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Twenty pearls for staff cost containment
Getting a grip on practice expenses is critical as payments stagnate and operating costs rise.
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“Executives owe it to the organization and to their fellow workers not to tolerate nonperforming individuals.” – Peter Drucker
“I can walk through the front door of any factory and out the back and tell you if it is making money or not. I can tell just by the way it’s being run and by the spirit of the workers.” – Harvey S. Firestone
The following exercise will be the least expensive management lesson you get this week.
Assuming you are sitting at your desk, put down this issue of Ocular Surgery News for a minute, reach into your wallet and pull out a dollar bill. With a pair of scissors, cut away the left third of the bill, right about where the “T” is in the word “United.” Put the larger part of the bill back in your wallet.
This one-third slice remaining represents the approximate fraction of every dollar your practice collects that goes back out to pay the wages, benefits, taxes and related support costs for your lay staff. It is your No. 1 practice cost today. So, it needs to be your No. 1 focus for cost containment.
Now tape that one-third of a dollar somewhere you’ll see it daily, and continue reading.
Practice expenses
In the present environment of stagnant professional fees, and upper human limits on how much longer and more intensely you can work every day, your mandate (if you want to preserve personal income) is to shrink the size of that dollar clipping.
Unpacking the concept a bit, the typical general ophthalmology practice today spends about 28% to 33% of every collected dollar on support staff. Retinal surgeons and those with a high surgical density come closer to 25%. Urban practices, with reduced managed care fees and higher labor costs, can have a hard time tamping staff cost below 35%.
We are now poised at a labor market turning point. If unemployment levels continue to dip in the next couple of years, and employers start competing once again for workers, labor costs are likely to rise at a faster clip. Now is the time to get a grip on staffing expenses.
Reducing costs
What follows are 20 approaches to stabilizing and reducing labor costs. Some of these approaches may sound harsh. No doctor or administrator relishes taking hours or benefits away from workers. But the present business context has a clinical analog: patients sometimes have to accept unpleasant procedures to stay alive. In this case, your practice, which may now be supporting dozens of families, including your own, is more important than any individual worker.
1. Learn what your real labor needs are. Industry norms have now been long established for how many staff members it takes to see “X” number of patients. Example: It takes 0.5 receptionist payroll hours in the typical setting per patient visit, 0.3 billing staff payroll hours to handle a single claim, and so forth. If you do not know these figures, read the fourth edition of Pinto’s Little Green Book of Ophthalmology, published by the American Society of Cataract and Refractive Surgery/American Society of Ophthalmic Administrators. (Note: This is no pitch for book sales; I write pro bono for the Societies.) Such benchmarks will briskly reveal under- and overstaffing.
2. Eliminate the 40-hour-week entitlement. If you must, reduce average weekly payroll hours to those levels actually needed by the practice; wean staff from the expectation of a 40-hour work week. You wouldn’t lease a 2,000 square foot office if you only needed 1,500 square feet. Only pay for the labor you need. Anything more is wasted.
3. Know your local market’s customary labor rates. If you practice in rural America, do not read too much into national salary surveys. Survey neighboring practices and peg your wage scale to local norms.
4. Realize that people work for love plus money. If you are a beast to work for, you will have to bribe your most capable people to stick around. Take your charm pills every morning to reduce the pace of wage inflation in your practice, and watch labor costs fall as a percent of collections.
5. Change provider behaviors. Be a bit more “Yankee.” Do it yourself when this is more cost-effective. I have seen providers who insist on two assistants in the room, one to scribe and one to instill drops and help a patient center their chin in the slit lamp. Unless you make rock star wages, reduce your dependency on an entourage of support staff.
6. As feasible, replace full-time workers with part-time staff. You will save benefits costs and potentially increase the elasticity of your practice’s capacity (eg, having a 28-hour worker come in for additional hours to cover for a temporarily absent colleague.)
7. Hold off on hiring if the practice can be more thriftily covered with episodic or seasonal overtime wages. Imagine you need an extra tech, but only for about 25 hours a week, and you cannot find anyone qualified willing to work less than full time. It may be less expensive to pay your current staff overtime as needed.
8. If the math works, pay a “battle pay bonus” rather than hiring new staff. Turn to your existing employees and say, “We are now at 40 patients per day and rising. We could either add a new employee to help us on the busiest days, or we could give everyone here a $15 bonus on those clinic days exceeding 48 encounters if we can do it without a new hire. Which would you prefer?”
9. Liberalize flexibility. Staff will often accept a cap on wage hikes if it is traded off for greater flexibility with their hours.
10. If you only have enough patients to fill up a four-day week, consider closing the office. Or, at least compress your personal clinical schedule from 5 days to 4 days, and bring in a guest subspecialist to help cover overhead.
11. Shift a larger portion of health insurance costs to employees. In the typical practice today, staff members pay for 30% to 35% of their personal health insurance benefits and 100% of dependent costs. If your practice can no longer afford to be more generous than this, shift costs accordingly.
12. Out-source instead of in-sourcing. Or, in-source instead of out-sourcing. It may be more cost-effective to have others outside of your practice handle your dictation or IT support. It may be more cost-effective in a small office to have a staff member stay after patients leave to handle light office cleaning.
13. Do not use costly, high-level staff for mundane work. The greenest front-desk staffer, at $12 an hour, can be drafted to run a visual field test, freeing time for a $22-an-hour tech to work up a new patient.
14. Develop your own staff competence in-house through training programs, rather than hiring expensive, seasoned workers. This approach is obliged in rural areas with few experienced staff; however, urban surgeons can take the same approach, save significantly on labor costs and get the added benefit of having staff who learn your way of doing things rather than importing bad habits.
15. Replace five mediocre workers with three superstars. The “stars” will cost more per hour, but their aggregate costs will be less, and their output and quality could end up being much higher.
16. Consider sharing staff with compatible local colleagues. Even if you practice alone, you may be able to enjoy some of the labor efficiencies of group practice by sharing staff. This could be at relatively junior levels — such as sharing a receptionist who needs a full-time job, but whom you do not need on Wednesdays — with a practice that could use extra help. Or you could use this approach at very senior levels. As business and regulatory complexities arise, it may be better for two soloists to split the cost of a $90,000 administrator than to each pay $60,000 for a more junior person who is overwhelmed.
17. Cross-train avidly. The biggest rookie mistake is to segregate your technical staff into “technicians” who work up patients, “special testers” who test patients and “scribes” who assist chair-side but do not cross functional lines with testers or techs. Everyone on the clinic floor should be a “tech-scribe-tester” and float to where they are needed throughout the clinic session.
18. Think of your staff in terms of “core” and “peripheral.” The core staff (department managers, your administrator) may well deserve above-market wages to reward output and aid loyalty and tenure. To counterbalance these higher costs, you may be able to get by with paying peripheral staff, who are more readily replaced, lower wages.
19. If it becomes necessary, reduce staff wages overall. If your efforts to shave costs, elevate collections and sacrifice your personal income are not sufficient, your next recourse will be to cut wages. Just as in patient care, where any strong medicine is likely to have adverse side effects, you will have to plan ahead to mitigate the adverse knock-on effects of a pay cut. Ethically, such efforts should probably include having the doctors and management staff accept disproportionately higher sacrifices than the rank-and-file.
20. Make any needed cuts all at once. When you were 5 years old and your mom had to take off your Band-Aid, she probably — out of kindness — distracted you for a moment and then ripped it off abruptly. It is cruel and disconcerting to staff to have wage freezes and benefits takeaways linger drip-by-drip over several quarters. Rather, it is far better to plan out everything that has to be done in a concerted way to bring labor costs into balance, and then get the pain over with all at once.
In your zeal to shave staffing costs, do not go too far, reducing quality or revenue production. And, of course, do not let up on efforts to boost provider productivity. If your overall collections — the denominator of the labor cost-percent equation — rise, then labor costs fall in comparative ratio terms.
PS: Since this is a column about thriftiness, realize that you can still use the remaining two-thirds of the bill you chopped for today’s exercise as legal tender. Simply exchange it for an unharmed bill at your bank.