Are you giving away your power in your practice?

May 1, 2008

It's your practice, and it's in your best interest to stay involved and approve major decisions. Don't give the power away.

This article explains how to maintain control of the key financial and management aspects of your practice.

Not long ago, I received a call from a urologist reaching out for help. He told me he's busier than ever, but can't seem to get ahead. He went on to tell me that his manager of 10 years was a hard worker, dedicated, and trustworthy. He wasn't sure what was wrong, but everyone seemed to be drowning, and the bottom line was suffering.

When work wasn't getting done, the manager just added more staff, instead of evaluating efficiencies and staff performance. Salary costs were skyrocketing, and without a budget, so were the costs for building out a new facility. The manager, buried in planning the new office, neglected the billings, and the receivables were soaring. This didn't come to the physician's attention until the bills were unpaid. Don't let this happen to you.

Establish guidelines

How are decisions made in your office? Be sure the manager understands what she can and cannot do, and be sure you understand those capabilities and limitations as well. Clearly define how much authority the manager should have and what decisions require your approval. For example:

Managers need guidelines, too. Establish reporting guidelines to monitor compliance. I suggest you meet early in the month to review the prior month's performance reports and look for any major shifts. Examine charges, receipts, adjustment activity, and total accounts receivable for each of the past 12 months.

Review the monthly income statement with itemized expenses for the month and year to date compared to the same time last year. Pay special attention to staffing costs, including overtime pay, as this can be an indication of inefficiencies that need management's attention. Include the costs for independent contractors, such as temporary staffing services.

Develop a budget

Early in the year, develop an operating budget and a capital improvement budget. The operating budget can be prepared by looking at itemized expenses for the prior year and projecting what changes might be necessary to manage costs for the current year. Some practices review national expense benchmarks when preparing budgets. If their line item costs are higher then the benchmark, management will explore ways to improve efficiency and reduce costs, setting a new projected budget for the coming year.

The capital improvement budget will include expected purchases of major clinical or business equipment, expenses involved with bringing in ancillary services or products, adding another physician or mid-level, or any major marketing campaigns you expect to conduct. Each month, review the projected budget and compare it to the actual expenses.

Monitor the number of full-time equivalent employees to see whether it is stable or whether costs and patterns are being falsely managed by shifting to independent contractors or outsourcing some services. A sub-component of the operating budget is a separate salary budget to ensure staffing costs and individual pay rates are managed throughout the year.

Summary

Reports and meetings are important elements to communication and staying on top of finances and performance. But the proof is still in the actions. If you fail to respond to a manager who is underperforming or overstepping his boundaries, it gives the appearance that you are giving him permission to do so.

It's your practice and your responsibility. Give your manager the authority needed to do the job, but don't give the power away.

Judy Capko is a health care consultant and the author of Secrets of the Best Run Practices. She can be reached at 805-499-9203 or judy@capko.com
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