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Home > Medical Professionals > Practice Resources > Practice Articles > Practice expense may be reducible

Some practice expenses can be reduced 

Clifford M. Sales, MD, MBA

One need not have any formal business training to recognize that

PROFIT = INCOME - EXPENSES

The continued drop in income (reduced reimbursements) coupled with increasing expenses (malpractice premiums, health insurance premiums, staff salaries) has resulted in plummeting profits for medical practices. Is it a foregone conclusion that our incomes will head south? What can we, as relatively intelligent members of the workforce, do to influence our future?

We have all figured out that in order to bring in the same income we either need to see more patients (volume) or see less patients at higher prices (income.) That translates into either being part of many insurance plans and turning up the volume OR dropping out of plans and charging "reasonable" fees for your services. Both are applicable to almost every practice—in my opinion. The important part is to figure out how best to implement the strategy!

The expense side of the equation is equally amenable to alteration! One cannot change malpractice rates—at least not alone! Banding together and pressing political issues may offer some help—although it is lawyers who are charged with making the rules and it is unlikely that they will act to hurt their own unless pressured from the public! However, most physicians have no idea how much money they spend on various services in their practice! Take a quick test—how much was spent in 2003 on transcription? On accounting? On staff salary—including benefits, bonuses, taxes, vacations, etc?

Would it be possible to reduce each of these cost centers? Can you replace full-time employees with part-time workers? Women re-entering the workforce after their children return to school are, in general, outstanding finds for a medical practice. They generally are mature, intelligent (often having held rather impressive positions in their "pre-child" days) and reliable! You must be willing to be flexible however—these employees may need to take a day off for a sick child or a school play! Additionally, they prefer to work during school hours (9-2).

Outsourcing may be a very simple way to save money as well. A personal example saw our practice outsource the transcription function from in-house to an offsite firm (www.medilynx.net) with a 71% cost reduction!!!!!!! It required letting a valued employee go but the savings exceeded $50,000—a significant dollar amount in our practice! Another cost savings may come from outsourcing some of the accounting work. Payroll companies (www.adp.com or www.paychex.com) are examples of companies that not only complete the payroll process but can also complete tax forms (e.g., 941 and 940) at a rate that is hard to match by any accounting firm.

Therefore, do not despair! Before you quit the practice, take a look at things a bit more closely! We, as physicians, are a rather intelligent bunch—turn some of that intelligence towards the business of your practice and you will likely find some good results!