How to control overhead costs

You can’t control costs if you don’t know what they are. And many medical practices don’t have enough granularity in their budgets to determine what’s really going on — let alone where to start making cuts if needed.

Cost breakdown

First, take a much harder look at your practice’s profit/loss (P/L) statement and budget, and then fill in the details. For example, “salary” alone isn’t detailed enough. Your budget should break out salary into more categories — including staff benefits, staff salaries, payroll taxes, education expenses and overtime. Then compare these costs to national benchmarks for your practice’s specialty areas. That allows you to pinpoint potential areas for cuts.

Look carefully at your large expenses, such as:

Malpractice insurance. Some insurance carriers offer discounts if practices attend a risk management course. Shop around.

Advertising. Good advertising is tied to measurable metrics so you can evaluate return on investment (ROI). When you do this analysis, you’ll know what works and will be able to decrease or eliminate the advertising that isn’t working.

Supplies. Evaluate your inventory to ensure it’s sufficient — and efficient for your practice. Negotiate for better deals with competing vendors, and verify that billable supplies are reimbursed correctly.

Phone service. Phone companies are often willing to negotiate better prices to get or keep your business. Consider Voice over Internet Protocol (VoIP) options and bundled phone and Internet services. Analyze phone bills for trends and usage patterns.

Other services. Medical practices hire a variety of services, from cleaning to information technology. It’s possible some services can be handled efficiently in-house.

Equipment. Upgrades, repairs or replacements, and usage itself can cause you to rethink whether to lease or buy equipment. Your accountant can help you analyze the numbers to make the best decision.


Finally, ask some key questions to determine whether you can cut back on facility costs. Does the size of your space fit your needs, or do you have a bigger-than-necessary space for ego reasons? Are exam rooms being used to capacity?

Do you have unused storage space? If you have a satellite office, is it making money or losing money? Take a hard look at all of these areas and reduce costs where possible.

Benchmark drawbacks

When comparing your own practice to national benchmarks, remember that one characteristic of benchmarks is that they report average or median values — and may vary depending on the geographic area. You should want your practice to be the “best of class,” not average.

These numbers are useful for measuring your practice’s success, but are they the most important factor? The most important factor should be patient satisfaction — and the long-term financial health of your practice.

© 2017