janitorial service to clean the office each weeknight. Yet when the work is divided between three or four staff members, the same job can be done in a matter of minutes. At the end of the day, one person can vacuum while another cleans the bathrooms and a third takes out the trash. To prevent negative feelings and possible resentment about these additional duties, you could add a little more to each staff member's salary to thank them for helping out in this way. If you give them each, say, $1,000 more per year, you'd still come out ahead. Make sure the practice's leaders occasionally pitch in and help with the dirty work too.

4. Dump ineffective advertising. Since you first opened your practice, it's probably been an annual tradition to run a display ad in the Yellow Pages. But in recent years, how many new patients have you gained because of that ad? Probably none. For primary-care practices, most new patients will find you via word of mouth or from their insurance carrier's provider directory. That is not to say that paid marketing never works. But you need to find out what is working for your practice. Include a question on your patient check-in forms that asks how they heard about you. You may find that other high-cost advertising venues aren't yielding the necessary results either. All of them should be reexamined and dealt with accordingly.

5. Assess staffing needs. Staffing expenses eat up almost a quarter of a practice's revenue. Because it accounts for such a significant chunk of your overhead, you cannot ignore staffing when you're looking for ways to cut costs. Take a good, hard look at each staff member and consider the value he or she brings to your practice. Reducing overhead may not mean firing members of your staff, but it could mean cross-training and then reassigning someone to an area where staffing is short. A well-rounded staff could mean that you won't have to hire so many temp workers during vacation season, and you may not have to replace every departing employee with another full-time staffer either.

David Doyle is the chief executive officer at CRT Medical Systems, a top 100 medical billing company serving clients throughout Michigan and the Midwest. E-mail him at ddoyle@crtmedical.com.

This article originally appeared in the October 2014 issue of Physicians Practice.