Part 12 of 12 – Admin Overhead Must Have a Positive ROI Too and Series Final Thoughts: Knowledge Without Execution is Useless – Take Action – Here is How

The Last of This 12 Part Series: MedCV Practice Financial Management – Insights & Tips You Need to Know About to Quickly Maximize Your Income

Tip 12 of 12 – Leaders must be expected to manage their resources to stay below their budget target or they clearly have to demonstrate their ROI

Administrative (Overhead) Costs:
a. Assessment: In addition to prudently managing the clinical operating costs every medical group should be actively managing the costs generated by administrative/support functions.  These functions include organizational leadership and support services, revenue cycle management, information technology, accounting and reporting, marketing, materials management, and facilities management. 

Each organization should set a cap or target for overhead expenses as a percentage of total revenue and then segment the percentage into functions.  Function leaders must be expected to manage their resources to stay below the target.   The value of the opportunity for savings on overhead functions is calculated by identifying your current cost to revenue for these functions and comparing it to the established targets.  

Improvement Actions: Several of the services listed above fall within these administrative functions and it should be the role of the function leader to actively manage those services. In addition, the function leaders should be deploying the staffing and supply management improvement actions listed above within their areas of responsibility to make sure the cost for these resources are effectively managed. 

While these overhead services are frequently considered indirect costs, their magnitude can often be linked to the volume of the line services they support using SIPOC, process maps, and activity-based costing tools.  Smaller organizations will have more difficulty meeting aggressive targets due to their minimum operating needs unrelated to volumes.  However, there is an opportunity to reduce cost in nearly all organization through the application of competitive pricing and lean tools. 

Final Thoughts – Execution/Take Action

As a final thought, we suggest reviewing each of the 12 part series and make sure you take action where you see opportunity. An assessment of the 6 revenue and 6 expense improvement opportunities covered in the last 12 briefs will provide you with the total value of the financial opportunity in your physician enterprise and serve as the basis for your financial improvement plan.  A root cause analysis for each area with a shortfall should be conducted to establish effective corrective actions. 

Successful execution of improvements will be achieved by adopting an agile continuous learning and improvement approach. 

“Many great ideas go unexecuted, and many great executioners are without ideas. One without the other is worthless.”

Tim Blixseth

This approach involves a comparison of actual performance to the standards each month with an expectation that below standard performance is addressed with a corrective action plan. Manager mentoring and an evaluation of improvement performance must be completed each month by following-up on planned actions, evaluating results, and agreeing on next steps if the problem has not been solved. 

John Rezen

President & CEO
Value Health, LLC

MedCV Advisory Board Member

This continuous learning and improvement approach will result in more effective corrective action plans each month as the managers continually gain a better understanding of the factors driving performance.

We hope you have found this Financial Performance Series helpful. Remember, as a physician, if executing the solutions described for each of the 12 financial improvement ideas sounds like a lot of work, 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 Series 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. Your team needs to report improvement(s) made and the results.

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.

Financial Improvement

Each of the 12 part “2-3 minute reads” in this Financial Improvement series have been provided by John Rezen, FACHE, MHA and your MedCV team to help you 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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Published by Niels Andersen

Founder and CEO of KontactIntelligence, MedCV, VetCV, and VeritasHealthCare. 40 Years in healthcare, 20 years in healthcare tech supporting Government and commercial health systems, physicians, as well as Veterans and their families throughout the US.

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