Healthcare cuts often target the wrong areas

Most medical practices turn to familiar cost-cutting methods when margins shrink: reducing staff, postponing software updates, or changing suppliers. Shawntea Gordon, CEO of Atlas & Perpetua Healthcare Consulting, states these steps often fail because the real issue begins before any cuts are made.

Gordon explains that cost reductions without benchmarking data are essentially guesses. The wrong decision, she notes, can end up costing more than it saves.

Financial pressure triggers automatic responses

Practice expenses have increased across the board. Staffing costs have risen, medical supplies are more expensive, and some organizations now manage up to 15 separate systems instead of two or three. Reimbursement rates, however, have not kept up with these changes.

The growing gap between costs and collections leaves little margin for error. When financial pressure builds, Gordon says, practices typically react by cutting expenses. Without data to guide these decisions, they risk making harmful reductions.

One frequent error is assuming staffing is the largest expense and the easiest to reduce. Many groups that believe they have too many employees are actually understaffed, with burnout limiting their revenue. Reducing staff in this situation only worsens the problem.

Hidden financial losses in practice operations

Gordon identifies several areas where money is lost without notice. Front desk data entry mistakes, uncoordinated insurance benefits, and uncollected patient payments all contribute to financial leaks. The most significant issue, however, is unmanaged denials and unprocessed claims in accounts receivable.

Other problems include undocumented in-office services, unappealed denials, and downcoding—billing for a lower-level service than what was provided. Each of these represents recoverable revenue with better tracking and follow-up.

Before making cuts, Gordon advises practices to review their own records. Examining 12 months of invoices, comparing orders to payments, and exploring group purchasing contracts can help. The aim is not just to spend less but to spend more effectively.

Benchmarking matters, but not all data sources are reliable. Gordon warns against using comparisons from organizations that lack established credibility. A useful benchmark requires an accurate assessment of a practice’s size, location, services, and payer mix.

Ongoing expenses that persist unnecessarily

Some costs remain long after they become unnecessary. Gordon points to shredding services as an example. Many practices moved to electronic records but kept their shredding contracts, paying monthly fees for bins that rarely fill.

Before implementing changes, Gordon uses four questions to prevent new risks. One practice she worked with switched suppliers to save money but lost access to a critical surgical item that was frequently backordered. The savings disappeared when they had to find alternatives quickly.

A structured approach works best: a full review, a 90-day improvement plan, and a monthly time block for ongoing adjustments. Small, steady improvements—like a 1% monthly gain—are more sustainable than a single annual overhaul.

The first step for practices that haven’t benchmarked is to generate a monthly report comparing billed CPT codes to reimbursed codes. Each discrepancy may indicate a downcode, and every downcode represents lost revenue.