Financial heat will be on this winter
■ A column about keeping your practice in good health
By Mike Norbut — covered practice management issues during 2002-06. Posted Nov. 28, 2005.
According to predictions from the U.S. Dept. of Energy, heating costs are expected to increase significantly this winter; how significantly will depend on where you live and how cold it gets.
Government officials estimate households can expect to pay an average of about $350 more this year, a 48% jump over last year. Increases for business are expected to be eye-popping as well. Even the costs for electricity and heating oil are expected to increase dramatically, leaving virtually no one unscathed.
For many physician practices, extra heating costs probably will not compare with other expensive business costs like rising medical liability insurance premiums. But they could provide an extra headache from an unlikely source.
With little wiggle room as it is, an addition to overhead costs could come right out of the physician's personal income. There aren't many possibilities for escape; you either get the heating bill directly, or if a landlord pays the bill, those costs will probably be passed on through a more expensive lease next year.
"Physicians are in a tough spot," said Michael O'Sullivan, a health care consultant in Bow, N.H. "They don't have the ability to pass the expense on."
All you can really do is to work on limiting those expenses, making adjustments elsewhere in your budget, or just eating the cost.
When you get that first outrageous heating bill this winter and want to control those costs, your first consideration should be your office itself, consultants said.
Annual winterizing strategies you might employ at home, such as protecting against drafts around windows and doors, also would be good for your office.
Dick Roy, a health care consultant based in Portland, Maine, said many of the practices he works with have installed programmable thermostats within the last couple of years. Being able to control the amount of heat in your office so that it only stays warm during office hours and when people are working can be a cost-saving advantage, he said.
The digital aspect of the thermostat also provides a reliable way to keep the heat consistent in your office. You can program it in a way that lets you raise the temperature gradually. With a manual thermostat, you would have to raise the temperature when you arrived in the office, requiring the furnace to work harder to heat the office in a short time.
Groups in updated or new office buildings might not find a lot of savings through attempts at weatherproofing or insulating. They may instead have to turn to other items in their budget to see if they can manage some short-term cuts.
Consultants suggested groups look at finding ways to be more efficient in ordering medical or office supplies. Being more vigilant in filing timely claims could also generate cash flow more quickly, they said.
The efficient practices, however, might not have as much waste to eliminate and couldn't make up those excess costs over such a short period. It may come down to paying extra bills out of what's left at the bottom of the bucket.
While that money normally would be saved for a year-end bonus, it may be the only source of cash left.
"Or, it could come out of salaries starting next year," said Tom Allen, a health care consultant in Milwaukee.
If physicians have the attitude that a bonus is a windfall based on how the practice performs, it may not be too damaging to pay excess costs from that pool. However, if doctors view it as an extra necessary paycheck, or if they structure their monthly salary draw too high, the extra bills could drain their regular income.
"Most people build in some leeway, because the bonus can fluctuate," O'Sullivan said. "The bonus is not guaranteed. An unforeseen billing snafu can disrupt cash flow."
A frigid winter can, too.
Mike Norbut covered practice management issues during 2002-06.