Rampant inflation doesn’t just mean a spike in everyday expenses like gas and groceries. It’s also bound to have a significant impact on the cost of healthcare — and on your practice. A recent report from McKinsey & Company predicts that the current inflationary spiral will force healthcare providers to charge higher reimbursement rates, and those costs inevitably will be passed along to both employers and consumers. Bottom line: Your patients will likely have to pay more out of pocket.
How, precisely, will inflation affect your practice, and what’s the best way to minimize the damage? Here are seven steps that you, as a physician, can take right now to make the ripple effects of inflation easier for all concerned.
Step 1: Maintain Operational Standards
“Based on the conversations we’ve had with our physician clients that own practices, we see the potential for cost inflation to outrun revenue inflation over the next year,” says Michael Ashley Schulman, CFA, partner and chief investment officer at Running Point Capital in El Segundo, California. “Staff wages, as well as office equipment and medical supply costs, are increasing faster than insurance and Medicare/Medicaid reimbursement amounts.” Even so, topflight employees are essential to keep your practice running smoothly. Prioritize excellent nursing. Instead of adding a new hire, compensate your best nurse as well as possible. The same goes for an efficient office manager: On that front, too, you should go the extra mile, even if it means trimming expenses elsewhere.
Step 2: Plan Ahead for Insurance Challenges
Many insurers, including Medicare, set healthcare costs a year in advance, based on projected growth. This means insurance payouts will stay largely the same for the time being. “Almost all physicians employed by large groups won’t see costs due to inflation rise until next year,” says Mark V. Pauly, Bendheim Professor in the department of healthcare management at the Wharton School of the University of Pennsylvania, Philadelphia, Pennsylvania. “For self-employed physicians, there will also be a cushion.”
“The big issue with inflation is that more patients will likely be underinsured,” says Tiffany Johnson, MBA, CFP, co-CEO and financial advisor at Piece of Wealth Planning in Atlanta, Georgia. “With more out-of-pocket costs … these patients may not seek out medical treatment or go to see a specialist if they do not believe it is necessary.” A new study from Johns Hopkins finds that patients under financial pressure often delay or forgo medical treatment because of food insecurity. Compassionate care is the solution: Direct these patients to financial aid and other resources they may qualify for. That way, they can continue to receive the care they need from you, and your need to pass on costs may be lower.
Step 3: Rely on Your Affiliated Healthcare Organization
These are tough times when it comes to expansion. “Since we are in an environment where inflation and interest rates are both high, it will be much harder for physicians to have the capital to invest in new technology to grow or advance their practice,” Johnson says. With that in mind, keep the lines of communication between you and your affiliated hospital/healthcare organization more open than ever. Combining practices with another doctor is one way to increase revenue; you might ask if any affiliated doctors are seeking to team up. It’s also vital to attend meetings and pay close attention to budget cuts your organization may be making. And don’t be shy about asking your administrator for profit-boosting recommendations.
Step 4: Revisit Vendor Relationships
Find out if your vendors will continue to supply you with the goods you need at reasonable rates, and switch now if they won’t. Be proactive. “Test new medical suppliers,” Schulman advises. “Reread equipment leasing contracts to check if the interest rates have increased. See if buyout, prepay, or refinancing options are more economical. Also, investigate [bringing down] your rental expense by reducing square footage or moving to a lower-cost location.” In light of ongoing supply chain issues, it’s wise to consider alternative products. But stay focused on quality — you don’t want to be stuck with cheap, possibly defective equipment. Spend where it’s essential and cut the fat somewhere else.
Step 5: Don’t Waste Your Assets
Analyze your budget in minute detail. “Now is the time to review your current inventory and overhead costs,” Johnson says. “Many physicians let their office staff handle the restocking of inventory and office supplies. While this can be efficient for their practice, it also leaves room for unnecessary business expenses.” Take a cold, hard look at your supply closet — what’s in there that you can live without? Don’t reorder it. Then seek out any revenue stream you may be overlooking. “It’s important to review billing to make sure all the services are reimbursable,” Johnson adds. Small mistakes can yield dividends if you find them.
Step 6: Be Poised to Pivot
Get creative. “To minimize a profit decline, use video consulting — it’s more efficient and less equipment-intensive,” Schulman says. “Look at how remote work and flexible hours can maximize the work your practice accomplishes while cutting office costs.” Johnson suggests adding concierge services, noting that “concierge doctors offer personalized care and direct access for an upfront fee.” With this approach, you may see fewer patients, but your payout paperwork will decrease, and that upfront fee can be profitable. Another outside-the-box idea: Start making house calls. A Scripps study found that home health visits requested via app can result in patient care delivered by a doctor and medical assistant in less than 2 hours. House calls can be an effective and profitable solution when it comes to providing non-emergency care and preventive treatment to patients who aren’t mobile, not to mention patients who just appreciate the convenience.
Step 7: Maintain Transparency
Any economic changes your practice will implement must be communicated to your staff and patients clearly and directly. Keep everyone in the loop and be ready to answer questions immediately. Show those you work with and care for that, regardless of the economy, it’s they who matter to you most. That simple reassurance will prove invaluable.
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