It’s no mystery that healthcare is an expensive venture in the United States. The cost of healthcare services has increased incrementally for over a decade with no signs of slowing. Even with laws designed to reduce expenses and expand insurance coverage, Americans that live paycheck-to-paycheck struggle to maintain routine care with their primary provider.
In the provisional sector, it’s also pricey. Healthcare organizations provide a range of services and seek to turn a profit while juggling overhead costs. Smaller and private practices are also burdened with escalating costs. They’re confronted with a challenging prospect: join larger healthcare organizations and lose autonomy or find ways to reduce expenses in a practical manner without impacting care quality.
Considering patients prefer the personal touch of a trusted primary care provider, it’s a scenario to avoid.
First, let’s take a glance at the variables driving high healthcare costs in the US for both doctors and patients. If you’re a new practice, or considering it as a local startup, there’s an overview of cost factors to take into account.
Common medical costs and overhead concerns
Wasteful data and information are common problems in the medical industry. Paperwork and legislative demands create large invoice backlogs that must seamlessly function with electronic health records. In turn, the healthcare realm observes duplicate billing errors and incorrect charges, requiring remediation and extra spending to fix. The expansion of billing requirements also creates demand for administrative departments and personnel handling the paperwork services. That’s more staff to train, onboard, and keep in an already competitive market.
Some other points of increasing expenditures are:
- Increasing wages for administrative positions related to billing and healthcare code regulations
- Higher healthcare charges in the US versus other countries (PCP, emergency, specialist)
- High prescription drug costs, averaging a 4x higher amount versus non-US countries
- Complexity when charging for care through multiple billing systems
Consider what a typical patient visit looks like. For this example, let’s also say they’re a new patient. After they provide insurance information, how are they charged? Is the visit covered by workplace insurance, healthcare marketplace plan, Medicaid, or non-insurance?
A patient has to deal with several cost tiers and insurance options. Even after deductibles, they’re stuck with a bill. For those that can’t afford all the costs associated with medical visits, the “junk debt” is either offloaded into other treatment costs or sent into a collection void.
Know your costs
We’ll cover a range of ways to reduce overhead expenses and offer solutions to mitigate said costs. However, you can’t make a cohesive plan without assembling your financial picture. You need to develop a realistic annual budget and estimate expected current expenses. Categorize them and prioritize the areas where you should cut expenses and can cut costs. Think about practicality and set a reasonable timeframe for the overall cost reduction. Do you want to achieve this in a few weeks? Months?
Be sure to account for “disaster scenarios” and how they could change or impact your plan of action. Account for them in a realistic fashion, such as “What is the likelihood we’ll experience hardware failure, natural disaster, regulatory penalties, need to make new investments, etc?”
Once you’ve established a plan, you can safely move forward.
Tip: a good rule of thumb is to identify expenses you can reduce within a timeframe of 3-6 months. Every medical practice is different with varying goals, but you must consider reasonable cost reduction initiatives you can achieve.
How it impacts your practice
No matter the size of the medical organization, administrative costs are native to doing business and patient treatment. Administrative overhead is therefore one of the first major expenses you have to examine. Managing invoices and billing in an accurate fashion is one state of administrative paperwork. Minding regulatory mandates and privacy rules such as HIPAA is another.
Scaling wages for doctors and nurses
Medical experts, specialists, doctors, nurses, and clinicians actively seek out competitive wages. When dealing with the challenges of staff retention, a medical practice needs to remember what it pays and the benefits it provides. Considering healthcare burnout is a serious issue, one that’s steadily increasing in a “post-COVID” environment, keeping staff is harder than ever. More so, the post-COVID environment saw wages lag when compared to countries outside the US, creating a highly competitive market with higher chances of rotating medical staff.
Operational Expenses
Of course, the size of the healthcare organization determines its operational costs. This covers utility, building lease/rent, maintenance, installation of new devices, heating/air, and all functions related to performing healthcare services. Cutting back or finding ways to reduce operational costs is challenging since many are vital to care for patients.
Vendor Services
Smaller and private medical practices will often use third-party vendors and providers to handle invoicing and electronic healthcare records. Different services will provide varying options, and practices need to take careful consideration before investing in vendors. A guesstimate is around 8 to 10 percent of monthly earnings are directed toward the management of EHR and revenue management. Larger healthcare organizations will typically house their own billing and electronic health record departments.
Mitigating costs and increasing healthcare practice value
As running a private medical practice involves costly overhead, finding ways to reduce expenses is important. It’s also essential to do so without reducing the quality of care provided. Patients are hassled with insurance costs, PCP visits, and prescription drug costs, and will therefore seek out what is affordable and effective. To remain a competitive practice, you must meet and exceed these needs.
Managing costs in a healthcare setting is based primarily on efficiency and reducing redundant processes wherever possible. Time is a massive factor regarding patient treatment, as doctors average 10-15 minutes per patient with hours spent on record and data management. In that instance, using powerful tools like dictation software (such as Dragon Medical One) can mitigate tedious paperwork.
A great way to handle time redundancies is to examine where those “sinks” are. What part of your healthcare process is the most time-intensive for patients and doctors? You might look at a monthly average and conclude “waiting times.” Therefore, deploying systems to resolve long waiting times increases overall efficiency. More patients generate revenue, maintain patient happiness, and guarantee long-term treatment paths.
Improving legacy infrastructure
The medical sector is no stranger to old tech, solutions, and practices. It’s this legacy infrastructure dragging down performance, costing time and money. Healthcare organizations and private practices need to conduct a sweep of their current tech. Considerations to upgrade where necessary should be made.
Legacy infrastructure introduces a range of costly problems. For example, older computer hardware is prone to failure, slowdown, and data loss. What happens if your staff can’t access medical records for new or returning patients? How much time do you lose when systems slow down or fail to load files? That can create delays, and billing issues, and generate negative experiences hurting your brand strength in the long term.
You can also use powerful digital tools and resources to expedite certain processes. Dragon Medical One, for instance, is an industry-leading dictation software that captures the spoken word with context-driven accuracy. Effectively, it turns hours of paperwork into minutes.
Using third parties such as a managed service provider can also help. MSPs provide vendor IT services for data backup and management, while also providing virtualized infrastructure options through cloud suites. It also grants access to IT support teams and cybersecurity experts, essential staff that not all practices can afford to onboard.
Updating code, practices, and invoicing process
As mentioned, one of the costliest issues in healthcare relates to billing and invoices. Duplicate charges, errors, and incorrect data cost both time and money. Patients will return invoices for remediation and corrections when discovered. Optimizing this process cuts away erroneous charges and yields better profit for the practice since you’re saving time (no hours spent on corrections).
Cutting unknown/miscellaneous expenses
When you categorize your weekly, monthly, and annual overhead costs, what can you eliminate? Do you know where that “miscellaneous” money is going? This is a different kind of medical waste, and its removal can bring you back to healthier profit margins. Every healthcare organization will have different misc costs, but they’re important to reduce and remove.
Reducing appointment time with website resources
Using online resources specifically catered for the patient experience is both a time saver and cost reducer. Do you have an accessible website? Does it have a patient portal with their medical records, invoice information, and ways to schedule new appointments? If not, this should be a priority. Remember that electronic healthcare records are a mainstream expectation in the medical realm. Lacking this key resource can turn away potential new payments and put your practice behind the curve.
You can even reduce staff workloads with online patient portals since said staff won’t need to always be on standby for over-the-phone appointments/questions. Furthermore, you’ll have less need to onboard new staff. While a larger headcount is always helpful, going beyond your means will sink a practice, forcing bigger cuts and drastic decisions.
If you haven’t already, plan to incorporate a patient portal. If you maintain the portal through your practice, you’ll need staff that is familiar with its processes in case of troubleshooting concerns, maintenance, and updates. It’s good to have at least one experienced IT staff member on hand, or utilize third-party assistance where available.
In general, software management suites can reduce workload and assist with the organization of your electronic medical records.
Final Considerations
We’ve covered a lot of ground regarding operational costs and expenses related to patient coverage. To stay afloat, private medical practices have to approach their invoice structure in a fair but practical manner. It needs to yield both profits to cover operational charges, but also remain affordable to maintain long-term patient relationships.
Where operational costs hit you hardest is based on different factors: location, services, available staff, and infrastructure are just a few. Therefore, you need to identify the biggest pain points, consolidate waste (reducing redundancies caused by wasted time/inaccuracies), and adapt to regulatory requirements.
Take advantage of software resources where available. Nuance’s dictation software, Dragon Medical One, is a powerful asset for healthcare organizations and private practices. To learn more, contact us today or start your free Dragon Medical One trial.
