Other Ways to Reduce Overhead Costs – Part II

Physicians everywhere are looking for ways to trim their overhead. However, most have found that there is not much else they can do. Here are a few additional ideas you might not have thought of……..

Change the Physician Compensation Formula

Changing how physician-owners are paid is one definite way to reduce practice overhead. This is especially true for larger practices. Oftentimes a practice’s physician compensation formula can cause waste of overhead and/or the inefficient use of overhead. One example is a formula that pays physicians based on the practice’s net income rather than using a direct allocation of cost methodology. Therefore, be sure to take a look at the practice’s current formula to see if the formula itself is encouraging the containment and efficient use of operating overhead.

Recruit a New Physician 

Another way to reduce practice costs is to recruit a new physician to the practice and at the same time seek financial assistance from the hospital where the practice regularly sends its patients. It is still legal for hospitals to provide this kind of financial assistance, on either a gross income guarantee basis or a net income guarantee basis but this assistance is limited by the Stark laws. Either way, it is possible to get a portion of the practice’s overhead subsidized for a period of time under these arrangements.

Office Share with Another Physician 

There are many practicing physicians out there, mainly solo to small practices, looking to reduce their overhead. Another way to reduce costs is to share them through some type of office sharing arrangement. For example, physicians could share rent, personnel, supplies, etc. by practicing in the same office location. Therefore, consider looking out for, or seeking, physicians who might want to relocate their practice to your practice. This could be on a full time or part time basis. There are many sharing arrangements where a physician sees patients one or two days at the office of another practice.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.