Post-pandemic inflation has affected the bottom line of medical practices across the country, especially smaller practices with less than 5 physicians. As the cost of supplies and labor continues to go up, payer reimbursements remain the same and have even decreased for certain CPT codes.
This shift has been felt by independent practices struggling to stay afloat. With already thin profit margins starting to dwindle even more, we have seen many small practices resort to private equity firms or hospital ownership. If your desire is to stay independent, follow these strategies to increase your profit margins this year.
Reduce No Shows And Cancellations
As a former practice manager, nothing was more frustrating to me than seeing open appointment slots on the schedule. An unfilled slot meant a total loss in revenue, as the cost of operations remained the same whether a patient showed up or not.
This is a multi-faceted issue to tackle, especially when taking patient satisfaction and Google reviews into the equation. We tested several solutions over the years, including mailing out reminders, incorporating no-show rules into our EMR and using automated phone calls.
When it came down to it, we noticed that these simple solutions ended up being most effective:
- Have an actual person call the patient the day before their appointment. We noticed that patients were more likely to not show up when called by an automated message instead of an actual person!
- Charge a no-show fee to patients who did not show up to their appointment. Make sure you double check payer rules on this practice. In our state, we could not charge anything to our medicaid patients including no-show fees. We did at least send out a warning letter to those patients so they were aware it was something we were tracking.
- Implement a 3 strike rule for habitual no-show’ers. This may sound harsh, but patients who repeatedly make appointments that they can’t keep will cost you hundreds in lost revenue. Our rule was if the patient no-showed 3 times in a 12 month timeframe, they would be formally dismissed from our practice.
- Have flexibility in your rules. This one is important, because you need to make sure you’re maintaining good customer service while also protecting your physician’s time. Life happens and emergencies are a part of that. If a patient offers a reasonable explanation for their absence, forgive this one and move on. It is often not worth a negative Google review or an unhappy patient.
Negotiate With Payers
As the manager of a small medical practice, I felt very ignored by a lot of the larger payers in my area. It was intimidating to think about going head to head with industry leaders, such as Blue Cross Blue Shield or Priority Health. However, negotiating with payers is very important if you want to increase the profitability of your practice.
Before starting any negotiations, make sure you have a full understanding of what volume your practice is billing out for any CPT code, how many patients for that payer you see on average, and what your average reimbursement rate is.
Focus on your high volume services first. Use leverage when you can. For example, my practice was one of only 2 specialty practices in our region. If we refused to see a certain payer’s patients, then those patients only had one other option for their care.
Join An MCO If that Is An Option
One of the best decisions we made as a private medical practice was to join a Managed Care Organization (MCO). Our MCO was local to our city and they were phenomenal in providing active resources for private practices.
One of those resources was to negotiate with some of our region’s largest payers for increased reimbursement rates. As a small medical practice with only 5 physicians, my voice was not very loud. But as a member of a 100+ physician MCO, my collective voice was capable of moving the dial!
Attract New Patients To Your Practice
The continual growth of your patient census is essential to increasing the profitability of your practice. If you are in a large area with many competitors, you will need to leverage different marketing techniques to ensure new patients are hearing about your practice.
Improve SEO For Your Practice
SEO is one of the top marketing methods for new patients. Since the majority of patients are searching for providers online, making sure your practice is on the front page of google is essential. Check out our complete guide on SEO for medical practices to get started.
Market To Referring Offices
Building relationships with other offices in your area is a great way to encourage more patient referrals. Include offices that are within your speciality, as it is always beneficial to have a good working relationship with peers in your region.
Buy Space In Local Papers
Newspapers aren’t dead yet, and while they’re still around you should use them to your advantage. Especially if your patient population is above 50, newspapers may still be a primary way for them to consume news. Make sure your practice listing is visible to those who still read the paper!
Manage Overhead Expenses And Reduce Waste
Waste comes in many forms. It can of course mean the misuse of supplies, but waste can also be in the form of an employee’s time. Managing both is key to reducing your overhead expenses.
Honest, trustworthy staff are the key to reducing overhead expenses in the office. I can’t emphasize this enough! When you have those key staff members you can trust to let you know when they need more to work on, or have the time to pick up extra tasks, invest in those people!
Assign A Trusted Team Member To Manage Expenses And Waste
Assign a staff member to lead your office’s efforts on reducing waste. This individual should manage most of the supply inventory and will be responsible for looking at trends such as products that commonly expire before they can be used. If trusted as a supervisor, this individual should also be looking for staff who are being underutilized.
Some successful practices we used in our office to reduce time and supply waste included:
- A list of downtime duties any staff member could do if they had downtime in their workday. These duties could be anything from cleaning/organizing the office to calling new patients for appointment reminders.
- A trackable log of any product with an expiration date in our office. This log was led by our waste reduction manager who was responsible for ordering these products in quantities that were appropriate for our use.
- A simple excel sheet that tracked our average patient census versus our supply orders. We used this to measure trends that seemed inappropriate, such as an increase in supply orders with a decrease in patient census.
- Encouraging our staff to slow down and think before opening products. Whenever possible, we would encourage our nurses and MAs to prep their trays and rooms before the patient arrived. This gave them more time to identify which products were needed for that appointment.
Retain Quality Staff
Invest in your staff, invest in your staff, invest in your staff! If I could yell it, I would! Quality, trustworthy team members are absolutely worth their weight in gold. Some of the top qualities I had in my most trusted employees included:
- Taking extra time with a dissatisfied patient
- Following up on outstanding patient accounts that increase aging accounts receivable
- Noticing and informing me of any important trends with supplies, patients, co-workers
- Offering support and additional training to co-workers
- Tidying up bathrooms, waiting room, exam room areas without being asked
- Identifying other ways to increase practice revenue or reduce expenses
When it came down to it, my most trusted employees valued our office as much as the owners did. They took immense pride in their place of work and were invested in its overall performance. These employees have always been a big part of our overall financial strategy, and could really move the dial on increasing revenue and reducing waste.
Financing Options For Patients
There is absolutely a need for collections companies when it comes to outstanding balances at a medical office. However, many practices use collections services at a large loss of overall revenue. With many collections companies keeping 40-50% of the overall balance owed as their fee, utilizing these companies can make a big impact on your bottom line.
The best practice for outstanding patient balances is to do everything you can to collect on those balances in house. For any balance over $500, have a payment plan option that patients can use. Allowing a patient to make more digestible payments over time can make all the difference when it comes to getting paid.
Best Practices For Patient Payment Plans
We followed these general rules for patient financing options:
- Balances had to be paid off in 12 months or less
- Auto payment on a credit or debit card was mandatory
- No interest would be added to any balance
- Payments could be paused if there were extenuating circumstances
- If payments were missed 3x in a row, the account would be sent to collections
Best Practices For Financial Management
Meet on an annual basis to discuss your practice’s profitability with the primary stakeholders. A good financial strategy is one that is flexible and can adapt to changing economic conditions. 2020 and 2021 were great examples of how a financial strategy that has worked in the past may not be one that can continue to be successful in the future.
To learn more about financial strategy management that can increase your practice’s profitability, check out our latest blog on Medical Practice Financial Management Strategies. We’ll take a deeper dive into developing a financial strategy that makes sense for your practice.