Staying afloat: How to tighten your practice's finances

Key Points

National report - Dermatology is not recession-proof. However, protecting revenue and containing costs can help your practice survive and even thrive, even in challenging economic times.

To learn how, Dermatology Times interviewed practice management consultants and dermatologists for tips and strategies.

Balance your practice, says Elizabeth W. Woodcock, M.B.A., founder of Woodcock & Associates, a practice management consulting firm in Atlanta. Some groups perform excessive self-paying cosmetic procedures and neglect basic, reimbursable medical dermatology, she says.

"Be proactive before your administrator says, 'We can't make payroll,'" Ms. Woodcock says.

Pamela L. Moore, Ph.D., director of content and strategy for Physicians Practice, Inc., agrees.

"Reimbursement isn't going up, and with many payers, it's going down," she says. Self-paying patients will delay elective procedures, and high co-pays or deductibles can cause others to postpone basic care.

Staying afloat: How to tighten your practice's finances

Dr. Moore recommends comparing your practice's current patient activity to last year's, to avoid an undetected revenue slide that can smolder for six to nine months and then suddenly spark a payroll crisis.

Monitoring trends can help you prepare for cash flow shortages, she says.

Evaluate this year's and last year's first quarters and look for drops in patients, the percentage of the change, and any change in the type of services you're performing, she says.

Also identify any change in the payer mix, such as a switch from private insurance to Medicaid or to no insurance, she says. Notice whether patients are shifting to policies with lower reimbursement rates or slower payment schedules.

Dr. Moore also recommends tightening up payment policies, as patients will still self-pay for cosmetic procedures.

"Collect at the time of service as much as you possibly can," she says.

Expedite your billing cycle, too. "Send the first bill the same week that the patient came in. Send a bill for any unpaid balance in another 30 days, and the next bill in 15 days," she says. "Afterward, refer unpaid bills to collections."

Your top cost: Personnel

Although many costs, such as office rental and equipment maintenance, are fixed, certain categories are obvious starting places for trimming.

"Personnel is always, always the highest cost category," Ms. Woodcock says. "Labor costs go up, employees expect more money per year, and, therefore, long-term employees are more expensive."

However, she cautions that cost-cutting in personnel can be tricky.

"Letting a long-term employee go or reducing his or her hours is very difficult," she says.

She recommends openly discussing with employees the challenging times and the strategies the practice is using to avoid layoffs, as well as the impact on the group's physicians.

Ms. Woodcock stresses that physicians should not feel pressured to reveal their incomes, but focus on the recession's impact.

Creative strategies can help, such as recruiting volunteers to sign up in advance for unpaid days off on predictably slow workdays.

It also can be helpful to reduce all employees' workweeks; for instance, cutting back to 36-hour weeks instead of 40-hour weeks. These steps are more palatable if higher-level staff, such as nurse practitioners and physician assistants, cut hours as well. Eliminate all overtime work, she says.

While benefits may have been substantially reduced, the practice should know what other companies are offering, and not offer more.

"Other companies are passing more healthcare costs to employees, so physician practices should be doing the same," Dr. Moore says.