What the Numbers Should Say Before You Cut Your Clinical Hours

Few understand that reducing clinical hours to cover needed time off affects more than that of an employed physician. The collections generated by a solo or small practice owner’s time, plus that generated by their scheduled time off, affects the owner’s compensation for the hours worked by others.

The owner’s compensation also covers the practice’s fixed monthly expenses (rent, salaries of salaried staff, insurance, software subscription, etc.) that continue to need to be paid regardless of declining patient volumes.

A financial analysis does not necessarily mean that cutting hours is a bad financial decision. Rather it will reveal what revenue may be lost, what expenses will remain and how much wiggle room there is in between.

Your Schedule Is Part of the Revenue Model

Whether you are an employed physician or the owner of a small solo or two physician practice, your hours can affect your compensation. As a solo owner, your hours affect the collections that you have produced as well as the contributions to the practice’s overhead that your patients bring.

The harder you work, the more you are likely to collect in compensation from your practice. Using healthcare accounting services can help you connect the hours that you work with the end results that you see in your practice’s billing information and in your practice’s general ledger.

Compensation for physicians can be determined by more than one measure. The American Medical Association’s 2024 Physician Practice Benchmark Survey found that 60.8% of physicians received compensation through more than one method. Practice owners are more likely to have compensation tied to the financial performance of the practice than other employed physicians.

Know these 4 numbers before reducing your clinical hours.

• Owner-generated collections: The actual dollar collections made by the physician.
• Contribution from those visits: revenue remaining after costs that change with patient volume.
• Fixed monthly overhead: rent, salaried staff, insurance, software contracts, and debt payments.
• Owner compensation and distributions: the owner’s take-home pay and how dependent it is on the physician-owner’s production.

Focusing only on revenue ignores the difference between decreased production and its high cost. Similarly, focusing only on the owner’s take-home income from the practice ignores how much the owner’s clinical production currently funds the practice’s fixed expenses.

Model the Missing Clinic Day

Evaluate the loss of the missing Clinic Day by modeling the reduction in your practice’s Schedule first, and then measure collections for several months for those same days to get a more realistic evaluation of what that time generates for you and your practice.

A reduction in clinical hours has different effects on different financial items – seasonality, cancellations by patients, the mix of payers of patients and the type of services provided all affect collections over time, and therefore a longer period of time is required to develop a realistic view of what the missing time actually generates.

Separate Lost Revenue From Costs That Stay

Not every expense falls when patient volume does.

Financial item	Likely effect
Physician-generated collections	Decreases
Visit-dependent supplies	Usually decreases
Hourly clinical staffing	May decrease
Salaried staff	Often unchanged
Office rent	Unchanged
Software contracts	Usually unchanged
Loan payments	Unchanged

Note that the effect on salaried staff (such as some nurses) and the cost of software (which is often contract-based and may be fixed for all providers at a practice) may differ from that of hourly clinical staff.

Look at a simple Excel or Google Sheets model of historical collections against the data in the practice’s accounting ledger. If owner production is going down, can the practice continue to cover its expenses with what it has?

Cash Flow Can Lag Behind the Change

Remember that for several weeks, claims will continue to flow from visits completed before the new schedule, so the full impact of decreased hours may not be immediately felt in the practice’s bank account.

Typically, claims from completed visits are paid out over several weeks, so the full effects of reduced hours may not be felt immediately in the bank account. In some instances, however, a large payer’s delay of payment during the evaluation period can have the opposite effect and negatively impact cash flow.

Test More Than the Best-Case Scenario

Test what happens when your collections fall below average, rather than assuming a best-case scenario (i.e., every remaining appointment is filled and 100% of your claims are paid on time).

A cash reserve is necessary to cover occasional months when revenue is lower than expected but fixed costs are due. A similar financial buffer is required when opening a medical aesthetics practice, where uneven revenue and ongoing costs are unpredictable and must be planned for from the outset.

This will vary depending on factors such as practice type, staff, debt, and specialty. What matters most is that the practice has sufficient funds to get through a weaker month, after which time owner clinical hours can be reviewed again.

Decide What Success Looks Like

Determine whether the new schedule is working after 60-90 days, considering issues such as minimum cash reserves, owner’s clinical time and compensation, the practice’s accounts receivable, and its ability to book enough new appointments to maintain capacity during the week of reduced hours.

In 60-90 days, review against defined metrics (e.g., minimum cash reserves, stable owner income, a reasonable accounts receivable balance, and the ability to book sufficient future appointments).

Reducing hours isn’t meant to keep owners from working fewer hours, but to ensure the practice can support the Owner’s choices and that the Owner’s clinical time doesn’t create unforeseen financial consequences for the practice.

The end goal for a practice owner is to know how much owner clinical time generates income and what costs are variable versus fixed. With that information, a practice owner can make an informed decision about how many hours he or she wants to work while maintaining a financially stable practice.