Cost management effort saves $100K per year
Cost management effort saves $100K per year
A comprehensive cost management study involving the administrative staff and physicians has paid off for a Birmingham, AL, cardiology practice. The practice is saving $100,000 a year by self-insuring its contracts for equipment maintenance and $20,000 a year by reducing number of different types of electrodes for EKGs.
Faced with rising costs and highly competitive health care market, Cardiovascular Associates, PC, instituted a cost managed initiative in eight different areas, says William Cockrell, FACMPE, administrator of the 38-physician practice with eight full-time office locations and a total staff of about 250.
Cost management is part of running a medical practice as a business, he asserts. "We have to find a way to maintain the good elements of patient care and still stay in business."
For its cost-management initiative, the practice took eight different areas and assigned a physician and administrative subcommittee to study them. Each committee did an in-depth review of its area and reported back to the finance committee and the board of directors. The committees examined long-standing practices, analyzing them to see if they made sense in today’s health care environment.
"People in health care are notorious for having the attitude of we’ve always done it this way.’ They just don’t like to make a lot of changes. It has been difficult as we looked at some of our programs," Cockrell says. The insurance committee found that the practice could save about $100,000 a year by self-insuring and reinsuring its contracts for equipment maintenance.
The committee studied utilization as well as the actual cost of repairs and concluded that the maintenance contract was not paying off. The practice was able to save roughly 25% of what it was paying for maintenance contracts by self-insuring and reinsuring, Cockrell says. "We weren’t getting our money’s worth out of our maintenance contracts, but it took an in-depth look to realize it."
The committee examined all the practice’s insurance products, including liability and disability. It was able to identify some areas of savings in the insurance programs, but the most dramatic savings were on the maintenance contracts the practice maintains for its equipment.
Before the cost-management study, the group was buying eight different types of electrodes for EKGs simply because no one had looked at standardization, Cockrell says. Initially just a couple of types of electrodes were used but as physicians joined the practice, their preferences were added to the purchasing list. As a result of the cost-management study, the practice was able to save $20,000 a year by taking advantage of volume discounts by buying only two or three kinds.
The committee sat down with all the doctors in the practice, talked about the cost-saving initiatives. The group has applied the same system to other items purchased. "Sometimes we got into good discussions about what the differences were in their preferred equipment. Other times we hit a block when a physician refused to change," Cockrell says. In that case, the staff made sure that the physicians who didn’t want to change knew that there was a cost to doing things the same way.
"When you have a large group, there’s a fine line between maintaining standards but avoiding the cookie cutter approach. All physicians are trained differently and you don’t want to have a cookie-cutter approach," he says.
The physician time on the committees was about three to four hours per committee. Administrative personnel spent much more time assembling the data. "We tried to keep the physicians out of the analysis part. It’s not a real effective use of their time," Cockrell says. For instance, the staff spent several days on a study on the most efficient way to get patients through the nuclear medicine program. They looked at what was different from location to location, then presented their findings to the physician committee.
Other areas the committees studied included pension plans, the nuclear department, the ultrasound department, and accounting services.
In the case of the pension plan studies, the cost actually went up because the committee found benefits were available that the practice wasn’t getting. "To us, cost management doesn’t necessarily mean using the lowest cost item but it means using the item that gives you the best service," Cockrell says. "If you get good services, the revenues will go up and quality will improve."
He attributes the practice’s success to having good managers who know how to look for other ways of doing things and having a group of physicians who are open to hearing new ideas.
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