Examining Service Costs to Revenue

Editor's note: This is Part 10 of a 12-part series focused on optimizing medical group financial performance. Each brief in this series takes 2 to 3 minutes to read and identifies specific actions medical groups can take to achieve sustainable financial improvements.

Assessment

Physician enterprises require a broad range of service contracts, many of which represent significant cost drivers. Among the most expensive are software services for EHRs, practice management, RCM, accounting, and reporting, purchasing and inventory management. Other service requirements may include: housekeeping, linen and laundry, alarm monitoring, security, landscaping, telecommunications (wired and wireless), telephone phone answering and nurse triage services, language translations, telehealth, copying and printing, hazardous and other waste disposal, patient satisfaction surveys, medical gases (oxygen, liquid nitrogen), shredding, sign language, and equipment tagging and inventory management.

The financial opportunity for service cost savings is determined by analyzing the current service cost-to-revenue ratio and comparing it to an established benchmark or target. Setting an appropriate target typically involves identifying the total cost-to-revenue benchmark and estimating the portion attributable to service costs.