Admin Overhead Must Have a Positive ROI Too and Knowledge Without Execution is Useless, Take Action! – Here is How – Part 12

Practice Financial Management – Insights & Tips From MedCV That You Need to Quickly Maximize Your Income

Financial Improvement

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.

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 12 of 12 Leaders must be able to manage their resources and stay below their budget target or otherwise clearly demonstrate ROI.

Administrative (Overhead) Costs:

a. Assessment: In addition to managing clinical operating costs, every medical group should actively manage the costs generated by administrative and support functions. These functions include:

  • Organizational leadership and support services
  • Revenue cycle management
  • Information technology
  • Accounting and reporting
  • Marketing
  • Materials management
  • Facilities management

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

b. Improvement Action: As the services listed above fall under administrative functions, it is the responsibility of function leaders to manage these services actively. Additionally, function leaders are expected to deploy the above-listed staffing and supply management improvement actions within their areas of responsibility and to ensure that the cost for these resources is being managed effectively

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 are opportunities to reduce costs in nearly all organizations 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 parts in this series and making sure you act wherever you see an opportunity. An assessment of the 6 revenue and 6 expense improvement opportunities covered in the last 12 briefs will allow you to utilize the total opportunity value of your physician enterprise and serve as the basis for your financial improvement plan. Conducting a root cause analysis for each underperforming area will allow you to perform effective corrective actions.

Furthermore, adopting an agile continuous learning and improvement approach will help you successfully execute these corrective actions.

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

Sam Walton

This approach involves a comparison of actual performance to the standards each month and addressing any performance below that standard 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 the next steps if the problem persists.

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. Understandably, executing the solutions described for each of the 12 financial improvement ideas may sound like a lot of work. Remember, however, that as a physician, your role is only to ensure it gets done and that those who are responsible and accountable for these areas can explain and report details to you about the improvement plan and its progress.

Share this series with your practice manager, group administration, or hospital administration to ensure that they are working on this or see what resources they need to get it done. If they need help getting started, they should consider connecting with John Rezen at Value Health. Your team needs to report on the improvement(s) made and their results.

Again, it’s in your best financial interest to make sure all of these 12 Key Performance Indicators are optimized, that you 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.

Each of these 12-part “2-3 minute reads” in this Financial Improvement series has 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.

President & CEO
Value Health, LLC

MedCV Advisory Board Member

John Rezen

Your Career is More Than Your Practice

MedCV is a Private Credentials Vault App built specifically for Physicians and Advanced Practice Providers where you can manage & control your most valuable career and practice documents, remind you of license and certification expirations, track your CME, and of course… even find your next great job! Additionally, MedCV includes important tips, tools, and resources to help you navigate the ever-changing “Business of Healthcare.” Join the MedCV community if you haven’t already!

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