Cost containment and reduction tactics are common to many chiropractic practices. And, when they are tied to the budget, they are a necessity. Although there is some confusion about the first two terms, and “cost management” is another matter entirely.

Cost management is not cost reduction

Cost reduction and cost containment do not embody a strategy. Think of cost management as part of a long-term strategy and cost reduction as a short-term tactical approach.

In general, cost cutting happens because the costs seem greater than the budget, so you need to reduce them. Cost containment usually means that you don’t want costs to exceed budget, so you need to find ways to keep them under budget.

Cost containment may be part of cost management, but cost management involves a longer-term strategic approach, not a short-term tactical approach to cost control.

As a fundamental concept, strategic cost management means making the most of your resources as part of an overall strategy.

When developing a cost management strategy, it’s helpful to start by thinking about how you can get the most value from the resources you use to achieve your goals.

For example, if it’s important to provide an exceptional patient experience on each and every visit, don’t start with the idea that this means higher costs. Start with the idea that an exceptional experience is important and ask yourself how best to invest your resources to achieve the desired outcome, which will likely indicate that spending more resources early in the patient experience will save money in the long run…and a PVA improved.

Strategic cost management sounds like a great concept, but implementing it isn’t as difficult as you might think. Essentially, it’s about thinking about the long-term impact inherent in the cost of the practice and making it more manageable where possible.

You probably already employ several tactics, however, when taken together, they can represent a true strategic approach. Examples of techniques that could make up a cost management strategy could include:

*Buy in bulk – Warehouse clubs such as BJ’s, SAM’S Club, and Costco give you the opportunity to purchase key supplies: pens, paper, printer cartridges, cleaning supplies, and even toilet paper – buy in bulk at better prices than most office supply stores.

It means supplies last longer, your office supply budget is easier to stick to, and when it comes to tax write-offs, having just one receipt makes bookkeeping really simple.

You can also ask your suppliers for discounts if you buy in bulk or agree to longer terms of service than you currently have. Also, if you are someone who attends a lot of conferences and trade shows, prepare a shopping list before the next one you attend; discounts on the site are almost always available.

* Use your providers – Requesting discounts for bulk or quantity purchases is just one way you can help yourself with suppliers. Remember, they often have the same cash flow problems you do, so they may be willing to offer discounts for early or cash payments. You could offer a monthly warranty order in exchange for a better price.

* Go cooperative when you can – Join volume purchasing groups. They exist to buy everything from the common supplies you might need to equipment, electricity and gas. Often, trade groups in your industry and local chambers of commerce offer access to these groups, not to mention their own discounts.

* Buy your services every year – Whether it’s insurance, a phone, a merchant account, an Internet provider, or any other type of service, shopping around can always help you better manage those costs.

*Buy it with barter. You can trade chiropractic care with other providers for products or services, for example.

* Renegotiate your rent – If you’re ready to move, renew a lease, or just think you can do better, open up a dialogue with your landlord. If a short-term lease is nearing expiration, ask the landlord to redo the long-term lease at a lower rental rate. Yes they will. And you can do it with equipment leases, too. See if your bank will give you a better lease rate and pay the current landlord, for example.

Keep in mind that many costs are not measured by any accounting system. The cost of patient care is due to poor service or quality, for example. When you impact the patient experience and your charges go down, further cost reduction will not improve your bottom line.

This is a real cost that should be part of cost management, but is not explicitly measured by any accounting system.

Another example is the opportunity cost of people’s time. When assigning projects and tasks, it’s worth considering what will be given up if an employee completes the task or project. For example, I knew a chiropractor who asked his team at the last minute to provide him with a performance report. The employee had to resign from patient care to fill out the forms the chiropractor wanted.

Replacing your answering service with an answering machine can save money, but how will it affect the experience of the patient who calls your office after hours?

You may be able to downsize the team. to reduce overhead, but what is stretched to the limit or causes burnout for the rest of the staff?

When you’re thinking about cost management, remember that it’s as much about the value of the time you’re spending as it is about direct costs and expenses.

Spend as much time trying to lower your overhead to attract new patients, and you may find that it’s easier to increase your NPP (new patient production) than it is to keep your overhead to a minimum.

And remember, it is virtually impossible to reduce yourself to greatness!