More staff may actually be a more reliable path to a more profitable practice.
An email from the MGMA delivered an exciting tidbit into my mailbox this morning.
The email promoted the association’s newest dataset, which analyzes financial and operational excellence. It asked readers to guess which organizational effort was correlated with an extra $85,000 in annual revenue per physician. The choices were trimming waste, reducing headcount, or launching an employee appreciation program.
It didn’t surprise me that the answer was the employee appreciation program. But it also won’t surprise me if you guessed one of the other two options. In my experience, many physician-owners and practice executives assume staff is a cost they should always look to minimize. This notion is something my partners and I are always trying to combat.
While there is, of course, an expense associated with staff, your employees are also essential to generating revenue. That’s why I argue it’s better to think of your team as an investment—and consider the revenue and profit they contribute to your business, not just the cost.
Here are just a few examples of how focusing primarily on minimizing the out-of-pocket cost of front office staff to bolster profit can have an unintended opposite effect:
Many practices we’ve worked with are more troubled by front desk staff having occasional downtime than by what might not get done timely when staff are overloaded. For example, a common hidden cost is lost business when phones aren’t answered. If your practice is not the only option a new patient is considering, they may call another office and book with them if they get voicemail when they call yours.
Many practices are reluctant to have enough phone/scheduling support to enable insurance eligibility verification at the time of booking, instead waiting to verify a day or two before the appointment (or worse, not at all). But this may mean that appointments need to be cancelled too late to offer the slot to a different patient—a deadweight loss for your practice and any other patient who wanted to be seen.
Similarly, if mistakes in demographic information make their way through the billing process, they create extra re-work and delays in getting paid. (And this extra work and delay is actually the best-case scenario—in which the patient is actively insured under a plan you’re contracted with. If it turns out the patient isn’t covered, you lose both the billing time and, likely, the revenue.)
Practices that focus on minimizing staff may leave themselves vulnerable to spikes in demand, the exit of an employee, or a bug that sweeps through the office. Being slightly short-handed versus your norm shouldn’t put your practice into a high-pressure situation, but if you’ve cut your headcount to the bone, this can easily occur. You may have been patting yourself on the back for keeping costs as low as possible, but if your employees feel overly stressed by their workload, especially if they’re dealing with impatient or angry patients to boot, you’ll likely have higher turnover than you should—and the costs of it can quickly exceed the profitability gains you thought you were getting.
So how does all this connect with the MGMA finding? The presence of an employee appreciation program suggests that a different mindset about staff, one that seems “softer,” yet can pay off with the bottom-line impact practice owners and managers are looking for. Staff who feel recognized may work harder, be more creative, take more initiative, and be less likely to leave—all ways in which they boost your revenue and profitability. So, while it may seem counter-intuitive, investing more in staff, not less, may actually be a more reliable path to a more profitable practice.
Laurie Morgan, MBA is a partner and senior consultant for Capko & Morgan. Her consulting focuses on practice management effectiveness and practice profitability. She is the author of the book People, Technology, Profit: Practical Ideas for a Happier, Healthier Practice business as well as the Management Rx series of e-books, and blogs at capko.com/blog.