12 Part Series: MedCV Practice Financial Management – Insights & Tips You Need to Know About to Quickly Maximize Your Income
Tip 10 of 12 – “Services” expenses often go unchecked year after year
a. Assessment: There are a broad scope of service requirements for a physician enterprise. At the top of the list, in terms of costs, are software services for electronic medical records, practice management, revenue cycle management, accounting, and reporting, purchasing and inventory management. Other service requirements may include: housekeeping, linen and laundry, alarm monitoring, security, landscaping, telecommunications—wired and wireless, telephone phone answering and nurse triage services, language translations, telehealth, copying and printing, hazardous & other waste disposal, patient satisfaction surveys, medical gases (oxygen, liquid nitrogen), shredding, sign language, equipment tagging and inventory management.
The value of the opportunity for savings on services is calculated by identifying your current cost to revenue for services and comparing it to a benchmark or target for this metric. Setting a target will typically involve identifying your total cost-to-revenue benchmark and then determining the portion of this benchmark that can be attributed to service costs.
b. Improvement Action: Service costs tend to creep up over time so organizations should plan to review these costs on a recurring basis. Prioritize your service cost evaluation project starting with the services that have the highest costs. A first step in the evaluation is to review or develop a statement of work (SOW). The SOW should identify the purpose or objective for the service and then provide details on the work to be done. The details should list the deliverables for the service with quantitative quality, frequency and timeliness standards established for each deliverable.
Next details on payment expectations should be established covering the basis for payments, unit pricing, and the timing of payments. The SOW should provide an understanding of the connection between the standards and the service costs.
To optimize service costs, the standards should be established to meet but not exceed the needs of the organization. A next step in evaluating service costs is to complete a market assessment to compare your costs to what others are paying or what other vendors are offering.
“compare your costs to what others are paying or what other vendors are offering”
If, after completing this assessment you find there is opportunity for improvement you should prepare a formal request for proposal (RFP) from other vendors sufficiently prior to the contract termination date to allow for a smooth transition. The SOW should serve as the basis for your RFP. Due diligence in vendor evaluations include reference checks and gaining a full understanding of all aspects of the proposed contract.
Service effectiveness must be a priority before any efficiencies gained through improved pricing. If your organization does not have resources or expertise to complete the service evaluation and negotiation process there are vendors that provide this support.
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“We find savings 98% of the time. No savings? No fee!”
For example, The Tryon Clearview Group offers to evaluate multiple service requirements and negotiate competitive pricing for each. The Tryon Clearview Group is another MedCV Teaming Partner that offers their clients a no risk arrangement. Their fees are based on a percentage of savings generated from their services.
Like we like to remind our physician members at the end of each of these 12 part series, as a physician, if this sounds like a lot of work and maybe even has your “business anxiety level” up a few notches, you are not alone. The great news is that your role in this should just be to make sure it gets done and that those who are going to be responsible and accountable for this can explain and report details about what the plan looks like and its status to you.
Share this article with your practice manager, group administration, or hospital administration to make sure they are working on this or see what resources they have to get at this work. If they need help in getting started, they should consider connecting with John Rezen at Value Health. The key is to be able to have your baseline, you would expect your team to report to you the improvement(s) made and the results.
Stay tuned for Part 11 of 12, Supply and drug costs-to-revenue of the last 6 part series focused on Expense Management. If you can’t wait that long, no problem, just contact John for the full 12 part series.
Again, it’s in your best financial interest to make sure each of these 12 Key Performance Indicators are optimized, you understand them, and take action, even if the action you take is to share the series and your new found business insight with your group or hospital administration.
Each of the 12 part “2-3 minute reads” in this Financial Improvement series provided by John Rezen, FACHE, MHA and your MedCV team can quickly add CASH to your bottom line just by having your practice “work smarter” for you. Even if you are not directly responsible for the management of your practice, knowing this information will help you make sure you are making the income you deserve.
As hospitals and medical groups emerge from the COVID- 19 economic shutdown, they will be faced with significant pressure to improve their financial performance. The following checklist of performance measures should help physician enterprises identify financial opportunities and accelerate their improvements. Below are the 12 topics, to read a previous segment, click on the name/link. The current segment is Blue and upcoming segments are Black.
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