October 2011

If Your Overhead Could Be Reduced, What Would You Pay?

By This e-mail address is being protected from spambots. You need JavaScript enabled to view it. and This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

Health care entities are constantly under pressure to manage their costs, which are generally a combination of fixed and variable costs. In an environment where reimbursements from payers continue to decline, the pressures only increase on management to contain and manage overhead costs. For many practices, the battle is difficult as the assumption is made that not much can be done to change the fixed costs, and to a certain extent variable costs, without compromising quality and patient satisfaction.

A quick review of most financial statements shows expenses broken out into various categories. Fixed expenses typically include buildings and most of the operating expenses of the building, with utilities being somewhat "semi-fixed." These expenses alone can comprise a big chunk of the fixed expenses with the other components of fixed expenses being equipment and furnishings, technology, management salaries and related benefits and third party services—such as legal, accounting, insurance, etc.

The rest of the expenses to a degree are variable and include nursing, medical staff, administrative staff and other support staff. In most situations, the management teams, along with their boards, have scrubbed these expenses to the point that they cannot find any additional savings.

However, what if the historical approach taken to reviewing these expenses is flawed and the eye should not be on the expense itself but on how services are delivered to patients? Are your systems operating in the most efficient manner possible? What efforts have been taken to completely break down and review every single task within your clinic? For example, when focusing on a patient visit, what efforts are made to understand the entire process from when a patient scheduled a visit to the point the patient is seen by a physician to when a bill is rendered? When reviewing a process that is repeated hundreds if not thousands of times a day, it may be possible to eliminate steps, add steps that streamline and/or eliminate processes that may consume resources both fixed and variable. Through examination of the practice in terms of process flow, we can isolate process waste and begin to find expense savings.

Inviting staff team members, managers and a few physicians to map core processes can often illuminate challenges and issues. Participants also learn where there are duplicative steps in the process. In hearing the concerns from appointment schedulers, physicians often find the need to revisit their scheduling templates to maximize the time spent with the patient and better utilize their time. For example, new patients typically take longer than established patients yet new patients calling into your practice may be turned away if there are no open time slots. Patients presenting themselves post-surgery (follow-ups) typically take shorter timeframes. Patients requiring significant work-up-- labs, x-rays, etc.--typically require a different template. Simple revisions in a physician's schedule can have a significant impact on the number of patients seen and ultimately the resources used for that physician each day in the clinic. By avoiding late day add-ons, your teams can save the expense of staff overtime hours.

In a recent study of the appointment scheduling process for OrthoTennessee, physician scheduling templates were determined to be outdated and inefficient. Appointments were over-booked, which created long wait times and added expense for staff overtime pay when the day ran late. By adjusting the templates, the practice identified potential savings by reducing overtime pay. Additionally, patient satisfaction improved due to shorter wait times. And most importantly, new revenue opportunities were found in newly opened patient time slots.

Something as simple as patient registration can consume significant resources if not optimized. What efforts are taken to minimize and/or eliminate these steps in advance of a patient's visit to the office regardless of the service being rendered? For example, is the patient upon presentation to the clinic or medical facility for service provided a game plan by which demographic information is obtained from the patient? Providing Internet access can reduce the amount of time taken by a patient upon presentation for services. Even in the absence of an Internet solution, a group can find more efficiency and, at a minimum, reduce the minutes per patient, thus reducing the need for full-time resources. One-half FTE could allow more than $20,000 in variable cost savings.

Inefficiency is also found when the practice nurses are losing care time to hunt for supplies. When supply cabinets are cleaned, standardized, labeled and maintained, this excess time can be reallocated to patient care. Saving a few minutes per nurse per patient can add up to more than $10,000 per year in staffing costs when schedules are maintained and overtime reduced or eliminated (not to mention added capacity for additional patient revenue). The practice also saves in medical supply expenses by returning never-used supplies and negotiating just-in-time re-orders.

A group in the Midwest recently reviewed their appointment setting process for new patients and uncovered excess variable cost in marketing materials and postage. Brochures, maps and patient forms were labeled by hand and sent via U.S. mail to the patients. The same forms were often handed to the patient when they failed to bring them to the appointment. A solution for emailing a link with all of the new patient materials will reduce the marketing and postage expenses.

In summary, what would you pay if your overhead could be reduced through the study of your patient processes? Is $50,000 savings in your variable expenses per year worth an investment this year? Would 20 physicians want to reduce their overhead by $2,500 next year? It may be a wise investment to examine your patient processes and find those dollars.

Ready to Reduce Your Overhead?

Our team can help you get started. We are available to help your team structure an improvement project, facilitate a process mapping session and implement new processes. For more ideas as to how to get started, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it. at 317-472-2165. There are other indicators your practice can use to evaluate how well it is doing.