The Management of Expenses In Radiology

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:
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
• Equipment owned
• Real Estate owned
• Supply inventory
Finances (Expenses)
• Salaries
Tachnicians and Nurses
Employee benefits
Real estate: rent, property
• New equipment purchases or
• Equipment maintenance
• Supplies: contrast, catheters,
wires, etc.
• Insurance
• Marketing
• Accounts Payable: payments
• Accrued Expenses: social
security tax, pensions,
• 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,
– 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
– Physicians and supportive staff (nurses, technologists, transcriptionists, IT,
– 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