The Importance of a Financial Stability Plan and Knowing the Bottom Line to Protect Your Most Valuable Assets
With the recent volatility of the economy, many practice Administrators and Managers have been forced to take a closer look at the books to ensure that they are prepared for any instability that may affect their practices and their employees. Many of us have had to struggle with the balancing act of decreasing revenue and ever increasing overhead with as little impact to our employees as possible. In anticipation of declining reimbursements, increase of uninsured patients, reduction in preventive visits, increase in “consumer directed” health insurance, and many others factors that typically lead to employee layoffs, Roswell Pediatric Center, P.C. decided to be proactive in combating current economic woes.
Roswell Pediatric Center, P.C. has always focused on the importance of our employees’ job security and continually strives to build and retain long term employees. To make certain our employees’ jobs were protected, we determined that the adoption of a Financial Stability Plan was necessary. Once our Financial Stability plan was in place, we concluded that decreasing overhead is achievable while ensuring that all measures have been taken before the consequences of the economic downturn impacted our employees.
First we reviewed our Financial Statement to determine what, if any, variable costs could be cut. In addition, we chose several key indicators that allow us to benchmark productivity internally and look for trends or decreases on a monthly basis that would prompt cost cutbacks. We decided that if a 5% decrease in the following categories over several months occurred, cutbacks would be inevitable. A few indicators Roswell Pediatric Center, P.C. evaluates are:
- Charges
- Payments
- Number Office visits
- Revenue and Charge per Visit
- Newborn Visits
- New patients
- Medicaid and Self Pay as % of charges
- Accounts Receivable
Typically, when productivity decreases so do variable expenses; however, a number of fixed expenses related to staff do not decrease, such as payroll, insurance premiums, taxes to pay, etc. Because of this, we decided to gain staff’s buy in on our projections of potential savings related to them that would be initiated as part of cutbacks, if necessary. We felt the opinions of our most valuable asset, our employees, was essential since the cutbacks would more than likely relate to their benefit packages. We presented benefits for staff review to see what they would be willing to sacrifice indefinitely or for a short time period, to protect their jobs as well as their peers’ jobs. We also encouraged our staff to put cost cutting and revenue generating ideas in writing and turn them into Management. Some of the options we gave our staff to rate were:
- Discontinue retirement plan funding for one year-potentially saving 12 FTEs
- Cut bonuses- potentially saving 1.5 FTEs
- Cut Medical Insurance Premiums- potentially saving 5 FTEs
- Forfeit Paid Holidays- potentially saving 1 FTE
- Pay Raise Increases- potentially saving 5 FTEs
Roswell Pediatric Center Physicians and Management decided that the line would be drawn at cutting salaries as this may be counterproductive. Of course, some benefit cuts were more popular than others; however, we were astounded to find that the majority of staff was dumfounded by how vast the employer contributions are for each benefit we provide, from the individual employee as well as the total amount spent per year for all employees. With education comes enlightenment and an educated staff is a motivated staff! I now have a folder in my office full of great ideas and suggestions to increase efficiency and generate revenue; therefore, increasing the bottom line.
Third, we decided that we would consistently provide feedback to the staff on the status of percentage decreases in productivity and revenue on a monthly basis. We felt that this would lessen the “shock factor” involved if and when cutbacks were to be made. We have found that staff appreciates consistent feedback regarding the practice’s stability. Our employees have become confident and secure in their jobs by knowing that Roswell Pediatric Center, P.C. is opposed to “knee jerk” reactions such as layoffs before reviewing all of the options available to the practice. This in turn improves employee retention while instilling assurance that we care for our employees and their families.
Fortunately, our assumptions related to the recession have not impacted our practice or employees, yet. Becoming aware of factors that may influence tough choices ahead and putting a financial stability plan in place, we have brought a sense of security to our Physicians, Management, and our employees. Reassurance on a monthly basis that our practice is thriving and has a plan in place has not only continued to instill confidence in our employees, but it has also proven invaluable to Roswell Pediatric Center, P.C. In the age in which we live, as Administrator and Managers, it important that we realize that knowing and continuously evaluating the bottom line is the bottom line when protecting one of our most valuable assets, our employees.
Written by Alisa Vaughn, Operations Manager, Roswell Pediatric Center