Let’s admit it. Running a successful medical practice is hard. It’s not just about administering quality care to your patients; it’s also about running a successful practice. Finding the time to balance the two can be challenging and, at times, overwhelming.
Successfully managing your business operations means having a handle on your overhead costs, vendor contracts, revenue flow, and staff productivity. This article will help you diagnose potential problem areas and highlight four signs your practice is hemorrhaging money and what you can do to stop the bleeding.
High overhead costs can be an indication your practice is hemorrhaging money
The first sign your practice is hemorrhaging money is your overhead costs are too high. Overhead can be an often-overlooked item for many medical practices. When was the last time you looked at your employee health plan costs? Or evaluated different cleaning services? Or checked out competition for your medical supply vendor?
For many practices, this is a set it and forget it effort.
If it has been a few years since you have evaluated your vendor contracts, take the time to review each one. Put together a simple spreadsheet of all the vendors and their monthly/annual costs. Reach out to 2-3 other vendors for bids on the same services.
Market dynamics have shifted, and competition is forcing many vendors to be more competitive on pricing or to add more perks as part of their contracts. Take advantage of these opportunities to lower costs or get more bang for your buck.
Low Staff productivity is an indication your practice is hemorrhaging money
The second sign your practice is hemorrhaging money is your staff productivity is too low. Ask yourself if there is room for improvement. Can you streamline workflows to bill faster or get more patient visits per day?
For the average family practice, missing one visit per day amounts to roughly $15,000 in annual losses (assuming 210 days of patient visits at $72 a pop.)
Some tips on improving productivity include mapping the patient journey through an office visit to identify improvements in processes to speed up visits.
A good example is having patients complete paperwork pre-visit through your patient portal. This eliminates the need to complete the paperwork in the office and can save up to10 minutes per patient.
Automate as many of your processes as you can. Technology can move faster than your office staff speeding up mundane tasks and saving time and resources.
- Use a patient portal to allow patients to book appointments directly
- Leverage automated appointment reminders to eliminate manual phone calls to confirm appointments
- Add electronic eligibility to verify patient coverage before appointments
One last consideration regarding staff productivity is to ask yourself if you’ve appropriately staffed. Staff exhaustion can negatively impact practice performance.
When your staff is run down, your practice just isn’t going to perform at maximum efficiency. Is your team working too much? Does everyone have equal workloads? Do you have a high turnover rate? These can all be signs of staff exhaustion.
It’s a balancing act, but you need to find the magic number that allows your practice to run efficiently and affordably without running into the red or creating backlogs. In some cases, outsourcing portions of the work, such as aged-AR balances, might make sense to create the ideal staffing balance.
You might be hemorrhaging money if you see a shift in AR balances
A third sign your practice is hemorrhaging money is a shift in your AR balances. Your Accounts Receivable (AR) represents how quickly your practice receives payment for your patient visits. The older your AR, the harder it is to collect. Studies show the likelihood of collecting AR over 90 days drops as low as 15% if the process is poorly managed. That means lost revenue for your business.
If you are seeing a rising trend in your practice’s older AR, it’s time to take a closer look at what is happening with your AR balances. Use your practice management system to analyze your AR buckets.
Examine your overall AR. Where is it spiking? Then break it down by payer type. Is it a patient payment issue or an insurance issue?
Patients are now responsible for 30-35 percent of their healthcare expenses. It puts new pressure on your practice to collect patient-owed balances in a quick, efficient, and consistent manner. You want to know if your patient balances over 90 are high or growing.
A high or rising percentage of insurance AR is a strong indication your practice has a denial problem. If that’s the case, you can use your practice management system to dig into your payer reports to understand the denial reason codes. You can use this analysis to take a deeper dive into the issues and help identify ways to remedy them in the future.
Dip in patient visits or a high no-show rate could be a signal you are hemorrhaging money
The final sign your practice is hemorrhaging money is a dip in patient visits. Patient no-shows are a long-standing issue for medical practices – sometimes patients don’t show up. According to MGMA, the average practice has a 5%-7% no-show rate.
Time is money for physicians, and a missed appointment is a lost revenue opportunity. Using the same assumptions as we did above, you are a family practice that sees 20 patients per day and has a 5% no-show rate with an average cost of $72 per visit (assuming 210 working days). That is another potential loss of $15,000 annually. If your rate starts to climb, you can imagine the impact.
Additionally, no-shows create more administrative work for staff and prevent other patients from receiving the care they need.
If you have an increasing no-show rate, there are strategies you can leverage to mitigate the impact.
Central to the effort is a strong patient engagement strategy that keeps you connected with your patients.
- Send regular emails on the importance of wellness visits
- Leverage reminder notifications
- Allow bi-directional communication so your patients can confirm or cancel with auto reminders
- Make sure to immediately rebook cancelled appointments
- Maintain a waitlist to backfill openings when cancellations occur
All these strategies can help you reduce the impact of no-shows on your revenue stream.
While managing a successful medical practice can be challenging, you can keep your business on the right track by monitoring some of the common areas where practices lose money. If you are struggling with any of these, reach out to see how CGM can help.