Tips for Managing Medical Practice Expenses to Lower Your Overhead

Here at 99MGMT, our primary goal is to help medical practices run as efficiently as possible, and one of the most impactful ways to help overall performance at a practice is to decrease expenses to increase revenue.

In a previous post where we addressed practice overhead, we discussed what expenses make up the cost known as “overhead” in terms of medical practice expenses:

What Counts as Overhead

Generally speaking, you should expect expenses from your support staff, medical supplies, and facility operations to make up the majority of your practice overhead.

The following are a more in-depth breakdown of specific expenses that count towards overhead:

• Total support staff cost (salary + benefits)
• Medical/surgical supplies
• Facility expenses (building rent or mortgage + occupancy)
• Information technology (Hardware, Internet, EHR, billing system, telephone system, servers, etc.)
• Radiology & imaging
• Furniture and equipment (typically leased or paid off via a loan)
• Furniture and equipment depreciation
• Administrative supplies and services (postage, forms, printer ink, etc.)
• Professional liability/malpractice insurance
• Billing and collections purchased services
• Other insurance premiums
• Outside professional fees (legal, accounting, consulting, etc)
• Promotion and marketing
• Other ancillary services (eg. cleaning expenses)
• Miscellaneous operating cost

4 Tips for Reducing Expenses

1. Calculate your Overhead

It's going to be incredibly difficult to lower your practice overhead if you don’t know what your overhead is!

Here are two formulas that can help you determine what your overhead is, as well as where it should approximately be:

• Total operating expenses (minus provider salaries and benefits)/total collections = actual overhead
• Revenue * 0.60 = benchmark overhead

2. Determine Your Practice’s Strengths and Weaknesses

Every medical practice has strong-suits and weaker points. It’s important for your clinic’s growth to make sure you’re aware of these aspects, that way you know where you’re solid in your planning, as well as where you have room to improve.

• Identify areas for improving practice operations and the bottom line
• Observe where your practice has been and predict where it is going
• Convince physicians and staff of the need for change

3. Develop a Plan

The worst possible way to go about making any changes in your practice would be to dive in without a proper plan.

Make sure that you keep your goals in mind and set up your next steps accordingly, and you will find much more success than you would by just winging it.

• Increase productivity: Get more bang for the buck
• Reduce costs: Get the same bang for less bucks
• Improve business operations: Get more bucks for the bang

4. Commit to Improving Your Practice While You Decrease Expenses

Any time you try to make changes (in any walk of life, but especially in a medical practice) there will be some hits and some misses.

The most important thing to remember as you move forward in your improvements is to be flexible and willing to make adjustments in order to keep your practice running successfully.