Looking for money? Try cutting costs
See how one practice trimmed overhead
When Neil Baum, MD, a urologist in practice in New Orleans, decided to look at his overhead costs, he didn’t think there would be much fat to cut. But he was mistaken. An accountant doing a study on Baum’s solo practice found that he was spending 55% of his income on overhead expenses.
But Baum’s story has a happy ending. Using the accountant’s findings, Baum did some juggling and enlisted help from his staff to bring overhead costs down to the low 40s. A number of ideas he generated may be worth investigating for your practice. (See chart, p. 16, for even more cost-saving ideas.)
The starting place for Baum’s practice was an audit by an accountant, which highlighted some problem areas right away. "We were spending something like 2% on postage," he says. "That’s way too much. We were mailing letters to the 20 physicians in our building. That was $5 or $7 per day."
The practice was also mailing a lot of material to the local hospital, when the hospital had a delivery service that would handle that service for free. Another $10 per day was saved. Those numbers seem small, but in a 52-week year, a $15 per day savings adds up to $3,900.
Overhead control surpasses standard
There were other areas where Baum’s practice needed to trim down, too. Now, his overhead cost percentages are in the low 40s better than even the better performing multispecialty practices surveyed by the Englewood, CO-based Medical Group Management Association (MGMA). According to the most recent cost survey by the MGMA, the median among those better performing groups is 51.45% revenue spent on operating costs.
How did Baum achieve this? Among the actions he took were:
1. Purchase seldom and in bulk.
"We were having people deliver office supplies from a catalog," recalls Baum. "That means we were paying top dollar." Instead, he started keeping a list in the lounge where staff could write down their supply needs. Then, every month, someone would go to [a local discount office supply warehouse] on his or her way to work. "Paying to have paper clips delivered is silly."
2. Invest in voice recognition software.
Baum says he reduced dictating expenses from $1,000 per month to nothing by purchasing a $5,000 voice recognition software program. "There is no turnaround, now, and accuracy is about 95%." That percentage increases with use, he adds. The practice has completely eliminated note transcription costs and is looking at a remote, wireless system which will allow Baum to dictate when he is with a patient.
3. Cut stationery costs.
Baum’s practice saved $700 on stationery by using the computer system to create letterhead. He often faxes directly to people from the computer, eliminating the hard copy letter altogether. He also faxes prescriptions directly to pharmacies, which saves time, paper, and is a convenience for patients.
4. Use an automated lab report system.
Patient Response Network in Chicago allows patients to phone in for lab results, saving Baum and his staff telephone time. "The cost is only in the hundreds of dollars," he says, noting that the service is based on a per-use charge. Patients who come in for a test are given a code number the last four digits of their chart number. They call a toll-free number, available 24 hours per day for their results.
"It costs three dollars every time a person has to touch a chart," he says. "This saves you that money, plus about eight hours a month of physician time."
Three appointments out of 20 were no-shows
1. Cut down on missed appointments.
"We found that on a given day, if we were seeing 20 patients, three people would forget their appointments," Baum says. "That’s lost money and time."
But rather than use staff time to make reminder calls, he uses a program called Telebox, based in Mobile, AL. This automatically calls people the day before an appointment to remind them. It also asks for the person answering the call to confirm by pressing one. "It cut our no-shows to one a week."
2. Cut authorization waits.
Using staff time to get authorizations for a test or procedure was another big time waster. "We might be waiting on the phone for an hour or 45 minutes." Baum created a form (see sample form, inserted in this issue) which is faxed prior to an authorization call being made. This encourages the payers to deal with the request in a timely manner.
3. Ask for freebies.
Most drug companies will provide physicians with free prescription pads. But what most practices don’t know is that they will willingly provide them in a variety of colors and with common medication names and directions pre-printed on them. Baum has a color code system which is based on the type of drugs being prescribed. For instance, all prostate drugs are on one color of pad, all antibiotics on another.
Baum can quickly grab the correct color pad and circle the appropriate drug and directions, saving about 30 seconds for each prescription. "It sounds like pennies saved. But if you have 20 patients each with two prescriptions you save 20 minutes a day, times five days a week, times 52 weeks a year, that’s more than 86 hours. At $150 per hour, that’s $13,000."
Don’t neglect to motivate staff
Start profit-sharing programs.
"If I had to pick the best thing we did, it was starting a profit sharing program based on production minus overhead," says Baum. "Staff started saving paper clips; they reused paper. You have to make your staff understand that the motivation has changed. Before, it was more procedures, more patients. Now, you have to shift your thinking into saving on expenses."
There is always fat that can be cut, Baum says. "The take-home message is that managing care means managing pennies. You can’t increase reimbursements, but you can decrease overhead."
• Neil Baum, MD, private practice of urology, New Orleans. Telephone: (504) 891-8454.
• Patient Response Network, Chicago. Telephone: (800) 613-9050.
• Telebox, Mobile, AL. Telephone: (800) 644-4266.