Managing Costs In Your Healthcare Clinic

Jun 8 | , , , , , , ,


By Carol A. Wilcox

PREFERRED Therapy Providers Inc.

How are you managing costs in your healthcare clinic? Are you familiar with the types of costs associated with running a practice? Are you monitoring and managing those costs? As a practice owner or manager, it’s crucial to track expenditures, labor costs and other expenses each month to ensure that you’re operating your clinic at its optimal level of profitability.


There are three types of costs you should monitor on a regular basis: Direct costs, fixed costs and variable costs. Here’s a brief description of each cost type:

Direct costs – these are costs related to the practice of patient care. This includes labor, medical equipment and software. By far, the cost of labor (salary and benefits) is the most significant direct cost in a healthcare practice accounting for up to 25% of practice revenues.

Fixed costs – these are costs that do not fluctuate, such as office space rentals, equipment leases, and malpractice insurance premiums.

Variable costs – these are costs that include medical supplies, office supplies, utilities, credit card fees, and taxes.


Although each practice is different, there are some key ways to manage costs:

Direct costs – periodically evaluate your staffing requirements. This doesn’t necessarily mean cutting staffing or overtime, as often that’s not the remedy for controlling direct costs. Instead, evaluate the types of tasks your staff performs. For example, do you send a staff member out to the office supply store instead of having those supplies delivered? How much time does that staff person spend away from the office that could be better spent on improving the patient experience?

Take the time to observe the staff workload. Ask questions. Can a full time staffer’s duties be handled by a part-time staff member? Are there days of the week when more staff is required because of patient load? Can you shift responsibilities to create a more efficient team?

Involve your staff in being proactive about their work and ask for suggestions on how to improve efficiency. They’re the ones in the trenches. Their suggestions may prove insightful.

How about software? Can you improve staff efficiencies by investing in software? Conversely, do you have software that is no longer useful, but you’re still paying for it? By reviewing and evaluating your software requirements, you can manage direct costs in your practice.

Fixed costs – since fixed costs are often items such as office space rental agreements, malpractice insurance contracts, and equipment leases, you can manage these costs when it comes time for renewal. At least six months before a fixed cost renewal is up, start shopping around to compare prices so you’ll be prepared to negotiate better rates.

Variable costs – Do you order more supplies than you need because you’re afraid you’ll run out or because those supplies were on sale? Although it may be tempting to order supplies in volume to save money, it’s not efficient cost management if those supplies are forgotten about, out of date, or expired. By implementing a simple supply inventory management system in your practice, you could potentially save hundreds of dollars a year on variable costs.

Do you carry a balance on your business credit card? If you do, those monthly interest fees can add up. If you must carry a balance, shop around for other credit cards that may provide a better interest rate, or contact your credit card company and ask if they will lower your rate.


There are many systems that can be used to monitor costs. Your bookkeeper or accountant can make recommendations. No matter what type of system you use – be it spreadsheets or accounting software, the key is to monitor costs consistently, at least once a month. It’s much easier to deal with a smaller cost issue than a bigger one because you neglected to consistently monitor your costs.


  • Understand the different types of costs in your practice
  • Look for ways to manage costs without compromising service to your patients
  • Take the time to regularly monitor costs and make adjustments as needed

About the Author:

Carol A. Wilcox is the staff writer and head of marketing communications at PREFERRED Therapy Providers, Inc. You can reach Carol here.

This article is brought to you by PREFERRED Therapy Providers Inc. PREFERRED is the nation’s leading payor management services network. Our expertise is working with physical, occupational and speech therapy practices – from single clinics to multiple clinic locations.