If you haven’t already started, now is the time to plan for a financially healthy 2011. Here are four steps you can take over the next six weeks or so to create a budget, set goals and engage staff – all with an eye toward a better bottom line next year.
1. Analyze your 2010 numbers.
As soon as you close out the books this month, set aside time to carefully examine revenue, expenses, patient volume, and staffing data for the year. Compare 2010 to the prior two years and look for trends. Are payroll and benefit costs creeping up more than anticipated? Is volume moving up, down, or staying flat? Any changes in the number or sources of patient referrals? Are you seeing reduced revenue from certain third-party payers? How did bad debt write offs in 2010 compare with prior years? Are increases in supply costs related to higher patient volume, or have you gotten lax about buying in bulk and staying alert for special offers? Consider comparing your figures with those of similar practices using data from the Medical Group Management Association (mgma.com, click Benchmarking Tools under the Benchmarks and Industry Data tab). Studying rows and columns of numbers may be tedious, but it’s a wise investment of time.
2. Create a budget and set goals.
Without a practice budget and goals to work toward, you’re operating in the dark. Base next year’s budget on the analysis of 2010 and your goals for 2011. Be sure to factor in capital purchases that you know you’ll be making, and take into account recent or imminent events that might impact your practice (e.g., a large employer in the area is laying off workers, or a nearby competitor is retiring). Set realistic goals and incorporate them into your budget. Examples include: increase patient volume by 10 patients per week, reduce overtime by 50%, renegotiate or cancel insurance plans that don’t reimburse at a reasonable rate, reduce office supply costs by 5%, trim 10% off utility bills by implementing energy conservation measures. If you really enjoy number crunching, create budgets to reflect the worst case, best case, and most likely case scenarios for next year.
3. Hold a special staff meeting.
Bring the entire staff together for a few hours to go over the budget and goals for 2011. Often, employees in medical offices have no idea what it actually costs to keep the door of a practice open. Helping staff understand where the money comes from and where it goes will increase awareness and help everyone look for ways to keep overhead down and learn to appreciate (instead of bemoan) high patient volume days. This meeting is also an excellent time to ask employees for their ideas on how you can save on expenses and/or increase revenue.
4. Monitor progress.
Once you have your budget and goals finalized and have buy in from staff, ongoing monitoring becomes the name of the game. The office administrator and/or managing partner should review data monthly and keep the staff informed about how the practice is doing. Carefully evaluate variances from your planned budget numbers to determine why you’re over or under in specific categories. And, finally, remember to acknowledge success. Are you exceeding volume and expense reduction goals for the first quarter? Great … reward staff with a couple of paid hours off, a modest gift card for a local restaurant or shop, or order in pizza for lunch to celebrate.