Every dermatologist has in some way been affected by rising costs, declining payment schedules, or insurance reimbursement issues. Due to these challenges, some dermatologists and cosmetic surgeons have chosen potentially illegal ways to save costs on fillers and/or botulinum toxins by sourcing them from outside the country. While this might seem to be a good way to save on costs, the reality can be messy and likely will be for the over 350 doctors who were caught in a scheme that was recently revealed by the FDA via publicized practice warnings. This chapter in dermatology and cosmetic surgery has not ended and is sadly the continuation of a story that was first reported in 2007, when illegal botulinum toxins seriously injured four patients in Florida.
In a recent editorial in the February edition of Practical Dermatology, the principal author addressed the unsettling implications of these practices. And since this saga is likely far from over, the time is ripe for a discussion regarding responsible cost saving measures for practices. We have broken down the many smart ways that dermatologists can save on expenses and become more efficient in the process into categories including: Staff; Building maintenance/repairs; Billing/ EMR, Supplies; Advertising; Licensure and professional fees; Credit card processing fees; and Insurance. These categories are subdivided and can include expenditures such as mailing costs, telephone service, service contracts, laundry, cosmeceuticals, prescription products, and advertising. These will be addressed in a combination of articles, starting with this one.
The principal author, Joel Schlessinger started his solo private practice 20 years ago. His co-author, his wife, Nancy Schlessinger, has paid the bills and worked with vendors since the start of the practice. What started out as a very part-time job for her has turned into a vital and more than full-time position! In general, she has done this off-site as she felt it was best not to be ‘that doctor’s wife’ in the practice, but this has allowed her to take a somewhat unbiased view of the practice.
One area of the largest expenses that we encounter in our practice is staff expenditures. This can include items such as payroll, pension, bonuses, and education for the staff. While it’s not easy to save on staff, implementing policies for review and establishing guidelines for salaries help greatly.
First, let’s address the initial salary. We pay a fair but not exorbitant salary to begin and evaluate new employee performance carefully before advancing salaries. It is common for us to find that suspected areas of competency are lacking or have been exaggerated by new hires, and this can dramatically affect the salary profile for any employee. This is one reason it is helpful to start at a fair, yet not outrageous, salary to take into account this possibility.
Additionally, we conduct yearly reviews of each employee and try to follow a plan of salary and bonus/raises, which makes the table of salaries fair and even-handed for all employees. We pay for some educational expenses, but only if these are seen as benefitting work in the clinic. Pensions and other benefits such as health insurance and disability insurance are included in compensation across the board for every employee.
Health insurance is an important and difficult issue. While we have actively searched for ways to save in this area, generally speaking it is difficult to lower costs without suffering the consequences of poor insurance. We currently use Blue Cross/Blue Shield through the state of Nebraska and our state medical society, and although costly, it has resulted in some savings. We pay approximately 95 percent of all costs for the employee health plans but do not cover the staff’s family members (we offer the opportunity for the individual employee to do so if they wish). The remaining five percent of insurance costs are the responsibility of the employees, which encourages them to hold down costs and use their insurance wisely.
Because we have always felt that pension plans are very important, we offer pension and profit sharing for employees, which vests after five years. This, in our estimation, is a great help to retain top talent. Our plans may not be right for everybody, but they represent a way to keep employees from going elsewhere and saves us costs in not having to train new employees. Some practices feel that turnover is helpful in finding better employees, but we generally try to retain talent, especially since steeping employees in our culture is so important to us.
Utilities and Contracts
Maintenance encompasses a great many expenses that can build up easily. Building expenses can range significantly from practice to practice. In certain parts of the country (like the coasts), these costs can eat up a fairly large portion of annual revenue. It is therefore important to carefully negotiate any contracts before signing a leas—and run them by your attorney or CPA while also considering alternative spaces, especially those less expensive ones. Most dermatologists tend to settle in one place, so it is important to make sure there is room for growth, as relocation can be a significant source of expense in the future. Additionally, it’s quite important to make sure that the location you have chosen has visibility and is easily accessible as this will certainly influence the ultimate success of the practice. Whenever contracts come up, it is incumbent on the dermatologist to look them over and ensure that negotiations are effective and in your best interest. For those who own a building, the prospect of selling the building after you have ended your practice is potentially a very good opportunity, but it may necessitate more expenditure initially. Certain tax advantages may be available, another dimension which recommends constant interaction with one’s lawyers/accountant.
Service contracts represent another area where cost saving may be attainable via negotiation. At our practice, we rarely sign a service contract without first negotiating or, at the very least, reading it thoroughly. This has led to a 10 to 20 percent decrease off most service contracts, encompassing most pieces of equipment for Mohs surgery, lasers, and even copiers. Most suppliers have some ‘fat’ in these contracts and are willing to reduce your costs if you pay them in a timely manner, or if you offer some lengthier contract term (e.g., two year versus one year, etc.). Even if you aren’t confident in your negotiating skills, consider that it never hurts to ask. Not all contracts will have room for negotiation, but you’ll never know if you don’t ask.
Another potentially great area for saving is with phone contracts and internet services. We routinely negotiate these contracts carefully. One such negotiation caused us to switch from regular dial-up service to internet-based phone bundle service with significant savings (more than a 50 percent decrease). Competition among the various carriers is always advantageous for clinicians. Additionally, many carriers offer television service to the office, which can be bundled in along with phone and cable Internet service to decrease costs. As for internet speed, we feel that the internet is so integral to office functionality that it pays to have a plan that is effective and offers the least amount of downtime. For this reason, we have gone with a T-1 line for our office, and the office is wired for wireless internet as well, which saves us the costs of multiple Internet lines.
Anecdotally, we had a new employee who looked at our recurring landline phone contract and found a charge for a ‘trunk line’ from an old office to our newer office that was absolutely unnecessary and was costing us over $2,000 a year! He immediately stopped the service and we were able to recoup part of the overcharged services with negotiations. It pays to carefully scrutinize phone bills!
Various maintenance and repair issues will arise over time, but it is most important to avoid any contractual agreement unless you have thoroughly explored all options. Whenever we bid a contract for HV/AC, window cleaning, or other routine maintenance, we consider several different companies. The costs for these services can be very high, especially if you own your own building. Having said that, it remains essential to have a functional office with regards to heating/air-conditioning, electricity, etc., so make sure that you find a reliable service, as a need for service with no response from an inexpensive, but unreliable vendor, can seriously affect your bottom line.
Services such as window cleaning or maintenance around the building are important, yet can be decreased if you bid them out from time to time. We also try to avoid the ‘suggested’ timelines on things like window cleaning as these may be set to boost the service company’s revenue and deplete yours!
More Savings Ahead
We will be continuing our coverage of cost savings in future months, tackling issues such as supplies, advertising, product costs, and professional fees. As our coverage of these issues unfolds, always keep in mind that cost savings is sometimes more than a matter of being “in the red” or “in the green.” You must see the bigger picture and determine what expenditures are wise to make in the interests of saving money over time. We hope you have found this helpful. If you have any questions please reach us at JS@ CosmeticSurgeryForum.com.