Practice Financial Management – Insights & Tips From MedCV That You Need to Quickly Maximize Your Income
Hospitals and medical groups are finally shaking off the economic fallout of the Covid-19 Pandemic, but now historic inflation and looming economic uncertainties continue to place significant pressure on them to improve their financial performance. That’s why John Rezen (FACHE, MHA) in collaboration with MedCV has brought back this series of 2-3 minute reads on how You can assess and improve your practice financial performance in 12 essential areas. Each installment will help you and your team quickly add cash to your bottom line by allowing your practice to work smarter and harder. The following checklist of performance measures will 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 in Blue and upcoming segments are in Black.
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 and your team have earned. So let’s get started!
Tip 10 of 12 – Services: Expenses That Often Go Unchecked Year After Year
a. Assessment: There is a wide array of service requirements for physician enterprises. At the top of the list—in terms of costs—are software services for electronic medical records, practice management, revenue cycle management, accounting, reporting, purchasing, and inventory management. Other service requirements may include housekeeping, linen and laundry, alarm monitoring, security, landscaping, telecommunications, telephone phone answering and nurse triage services, language translations, telehealth, copying and printing, hazardous and other waste disposals, patient satisfaction surveys, medical gases (oxygen, liquid nitrogen), shredding, sign language, and equipment tagging.
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. The first step in the evaluation is to review or develop a Statement of Work (SOW). The SOW should identify the purpose or objective of 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, establish the details on payment expectations covering the basis for payments, unit pricing, and 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. The 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.
After completing the assessment, if you find there is an opportunity for improvement, you should then prepare a formal Request for Proposal (RFP) from other vendors prior to the contract termination date. It is important that this is done early enough to allow for a smooth transition. The SOW should serve as the basis for your RFP. Due diligence in vendor evaluations includes reference checks and gaining a full understanding of all aspects of the proposed contract.
Service effectiveness must be a priority before any efficiencies are gained through improved pricing. If your organization does not have the resources or expertise to complete the service evaluation and negotiation process, know that there are vendors who provide this support.
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.
“We find savings 98% of the time. No savings? No fee!”
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 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 next week. 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 ensure all of these 12 Key Performance Indicators are optimized. You should understand them and take action, even if that action is to share the series and your newfound business insight with your group or hospital administration.
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