Now is a Great Time to Review Your Practice Income Statement!

As we near the end of 2012 and look to the new year, now is the time to review where your practice is and look for opportunities to position for a successful 2013. When I work with groups on their reviews I always start with the financials. How are they trending? Are revenues and expenses trending in the same direction? Often I see reductions in revenues but expenses do not see the same percentage decrease. Some times this is for good reason but the group needs to look at what makes up those revenue declines and their corresponding expenses and make appropriate decisions. Revenue decreases are driven by many issues and can require a great deal of analysis to sort out. For the purpose of this blog I want to focus on some expense areas worth reviewing.

Medication cost is an area where vendors have been willing to renegotiate reductions in current rates. Cardiology practices that are using nuclear isotopes or oncology practices that use different chemo medications can achieve significant reductions by renegotiating these contracts. These are high dollar meds and offer a great opportunity for groups who put this back out to bid with their vendors.

Staffing is always a significant line item on the income statement. Review your staffing in relation to patient volumes. It is also important to review your staffing mix. Often I find highly paid RN’s doing clerical work or scheduling duties. Their skill set needs to be focused on appropriate clinical task; use inexpensive labor for your clerical work. Cross training staff to fill in during staff absences allows the group flexibility and can save on over time cost. And while we are talking about overtime, when it is not monitored it tends to increase. Generate a weekly overtime report and have the appropriate individual monitor its use.

2013 also presents a rare opportunity to actually negotiate a reduction in your employee health insurance cost. Commercial carriers are offering aggressive premium rate quotes to increase their book of covered lives to strategically position themselves for the implementation of the Affordable Care Act. I have spoke with insurance brokers and carriers and for “a limited time only” which covers the next twelve months, it is possible to negotiate a reduction in premiums vs. the double digit increases most groups have seen over the last several years. Talk to your broker, shop your coverage, and never take the insurance carriers first offer, send your broker back to ask for an additional reduction. And while we are on the topic of the Affordable Care Act, you should also be planning for some of the legislation’s future changes. Starting soon there will be an approximate 4% tax on your premiums. It will be in the form of two line items, one is to help pay for the insurance exchanges and the other is to help cover the cost of providing healthcare to the 30 million being added to the system. The other change relates to wellness programs. This has been an area where a group could receive a discount on premiums if employees participated. These will go away at the end of 2013, but for the coming year they offer an additional opportunity for the group to consider that may help bring down your premiums. If you are wondering why they are going away, in the past individuals who were healthy and used less healthcare paid low premiums; those who were older and had health issues paid higher premiums. Under the Affordable Care Act everyone is treated the same. Young healthy individuals will see their premiums increase and older individuals who have health issues will see their premiums decrease. Wellness programs are still a great idea for groups to keep their employees healthy and reduce time off work but for the purposes of premium reductions those are scheduled to be phased out at the end of next year.

Again, start with your income statement and focus on your larger expense items. There are always opportunities to achieve some reductions and it is good financial practice to review your income statement regularly.