The Great Practice Makeover: Overhead Headaches

June 1, 2007

What do you do when your overhead seems beyond your control? Makeover maven Laurie Hyland Robertson helps a North Carolina OB/GYN practice find the answers.


The physicians at A Woman’s Place, a busy OB/GYN practice in Fayetteville, N.C., are generous with their time. They make patient education a priority by hosting free community events like breastfeeding seminars and an annual women’s health day, with food, giveaways, and guest speakers on topics ranging from depression to nutrition.

How can practices continue these kinds of worthy efforts, not to mention offer their employees decent benefits, while dealing with dramatically escalating overhead and falling reimbursement, as A Woman’s Place is?

The two biggest drains on this practice’s finances are insurance premiums - for staff healthcare and physician malpractice. Office manager Gina Follrod acknowledges there’s not much individual practices can do about either expense. Ironically, “the doctors’ thing is to educate women about their health, especially the preventive aspects,” explains Follrod, “which would lower everyone’s premiums in the end.”

In any field, the two logical avenues for dealing with the mounting costs of doing business are to decrease overhead or increase revenue; the key is striking a balance that won’t stress either side of the equation to the point of collapse. There’s no question that practices are being squeezed from all directions, with costs climbing much faster than the rate of inflation.

FTE recount?

A growing number of doctors have responded to rising costs by refusing to participate with insurers, passing that time-consuming and cost-intensive responsibility to their patients. Others go the bare-bones route, still accepting third-party payments but maintaining minimal or no staff and office space. For those who prefer or need to keep practicing along more traditional avenues, the answer may involve redefining - or perhaps defining - your work.

Full versus part-time status seems a particularly tricky issue in OB/GYN, where a significant number of a practice’s panel - expectant moms - are guaranteed future inpatients. All those hospital visits demand physician out-of-office time, and that’s reflected in the schedules at A Woman’s Place. Founding partner physician Lakshmi Gordon, is scheduled in the office three days a week, seeing 35 to 40 patients on each of those days. She’s on call two to three days each week, handling rounds for ill patients in the hospital and squeezing in maybe 10 urgent office visits a day. Gordon’s partner, Andrea Dickerson, and a physician employee have similar calendars.

That’s busy, for sure, but it can’t really be considered full time when it comes to balancing out costs like an expensive EMR system and a brand-new office suite. Although inpatient work does tend to pay much better than office visits, such investments may look different, or at least assume different priority status, in the light of supporting three essentially part-time doctors. Bringing in a nonphysician provider to stay in the office full time - and generate patient-visit revenue full time - could be worthwhile here.

Nuts and bolts

Asked how her practice attempts to manage the overhead monster, an exasperated Gordon sighs, “We just try to meet it.” Follrod shops around, which is great, for everything from office supplies to that pricey malpractice insurance. Recognizing that overhead is a major hurdle, though, the practice needs to tackle these efforts as a consolidated cost-control program. It’s a theme I repeat often: Prioritize challenges carefully so you can address them and move on to the next one. There’s no getting comfortable, no end point to the process - this issue, and all others, will undoubtedly cycle back into a place of primary importance.

Within the issue of cost containment, therefore, insurance premiums take first priority. Follrod goes to lots of seminars to learn about alternative methods of financing employee benefits, and making decisions in this area should certainly be a top concern for both her and the managing partners. One option she’s come across is a high-deductible health plan with a lower premium, coupled with a supplementary policy to cover the higher deductible. “We may look into that next year,” she says. Really, though, the sooner the better. Just make sure you don’t end up spending more time, and therefore money, administering complicated policies.

Further down the priority list, but still worthy of concentrated attention, are smaller items like tools and supplies. Comparison shopping is an automatic. But also try to maintain a clear picture of inventory-use patterns; succumb to bulk buys only for things in need of constant replenishment, and keep only what you really need on hand. At the same time, don’t underestimate the leverage a good relationship with one or two key suppliers can provide. And don’t devalue negotiation - everything, even catalogue prices and employee health premiums, is open for discussion.

Concerted effort

Fittingly, part of the practice’s strategy for dealing with overhead involves the revenue side of the equation: “We try to come up with different ways to recruit new patients,” notes Gordon. A Woman’s Place is located near a large military base, so high population turnover means this group may have to allocate considerably more of its resources than the norm to ongoing marketing. The practice currently spends a relatively average amount, about 1 percent of its total budget, on advertising (compared with 8 percent for malpractice coverage), including those patient education seminars. As with the decision to bring on a nonphysician provider, complete basic ROI calculations to get a handle on whether the extra outlay, which might seem crazy given an already cash-strapped situation, will truly bring net benefits.

Also consider a more comprehensive approach to outreach activities. Gordon says that in addition to hosting patient events, the practice’s physicians give lectures in the community on average once a month. That’s probably not enough to garner focus from a public with an extremely short attention span. It may be time to become more proactive, targeting educational efforts for maximum impact.


Bring in advocacy to round out a multifaceted approach, and assign someone in the practice to act as a media liaison, offering interviews and articles to local outlets. Assuming you’re speaking out about an issue that stirs strong emotions, this is a great way to combat the helplessness many physicians tell me they’re feeling these days. I’d suggest focusing on a limited subject area, if possible. The practice could position itself as the authority on breastfeeding, for example, continuing its in-house seminars, giving outside talks on the topic to local groups, and participating in rallies on the right to nurse, all of which will raise the physicians’ profile with potential patients and referrers. Deliberately brand the practice this way, too, carrying the message through to marketing materials and the Web site.

But what can you do about the issues you feel are beyond your control? As an enthusiastic (though not necessarily apt) student of social economics, I feel safe saying that the swelling wave of costs will undoubtedly recede again. Over the long haul, malpractice fluctuations, for one, have been a relative constant as insurers adjust premiums in response to tort reform, changes in their own investment portfolios, or something else entirely. In the meantime, if you’re able to address the areas where you feel you don’t have a voice in a way that makes up for some of the important shortfalls - increasing the time with patients that’s been edged out of quick visits through other opportunities to connect, like weekend seminars - you’ll feel better about riding the waves.

Laurie Hyland Robertson has been in the medical publishing field for 10 years, working editorially on both clinical and management topics. She can be reached at lrobertson@med-iq.com.
This article originally appeared in the June 2007 issue of
Physicians Practice.