December 6, 2021

How to Manage Expenses & Increase Profitability for Your Medical Practice

Your medical practice's financial health is just as important as your patients.

When you’re battling against crushing administrative burdens and escalating operating expenditure in the medical field, the uphill battle can certainly feel more than overwhelming at times. To make sure your accounts are always on track when you’re busy dealing with patients, you'll need every tool at your disposal to keep your medical practice viable.

So where should you start? Though it might sound daunting, simply being intentional about how you view and manage your overhead expenses is the first step. It doesn’t have to be complex; thoughtfulness and planning can have a significant impact on profitability that goes a long way.

Steps to Effectively Manage Overhead Expenses and Increase Profitability

Labor is your highest cost –manage it wisely

One of the keys to the effective management of labor is making sure you use your human resources efficiently. That means making sure the right team members are doing the right jobs that matter.

1.    Schedule Labor and Review It Weekly

In a medical practice, labor is often scheduled based on the hours the employees need to work. However, this approach often leads to inefficiency.

For example, from noon to 2 o’clock in the afternoon, doctors are often catching up on patient visits and doing patient reviews and procedures. However, other technical and front office staff might keep themselves available during this time to attend to any matters that might arise.

2.    Budget for Raises

When it comes to giving pay raises, many practices simply go with a gut feeling or determine wages based on historical numbers without any rhyme or reason. It shouldn’t have to be that way as raises can be included in a practice budget.

To do so, owners and practice managers should first project their revenue for a given period. The next step is to determine the existing cost of labor and add the percentage of the raise. This method helps ensure that your labor costs are kept in proportion to your revenue.

Review Your Insurance Premiums and Coverage

You should make it a habit to discuss your insurance needs and coverage with your insurance agent at least once a year as you may find gaps or might be paying for insurance you don’t even need. When that happens, you can ask your agent to shop for better rates during this review period.

If you lease finance equipment, make sure you aren’t paying insurance on it twice. Most leases and financing facilities already include insurance in your monthly payment, but we still often see the same equipment being added to your general insurance policy regardless.

Periodically Review Communications and IT Costs

Ask your IT provider to provide you with a breakdown of the services you are paying for. Review your software licenses and the number of seats you are being charged as most people are not fully utilizing all the offerings on their plan. If you find this to be the case, you can downgrade or minimize these plans to significantly reduce your costs.

Again, you should always review your bills like your phone, answering machines, and even email accounts linked to personalized servers to check that everything is still being used. You might be surprised to find out you’ve been paying for multiple exchange/email accounts for people that are long gone.

Analyze Bank and Financial Charges

Don’t put off to tomorrow what you can do today. Look for any late payment fees and create a process to ensure that bills are not being paid late. You can also make inquiries to your vendors about early payment discounts. If your cash flow allows it, this is a great opportunity to reduce costs with many vendors.