Practice management literature often offers advice about cutting expenses – advice that promises cost-cuts improve margins and “directly boost the bottom line.” Many physician owners and practice managers seem to have internalized the idea, so they’re always on the lookout for things to trim. But is this the best way to strengthen your practice business? Some expenses do nothing to improve your practice. Paying more for identical supplies or credit card processing, for example, won’t serve patients better or boost efficiency. Once you start routinely cutting staff, technology, marketing, or materials, though, the risk of undermining productivity or the patient experience increases. It can creep in so slowly, you might not notice until profitability turns sharply south – when it can be much harder to turn things around. For example, if you’re busy, it may seem like you can “get by” without marketing. But today’s new patients probably reflect marketing efforts started months or even years ago. Cut marketing and you may see little difference – at first. By the time you notice a slowdown, you may be facing a year or more of significant investing before your volume returns. Staffing is another common focus of penny-pinching. Even a little bit of staff downtime can seem wasteful. Trying to trim staff so that employees are busy 100% of the time risks bigger problems, however. Without a bit of “excess” capacity, the impact of disruptions like employee resignations, sick time, or unexpected increases in demand can be much more expensive than the cost of a few “extra” employees. What’s more, too little support also undermines physician productivity, which has a much bigger impact on profit. Global consultants McKinsey & Company published an excellent study showing how continuous efforts to improve margins – rather than build the business – can actually undermine profitability after a few years. Their advice: consider whether expense cuts you’re contemplating will negatively impact customers (patients), your ability to compete with other practices, or both. If you’ve been focusing on expense cuts for a while, you could be in the danger zone. Be sure to give building the
“Fix the problem, not the blame” is a well-known Japanese proverb. It sounds like common sense – isn’t fixing problems what we all ultimately want? But when mistakes happen, the search for culprits instinctively begins – and with it often comes demoralization and tension. Worse, the search for a scapegoat usually won’t keep problems from recurring. Bad systems create more problems than bad employees. When workflow is faulty, the mistakes are built into the process. Figuring out who was working the process when it failed does nothing to prevent failure in the future. As organizations grow and silos (i.e., departments) form, so do opportunities for workflow inefficiencies to masquerade as staff incompetence. We’ve worked with medical practices that have grown so fast, they haven’t noticed their processes aren’t keeping up. But even more than growth, market evolution has put new tasks on everyone’s plate. These tasks may not fit well with jobs as originally configured – and that may mean more errors. Here’s a common example. Insurance has become increasingly complex for patients and staff alike. Higher deductibles have also made front desk collections a priority, but it’s a new priority added on top of everything else. Are front desk employees already trying to answer phones, check patients in, answer questions, collect demographic information, and verify insurance? When patients are seen and it turns out they weren’t covered or aware they owe a deductible, it may seem “obvious” that the front desk staff is to blame – especially to your billers, who must deal with the errors. But more likely, front desk employees are simply juggling too much. As jobs evolve, mistakes may increase. Resentments can fester between departments. But the answer isn’t to find someone to blame – it’s to find out where the process breaks down. In the case of the front desk, a better response would be to reconfigure roles, to let staff focus on the tasks in front of them, without multitasking. As work gets more complex, making people feel embarrassed and afraid won’t help them do their jobs better – retraining staff and refining their
Cutting long-term staff to improve profitability? Not so fast [practice management tip: human resources]
A practice we worked with recently was struggling to improve profitability. The practice’s new manager wanted to make an impact fast, so she decided to try replacing longer-term staff with less expensive newbies; since staffing was such a big practice expense, she reasoned that this was the best way to improve profitability. The physician owners were surprised not just that the strategy hadn’t worked, but that we questioned the decision. “Isn’t that the kind of thing you practice management consultants recommend?" they asked. But cutting experienced staff members who perform well just to save a few dollars isn’t something we’d recommend trying. Those exiting employees will take with them all the knowledge they’ve accumulated – knowledge that is easily taken for granted. While cuts might boost profits temporarily, it likely won't take long for patient service to deteriorate. Service will also be undermined by the panic felt by the rest of the staff. When employees see their most loyal colleagues being shown the door, they’ll wonder if – or when – the axe will swing their way. Once those doubts creep in, your most energetic and ambitious employees will begin job-hunting in earnest. Swapping out older workers for younger ones may draw a charge of age discrimination as well. Worst of all: the potential upside is probably small. Differences in pay for experienced versus new staff are typically large enough to cause a big swing in profitability. For example, a $5 per hour difference translates to $10,000 per year. The costs of recruiting and on-boarding a replacement could easily exceed these small savings. It’s natural to look critically at expenses when profitability is flagging. But insufficient revenue is often the main reason profits disappoint – and cutting your best people will severely impact your ability to fix that problem. Instead of cutting valued but ‘expensive’ employees, look for ways to refocus staff and make the practice more productive.
It’s easy to monitor your employees’ every move with modern technology. So should you? The temptation is understandable. The key question is: Are employees motivated to do a good job? Or does getting the most from them require constant oversight? Intuition might suggest the latter – but experience says otherwise. In the early days of business theory, the idea that management was primarily about surveillance (and “cracking the whip”) was popular. But over time, managers learned that employees aren’t just a cost – they’re an asset. Beginning in the 1980s, lessons from Japanese companies illuminated the value engaged employees bring to an enterprise. Toyota, in particular, found that by encouraging employees to be more involved in decision-making, they could improve product quality and productivity. Toyota’s success at improving manufacturing quality – which endures today – started with trusting employees. A culture of trust and respect tells employees their contributions matter – in turn, encouraging and empowering them go beyond the rote requirements of their job descriptions. With engagement tied to higher productivity, lower absenteeism, and better customer service, it’s easy to see how engaged employees can uplift a medical practice. But it won’t happen without trust – and electronic monitoring is a sure-fire way to communicate that you don’t trust your employees at all. Rather than trying to control your employees with surveillance, consider setting goals and incentives that encourage the behavior you want. Rely on reports and data, not constant monitoring, to evaluate how employees are doing. Start by hiring carefully, so you don’t have doubts about trust right out of the gate. And relax a little: Most people want to contribute and do their jobs well. Give them the structure to do it, and you won’t need to watch them all the time. Another thought to consider: If the huge potential benefits of an engaged staff aren’t enough to make you rethink surveillance, remember that every minute a practice owner or manager spends on monitoring is one that can’t be invested elsewhere. Surveillance is very time-consuming (read: costly). Odds are there are more valuable ways to use that
In a typical medical office layout, there’s a front door that’s used by patients and a rear door (or staff entrance) for employees. Of course, this can be quite convenient, especially when connected to employee parking. But an interesting consequence of this configuration is that physicians and managers never experience the reception area from the patient’s perspective. Next time you head out of the office during the day, come back in through the front door. Have a seat in the reception area. Are the seats comfortable? Are there enough of them? Are they spaced appropriately or too close together? (Imagine yourself sitting next to a sneezing flu patient if you need helping deciding.) If there’s a television, is it audible, but not too loud? Are there recent magazines on hand, or raggedy old ones from last year? What does the front desk activity convey to people waiting? Do patients look impatient – like they’ve been waiting too long? If so, does anyone behind the front desk seem to notice? In our consulting engagements, we almost always have comments on how the reception area can be easily and inexpensively improved. But you don’t need consultants to figure this out. It’s easy to self-diagnose – and the upside on improving could be huge. Patients start deciding how they feel about the quality of the care they receive the moment they walk into the office. Even ill patients will feel better about their visit – and their experience in the exam room – when their first moments in your practice reassure them they’re in a welcoming, professional, and caring environment. Patients view their entire practice experience as their “care” – not just the 15 minutes they get with a clinician. An inviting reception area is a cost-effective way to reinforce your practice’s caring attitude – and get the patient visit off to a strong start.
Independent primary care and specialty practices alike worry about increasing competition from hospitals and integrated systems. It’s not uncommon to see hyped-up headlines pronouncing independent practices “doomed” and the consolidation trend “inevitable.” But the naysayers always conveniently overlook a big advantage independent practices have versus larger organizations: the personal touch. In consumer settings, small players often find ways to compete against giants – and win. Maybe your town has an auto mechanic who outshines the dealer shops, thanks to better prices and more convenient hours. Perhaps your neighborhood has a family hardware store that’s going strong in the shadow of a big-box store, thanks to expert staff and a unique range of products. Or, if your area’s like mine, maybe you’ve got weekend farmer’s markets selling fresh vegetables by the truckload, despite the supermarkets down the street. Of course, these are just a few examples – but you get the idea. “Little guys” can flourish – if they find ways to serve their customers their super-sized competition can’t easily match. Competing against bigger, deeper-pocketed opponents can be scary. But it’s easy to forget those competitors have weaknesses as well as strengths. In medicine, it’s hard for a large, bureaucratic organization to provide the personalized experience a smaller practice can. And in what setting could a personal touch be more valued than in healthcare? If you’re worried about a big player setting up camp in your backyard, start thinking about how you can attract and retain patients with better patient service. Take a seat in your own reception area – and think about how it can be upgraded. Start looking at metrics like wait times and overall visit length, and consider how you can improve them. Check online reviews for comments you can learn from, and do your own confidential surveys to give patients a chance to tell you what they value – and what needs work. You just might find that you practice won’t just survive – it will thrive.
Do you find yourself reluctant to discipline difficult employees because they’ll be hard to replace if they quit? Is that same fear causing you to retain employees who’ve failed to improve, despite being counseled again and again?When the consequences of poor performance never materialize, underperforming employees will soon perceive they’ re exempt from the standards you’ve set for everyone else. Even worse, your better employees will have to pick up the slack and tolerate negative energy from complainers – increasing the risk you’ll lose the people you value most. Many practices feel squeezed for talent in their local markets. It’s understandable to be concerned about a key job staying unfilled for too long – but, still, keeping underperforming employees can harm your practice much more. Instead of going soft on performance problems, consider amending your hiring practices. For example, a little redundancy in your medical assistant ranks (e.g., maintaining one or two “extra” floaters) ensures coverage when someone’s out sick – or ends up leaving the practice. Those additional hands can also tackle valuable ad hoc tasks that might otherwise get skipped, such as recalls that serve patients better and generate additional revenues. A rolling system of recruiting can also ensure you don’t miss a chance to hire talented new grads. Establish recruitment relationships with local training colleges and med schools, and maintain key job postings for year round. (Be sure to use screening questions on recruitment sites and filters in your email software to help manage the applicant flow.) Even if you don’t need help immediately, being aware of available talent will allow you to hire opportunistically if someone exceptional becomes available. It will also provide a clearer picture of the current talent pool, so you don’t feel compelled to hold on to employees who aren’t measuring up.
When presented with ideas to update your medical practice’s technology, better support your clinicians, or market your practice in a new way, is your go-to reaction “we don’t need that” or “we’re doing fine without it”? Is your financial management approach simply to always minimize expenses? (Perhaps because you remember the old maxim of taking care of the pennies and the dollars will take care of themselves – or, its more modern cousin, “the latte factor”?) If you’re thinking about business spending in the same frugal way personal finance experts recommend you run your household, you may be missing out on opportunities to grow and increase your profits. Keep it up long enough and you may jeopardize your practice’s future profitability. The good advice to skip a few lattes and pocket the money simply doesn’t correspond to many business expenses. While a latte is a fleeting pleasure, upgrading practice technology is an investment that can increase productivity for months or years to come. Similarly, keeping headcount at the number needed to “get by” may mean your physicians, NPs, and PAs will be less productive – an opportunity cost that quickly outpaces the “savings” from bare-bones staffing. Just because a business investment requires a decision doesn’t mean it is analogous to that forgone latte that puts money in the bank. Not pursuing an investment may actually cost more in terms of lost revenue and profit. Over time, under-investing in productivity tools, visibility for your practice, and modern, convenient patient service can make it harder to attract patients and retain staff. Rebuilding from that sort of decline can end up being much more difficult and costly than investing in keeping your practice up-to-date and well-staffed would have been. Before rejecting investments in your practice’s infrastructure, marketing, and staffing out of habit, be sure you’ve considered whether the upside you’ll pass up is greater than the savings.
Background checks in hiring are sometimes confused with reference checks. While both are important, the differences between the two are critical to understand. Reference checks involve conversing directly with a candidate’s former bosses and coworkers. It’s a subjective process that provides insight into a prospective employee’s strengths and weaknesses. Checking references helps you learn how well a candidate’s self-perception matches that of former bosses and colleagues. It can validate (or refute) key narratives shared by candidates, such as how and why they left their former job and what their work style is like. Background checks, on the other hand, deal with purely factual aspects of a candidate’s record. For example, did they earn the degree they claimed? Is the stated employment history accurate? And what about legal scrapes – is the candidate’s background free of convictions or sanctions that disqualify them from working in healthcare? There’s no escaping the time required to contact references directly, but technology has significantly streamlined background checking. With automated online fact-checking services, checks that once required numerous phone calls and faxes can now be done more quickly, completely, and reliably, at much lower cost. Background checks offer peace of mind in any hiring situation, but they’re even more essential in healthcare. For physicians and non-physician providers, verifying credentials and licenses is, of course, mandatory for patient safety and to avoid liability. HIPAA also requires care be taken to protect patient information; with medical identity theft on the rise, too, careful hiring is critical for every role in healthcare. Detailed background checks may even help protect against embezzlement – an all-too-common crime in medical practices. Technology can help you perform these crucial checks more quickly, thoroughly, and easily – usually for less than a few hundred dollars.
So what does this old saw from Silicon Valley really mean – and how can it help your medical practice? Just like in Silicon Valley startups, medical practice teams are usually small enough that every person has an important role to play. When a key position in your practice is vacant, near-desperation can set in if the right candidate doesn’t materialize quickly. That can lead to hiring impulsively and compromising too much on important traits, skills, or knowledge. Because even the best candidates will have a learning curve, you probably won’t realize you’ve made a bad hire for months. Those extra weeks that you “saved” by not extending your search to find a stronger candidate will, in retrospect, seem trivial in comparison to the lost benefits of having the right person in a key position. When a key role is held by an underperformer, your entire practice is dragged down. But – just like in the tech startup world – the small size of practice organizations can feel family-like. In fact, that’s one of the most appealing aspects of working in an independent practice. However, that close-knit culture can make it hard to confront under-performers, who wind up staying in their jobs longer than they should. Physician owners and practice administrators often move slowly in dealing with performance problems out of compassion for the underperformer – not recognizing that their other employees are picking up the slack and, in effect, being penalized for doing a better job. Hire slow, fire fast is an important lesson mainly because most people’s natural tendency is to do the opposite – hiring too fast out of urgency, and firing too slow out of misplaced kindness. Both of these can lead to having the wrong employees in place for far too long, dragging down performance and morale in your practice.