As jobs continue to disappear, many physicians are seeing fewer patients because people have lost their health insurance, are making do with high-deductible health plans, or are simply reluctant to spend money.
In a study conducted by the Kaiser Family Foundation in February 2009, more than half of the consumers responding said they had cut back on getting recommended medical treatment or seeking routine healthcare during the past 12 months because of cost concerns. Some 35% of respondents reported relying on home remedies and over-the-counter drugs rather than visiting a physician.
To stay ahead of the deteriorating financial curve, doctors need to cut costs. Financial advisers say you are more likely to remain solvent in a down economy if you follow the two-thirds rule: put two thirds of your energy into reducing costs and one third into increasing income. The reason: expenditure cuts yield immediate results, whereas efforts to boost income often involve additional outlays and offer no guarantee of success.
If your practice is small, trimming costs is high on the "easier said than done" list, because a large percentage of costs are fixed. However, any size practice can reduce costs enough to make an impact.
There are 2 keys to cutting expenses. First, make cuts after consideration, not randomly. For example, some money-savers, such as looking for bargains when shopping for supplies, are obvious and don't require much deliberation. Others, such as cutting back on marketing expenses or staff members, may entail weighing factors and evaluating potential repercussions.
"Look at every line in the budget and assess its importance," says Kenneth T. Hertz, a principal with the Medical Group Management Association of Englewood, Colorado.
"All too often a practice budget is based on the previous year and the year before that," says Hertz. "Nobody ever questions expenses. Look at the general ledger to review and analyze what checks are being written. Getting down to a granular level is the best way to ensure a lean practice."
Second, make sure you pay attention to employee morale. Let staff know that you appreciate their efforts during these difficult times, and when possible, demonstrate your appreciation. "For example, have employment anniversary lunches, and reimburse employees for taxi fare home when they work late," says Will Latham, President of Latham Consulting Group in Chattanooga, Tennessee.
"There is an art and science to having just the right number of personnel, and careful attention should be paid to this area," says Ken Hertz. "If a practice isn't overstaffed but cuts staff anyway, the practice, in addition to decreasing its ability to provide a high level of service to patients, runs the risk of alienating both patients and employees."
Medscape Business of Medicine © 2009 Medscape, LLC
Cite this: Gail Garfinkel Weiss. Doctors' Recession-Buster Guide: Ten Effective Ways to Lower Your Overhead - Medscape - May 05, 2009.