Hidden costs, unmanaged denials drain practice revenue

Medical practices are losing money in places most administrators never think to look, from aging shredding contracts to appeals that never get filed, and the gap between what practices spend and what they collect is only widening.

Shawntea Gordon, MBA, FACMPE, CEO of Atlas & Perpetua Healthcare, said the pressure on practices has intensified in recent years as technology costs, staffing shortages and stagnant reimbursement converge. She works with practices across the country to identify revenue leakage and build sustainable cost-management frameworks.

“The disparity between the costs we’re putting out and the reimbursement we’re getting in has gotten so much larger,” Gordon said. “I think the tech stacks with our organizations have gone from maybe two or three main software systems to upwards of 15.”

That assessment tracks with data from MGMA, which has documented steady increases in operating costs per physician even as collections have remained relatively flat for many specialties. The AMA’s Physician Practice Benchmark Survey has similarly flagged rising administrative overhead as a top financial stressor for independent practices.

Gordon said the most common source of revenue loss she encounters is unmanaged denials, followed by charges sitting untouched in accounts receivable. But she said leakage often starts much earlier in the revenue cycle, with front desk data entry errors that miss coordination of benefits or patient responsibilities, undocumented in-office services and down coded claims that go unchallenged.

“We have denials that aren’t appealed. We have down coding happening. There’s kind of a ton of places where I find leakage typically,” she said.

For administrators who have never formally benchmarked their expenses, Gordon’s advice is to start with historical data before making any changes.

“If you are not starting from an evidence-based perspective, you’re at a high risk of going off in the wrong direction,” she said. “Go dig into your own historical data.”

She recommends using established associations, including MGMA, HFMA and relevant medical specialty societies, as benchmarking references rather than newer online tools that may lack the historical depth to produce meaningful comparisons. She also cautioned that practices must be honest about their own characteristics, including size, location, community type and payer mix, before concluding they are over- or understaffed.

“A lot of groups that I come into say staffing is the highest cost, we need to get rid of staffing,” Gordon said. “Then we do an analysis and find out they’re already vastly understaffed, and the reason they don’t have more revenue is because the staff is burnt out.”

Beyond the expected line items of supplies and technology, Gordon flagged one cost that often goes unnoticed: outdated shredding service contracts.

“So many people kept their shredding services on the same rotation” after transitioning from paper to electronic records, she said. “If you weren’t paying by weight, or you’re paying like a monthly minimum fee, and you’re not really dumping a lot into the shredder bin anymore because you’re putting everything online, that’s one place that I see people just have these monthly contracts that they’ve had since ’92.”

She acknowledged shredding costs are relatively small individually but said they illustrate a broader pattern of practices paying for services that no longer match their operational reality.

Before making any significant change, Gordon said leaders should run through a standard set of questions: Will this create a compliance risk? Will it hurt the patient experience? Will it affect revenue collection? She described a case in which a practice switched medical supply vendors to cut costs, only to discover the new vendor had a history of back-ordering a critical surgical item.

“You have to dig into those things ahead of time,” she said. “Really make sure you’re looking holistically and not just making a decision based on your gut.”

For the longer term, Gordon recommends building a structured improvement cycle rather than conducting one-time audits. That means doing a full organizational review, building a 90-day improvement plan and then converting that review cadence into a standing monthly process.

“This is something you look at every single month,” she said. “How can we do better than we did last month? How can we improve, even if it’s just by 1% every single month?”