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: http://webcast.jhu.edu/mediasite/Catalog/pages/catalog.aspx?catalogId= 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