Here are 30—yes, 30—of the best ways physician offices can save some cash

Medicine Money
Medical practice leaders can save money by thinking outside the box. (Getty/utah778)

You'd be hard pressed to find a physician practice that isn't looking to find ways to save their business money.

But finding the right formula? That can be tricky.

Michael O'Connell, the senior vice president of operations at Stanford Health Care in Newark, California, was determined to find some of the best ways and gathered cost-savings ideas from medical practice leaders across the United States, interviewing them and asking what they have done to be able to save money and reduce costs in their practices.

“We’re all in this environment where we are moving from volume to value,” O'Connell said as he presented at a session at the Medical Group Management Association annual conference last month and offered the top 30 of those ideas—yes, 30 ideas that were all “vetted and approved” by medical groups.

Here's a look at those ideas:

  1. Negotiate new contracts. The laboratory/pathology departments at the University of Arkansas Medical Sciences in Little Rock always used one blood bank. That is, until it decided to send out a request for proposals for blood bank services, on which it was spending $9 million a year. A new company, that offered enhanced services including education for physicians and staff, bid on the contract and saved the organization $1 million a year. “There’s nothing like competition,” O’Connell said.
  2. Implement an electronic medical record (EMR) vendor’s cloud billing. Pioneer Physicians Network, Inc., in Akron, Ohio, was looking at its EMR and decided to implement its vendor’s cloud billing, which allowed the organization to eliminate service hosting fees, provider licenses, support and maintenance fees. The cloud billing also handles automated processes. The organization saw savings of $125,000 annually for 42 providers with $1.8 million in monthly charges. Billing costs decreased from 6.5% to 2.9% of monthly collections. Shifting some of the duties from billing staff allowed them to spend more time on denial management, O’Connell said.
  3. Share equipment with multiple practice sites. The Cancer Treatment Center in Wooster, Ohio, is a radiology/oncology group with three locations. The organization realized staff at each location could share expensive oncology equipment that was not used all the time. The organization saved over $10,000 by not duplicating equipment.
  4. Create an expired supply product board. The Mayo Clinic in Rochester, Minnesota, created a board to track soon-to-be expired supplies. The interventional radiology department maintained a large array of supplies to accommodate a wide variety of complex procedures. The organization created a place to post supplies that were close to their expiration date so that doctors were aware they should use those products first. It cut the cost of expiring products from 10% to 1.2% of their total expenditure. The product board was implemented quickly and it took a great amount of management for staff to understand how to use the board and realize they were not impacting perceived care to patients. Collaboration, however, created cost savings, O’Connell said.
  5. Consolidate medical and general office supply vendors. Evergreen Health Care in Baltimore is a primary care practice co-op with four locations. Leaders consolidated medical and office supply purchasing with one vendor with an annual savings of $5,000. The consolidation resulted in 15% savings on most products, no minimum shipping, and centralized ordering. It demonstrated that a focus on simple efforts can have a great financial impact, he said.
  6. Consolidate vaccine supply purchasing. Children’s Practicing Pediatricians in Columbus, Ohio, had its member practices take advantage of purchasing vaccines in bulk before price increases went into effect. Some 400 providers participated with cost savings of 5.5%. Practices saved between $1,000 to $20,000. Issues for practices to consider are the cash flow since inventory needs to be prepaid and having the space to store vaccines, since they may need to be refrigerated or frozen. Each pediatric group now makes the decision on a yearly basis about vaccine ordering depending on cash flow, inventory storage, and potential cost savings.
  7. Improve energy efficiency. “We waste a lot of energy each and every day,” O’Connell says. One medical practice participated with National Energy Compact and hopes to see a 20% reduction in energy by 2020. In non-clinical areas, the practice sets temperatures at 74 degrees in summer and 68 degrees in winter. It also locks thermostats so they cannot be adjusted manually. It saved approximately 1%-3% in energy use. “They saved millions of dollars,” he said. But expect complaints from staff who are too hot or too cold. To get employees on board, the practice asked staff to sign an energy pledge encouraging them to walk the stairs if able, wear layers of clothing and turn off the lights when not in use. It’s an effort everyone can contribute to, he said.
  8. Reduce red bag waste. Also known as regulated medical waste, this includes blood, body fluids, discarded sharps, inoculated culture media, tissues, and slides. “There’s a lot of people who don’t understand it’s expensive to use the red bags,” O’Connell said. Practices can save money by decreasing the number of incorrect items being placed in red bags when they can be placed in regular trash. One practice saw an annual savings of $100 per provider.
  9. Reformulate operating room packs. Unused surgical and anesthesia supplies must be either discarded or re-sterilized, creating lots of waste. A health system and medical group reformulated packs for a hospital and ambulatory surgery center ORs. A team reviewed pack use and gained support for eliminating unused products. By consolidating 60 packs down to less than 20, the organization saved over $200,000.
  10. Use purchase orders and reduce check request spending. One organization realized a lot of people circumvented its purchase order process. Check requests circumvented the sourcing and procurement process limiting the ability to manage, spend, generate accurate reports and provide metrics. Eliminating inefficiency in its supply chain management process saved money.

    RELATED: U.S. hospitals wasting about $25.4B on supply chain every year
  11. Create bar scanning technology for smartphones. This can allow for a significant reduction in marketing and community affairs budgets for printing costs. Since most people own a smartphone, one organization, which did a lot of community outreach events, reduced spending on printed materials and handouts by creating bar scanning stations where patients can use their smartphone to download health information directories and educational materials. The potential savings is $3,000 for small practices and $20,000 for larger practices.
  12. Reduce unused, expired medications. Medications have an expiration date. One group found they had a lot of drugs that had high costs and low volume case use so they tended to often expire before they are used. When medications are within two months of their expiration date, the practice logs them on a site and shares the information with other locations via email. Exchanges are made within the network to prevent items from being thrown away. An oncology practice saved over $100,000.
  13. Re-sort supply vendor catalog. One practice discovered that when staff went onto a vendor’s site to order supplies, they didn’t necessarily find the lowest priced items. For example, when typing in “Post-it notes”, the catalog showed the first item as a brand name 12-pack for $10.00 while several lines down it showed the generic product for $2.00a savings of $8.00. They were able to change the “sort” function so that the cheapest product shows up first when using a standardized supply catalog online. The result is a 19%-20% cost savings.
  14. Eliminate paper staff directories. A multi-specialty group practice had a 200-page directory that it distributed to 3,000 people. That was 600,000 pages of paper. The practice put the directory online and saved $12,000, or $4 per provider.
  15. Eliminate paper mailings to patients. Instead of paper mailings, practices are transitioning to emails, texts and phone calls. One practice stopped mailing holiday cards and emailed a holiday greeting to their referrals. Another practice stopped sending reminder appointment cards and sends either a telephone or text reminder. One practice discontinued giving patients its brochure and posted the information on its web page, along with a PDF that patients can print. At his practice, patients automatically get an electronic statement unless they opt-in if they want a paper statement, O’Connell said.
  16. Evaluate facility service agreements. One practice had a service agreement of $3,000 per year for service on their telephone system. They found that they didn’t have one service call in two years and decided to eliminate the service agreement. The vendor still responds but at a higher “time and material rate.” Yet the practice saved $3,000 not having the service contract that was not used.
  17. Secure “time share” space. One medical group sought new clinic space in new locations by signing a lease for full-time space. However, practice locations didn’t ramp up as expected and they had multiple locations that were not fully used. The practice moved to a “time share” model, leasing space for four-hour blocks of time, and saved $10,000. The practice didn’t invest in a new location without trying out specialty and physician fit and saved capital equipment and paying for space not used.
  18. Centralize scheduling. One medical group had a disparate scheduling system across multiple practice locations, resulting in inefficiencies and waste. Nurses, receptionists, and schedulers all made appointments for patients and universal access to all physician schedules was not available. Many doctor schedules were “protected” by physician and nurses by limited access. The solution came when physicians approved a centralized scheduling process, which created a common template for all providers to schedule 30-minute appointments for new patients and 15-minute appointments for established patients. The centralized location for scheduling allowed for better continuity improved access and resulted in a 2% increase in appointments. Savings also came from improved staff productivity with fewer staff allocated per appointment.
  19. Restructure professional liability insurance. Paragon Health, PC in Kalamazoo, Michigan, is a group of independent physicians who are part of a larger group that allows for group purchasing, third-party contracting and administrative services with 10 specialty practices, 40 physicians and 16 midlevel providers. The practice restructured the funding of its malpractice premium fund. It placed $150,000 in an escrow account to cover possible settlements. It collected its original policy premium and banked the difference between the full policy premium and deductible. It fully funded its escrow account in two years. Today the practice has a $100,000 deductible on its professional liability policy. It achieved savings of 50%-60% on policy premiums. “Which is huge, absolutely huge,” O’Connell said.
  20. Implement a comprehensive supply program. The Fertility Center in Grand Rapids, Michigan, implemented a “switch and save” program. In coordination with its main supply vendor, during the ordering process, the practice is offered an opportunity to switch to the cheapest product and save money. For example, it bought syringes at a lower price, saving almost $124 for 24 boxes. It also reduced supply inventory to less than a 30-day supply and conducts an annual review of supply inventory on ordering patterns and pricing and selects new vendors based on cost and pricing. The result was savings of more than $1,000.
  21. Improve employee engagement. According to the MGMA, one out of three employees leave a medical practice within the first year of employment. It costs an estimated $4,000 to $8,000 per hourly employee. “I cannot say enough about employee engagement,” said O’Connell. One medical practice worked on improving employee engagement and reduced employee turnover, as well as improving morale, performance, productivity and patient satisfaction. Managers who recognize and reward staff members breed loyalty and offering perks, such as flextime, makes it harder for employees to leave.
  22. Join a network. The Council of Independent Physician Associations in Ann Arbor, Michigan, is one such network. It is made up of 40 physician organizations with 1,200 physicians in Michigan and Ohio. At a cost of $99 per physician, the network allows for discounted medical malpractice insurance, provides help to optimize incentives under MACRA, obtain value-based contracts and participate in an ACO. Doctors have access to a centralized library of tools, best practices and education. The network has led to savings of 2%-5% in overall expenses.
  23. Network with other medical practice leaders. That can result in cost savings if leaders share best practices, ideas, and solutions.
  24. Conduct an energy audit. One practice invited a vendor to conduct a free audit and determine potential energy savings. The practice upgraded all of its lighting with returns on the investment in two years that resulted in thousands of dollars in savings.
  25. Sign a sustainability pledge. One practice had employees sign a sustainability pledge to reduce waste in the organization. By recycling paper, cardboard and metal, the practice was able to reduce one garbage bin per week resulting in savings of $90 per trash haul. Another practice audited its waste management bills and dropped a vendor who had increased fees beyond its contract. It ended up saving 74% from original invoices with a new vendor, resulting in $5,000 in savings.
  26. Provide wellness activities. Employee wellness saves money since employee benefits are a top-rated practice expense. Keeping employees well keeps healthcare premiums down. One medical practice provided tiered premiums based on participation in wellness activities with savings of $100-$500 per employee. Healthcare costs were reduced by 10%-20%.
  27. Change supply inventory quantities. In one group, staff ordered more supplies than were needed because its supply list did not offer smaller quantities. Supplies ended up unused and wasted. The solution was to work with its supply vendor and material management department to reduce the amount of product ordered. Supply inventory was reduced by 14% over the first quarter.
  28. Pursue discounts for making fast payments. One medical practice was offered the opportunity to save up to 10% on medical supply invoices if it paid within 10 days. The practice didn’t realize the savings because internal systems were too burdensome to achieve the fast payments. The practice formed a workgroup to review its payment process and restructured its system to pay up front and audit at the back end. Overall savings amounted to $5,000 through the fast payment discount.
  29. Transfer smartphones internally. One large medical group had a contract with a smartphone company. Every new manager, director and administrator received a smartphone when they were hired. Each new phone cost $250, plus a $175 fee to cancel the phone. When an employee left the medical group, it cost $425, which added up depending on how many employees left. Now the practice transfers those smartphones internally between people, eliminating new phone and cancellation costs.
  30. Stop receiving paper reports. Staff at one medical group noticed that they were randomly receiving paper reports when they were already on the EMR. The practice reviewed all unnecessary reports and worked with IT staff and departments to slowly remove paper reports to ensure no impact on patient care. That resulted in savings of $60 per month by reducing the cost of one case of paper per month.