The Management of Expenses In Radiology

A Special Thank You to: Dr. David M. Yousem, M.D., M.B.A. Professor, Department of Radiology Vice Chairman of Program Development Director of Neuroradiology Johns Hopkins Hospital for allowing the use of his material/content in this presentation Dr. Yousem’s online lecture series can be viewed at: 7e18b7d5-9c63-487e-aaf1-77a86f83b011 Dr. Yousem’s project was funded through an RSNA Educational Grant

Challenges of Controlling Expenses In today’s constantly changing economic climate, the management of expenses is more important than ever There is a ongoing need to reduce expenses The cost and amount of care required continues to increase and the amount of money available for reimbursement is constantly under scrutiny and may decrease in the future –Healthcare reform- instability of the SGR –Capitated payments

Where does it go?

Finances (Assets) Accounts receivable (paid) Equipment owned Real Estate owned Supply inventory

Finances (Expenses) Salaries –Doctors –Adminstration/Billing –Tachnicians and Nurses Employee benefits Bonuses Pension/IRAs Real estate: rent, property taxes New equipment purchases or leases Equipment maintenance Supplies: contrast, catheters, wires, etc. Insurance Marketing Accounts Payable: payments owed Accrued Expenses: social security tax, pensions, medicare

Expenses are more numerous and more complex than assets Types of expenses: –Fixed –Variable

Fixed Costs Typically stable and not associated with practice volume Examples: –Property and equipment rent/leases –Standard equipment maintenance –Malpractice and employee insurance –Physician and supportive staff salaries –Utility costs

Variable Costs May increase/decrease with volume and change from year to year Examples: –Supplies: contrast, catheters, wires, etc. –Additional staff: extra radiology technicians, nurses, etc. –New equipment –Rent (may be fixed or variable) –Accounts Payable: payments owed

The Relationship between Volume and Cost When volume rises, the cost per scan/case decreases and vice versa for volume decrease –This idea is also the basis for the utilization assumption concept used by medicare in imaging reimbursement Profit margin is the revenue from the study minus the cost of performing that study

Accounts Payable Employee salaries and benefits owed –In any business, the largest expense is payroll –Employees are also your most valuable asset Money owed to creditors –Equipment and related service contracts and suppliers –Insurance/Taxes Payments owed for services rendered but not yet paid or billed

How to Control Costs Payroll –Physicians and supportive staff (nurses, technologists, transcriptionists, IT, administrations) –Be careful– remember that this is also your most valuable asset Make your money work for you as long as possible –Pay vendors, suppliers, and taxes as late as possible Economies of scale –Consolidate contracts/vendors for discounts –Buy in bulk to lower supply costs Economies of scope –Increase number of services offered

Controlling Costs Manage inventory wisely –Minimizes “carrying costs” such as product storage, maintenance, insurance –Donate expired inventory-- tax deductible Electronic Payments –Reduce costs of checks, postage, personel –Last minute payments Get a handle on malpractice expenses –Group consoildation –Quality control and improvement (minimize errors) –Stable faculty and staff

Other Important Ways to Reduce Costs PACS system Voice Recognition software Consider outsourcing some less critical Reduce upper level administration Consider the cost-benefit of pursuing unpaid claims Consider business consultants