Instructed to cut medical practice overhead

A question I received recently:

I am new to the position as CFO.  The finance committee has instructed me to cut overhead 15-20% in the next two months.  They have also reduced the work week to 35 hours.  I think this is counterproductive to patient care; however, all they see is the amount paid in salaries.  There are many areas of the practice that need to be addressed.  For example, there are no policies and procedures in place. They are a little heave with FTEs but I have not identified the areas yet because other areas require my attention.  At this point, where do I start?

Since you're new, you should proceed with caution.  I am sure that the head of the Finance committee must have in mind the area that he/she believes should be cut.  Get the input from other key physicians and the administrator then you should have a plan to discuss.  In the next meetings, I am sure that the physicians, administrator and you can exchange the pros and cons.  Be prepared to give your own opinion.  However, because you're new, you should depend on others and verify them.  I will try to look at non-personnel expenses first, then benefits.  The last cut should be personnel.  Any chance to increase revenues?  Good luck.

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.