How Much Does it Cost You to See a Patient?


Are you paying to see patients without knowing it? A medical practice is a business which is supposed to make money, not lose money. Do you know how much it costs you to see a patient?

Before the incursion of managed care, this figure was irrelevant. However, it is of prime importance now. The managed care organizations and insurance carriers know their profit per patient. That is how they determine capitation rates. You will be a more savvy businessperson if you know where your profit begins. It will help you to determine which contracts to sign, which to add and which to drop. Knowing your cost per patient may cause you to disenroll from all the contracts in which you participate.

How You Determine Your Cost Per Patient

To determine the cost of seeing a patient in your office, you need your true overhead. Therefore, do not include depreciation, contributions to your pension plan, or your bonus at the end of the year. Once you determine your monthly overhead, divide that total by the number of days your office is open each month. That is your overhead per day. Divide that by the number of hours in a day you or your staff sees patients. That is your cost of seeing 1 patient per hour in your office.

Because you generate income, sometimes the largest amount, in other facilities; hospitals,surgery centers, nursing homes, etc. Your cost of seeing those patients is minor. It is mostly staff time, i.e. scheduling, billing, collecting. So factor in 1 hour which is attributable to services you render outside the office. Divide that by the number of patients you actually see in one hour. Now you know what it costs you to see a patient.

For example, if your overhead is $14,000 per month, your daily overhead is $700.00 ($14,000 divided by 20). Your overhead per hour is $87.50 ($700 divided by 8 hours per day). Now divide by the number of patients you see in an hour, let's say 4, your cost per patient is $21.88. You can round this up to $22.00 for easy figuring. If you want to perform a retroactive reality check without going through these alculations,divide your total monthly expenses by the total number of patient visits that month to determine your cost per patient. Because expenses fluctuate, you will need to do this for several consecutive months to obtain a true number.

How to Use This Number

If a managed care contract pays you $5.00 per member per month, calculate how many of your patients come from that contract, how often you see a typical patient from that plan in a month, and how long the visit takes of your s and your staff's hands-on time. This should be quite a revelation!

Third Party Payors Will Still Pay You

Remember third party payors, except capitated contracts, will pay you even if you are not a participating provider. They pay you less than their participating providers, but your fee is not limited by a contract. Your patient will pay the difference between your fee and the amount of the insurance payment. Medicare and some other insurers will send the payment directly to the patient and the patient will pay you.

If you disenroll from a plan, you can protect your physician-patient relationship by notifying your patients of the reason for of your decision. Some will remain with you and pay your full fee. Others cannot afford to go out of plan and will seek another physician. At first you are going to lose patients, but you might lose more money by seeing them! You can replace contracted patients with paying patients by promoting your practice to other groups. Then you will make more money by seeing fewer patients. I have numerous clients all over the country who are doing just that. Their overhead is lower. Their patients are happier. And their profit is considerable.

Lesson: My most successful clients do not participate in managed care contracts and are non participating providers. This is the time for physicians to take back the lead in health care payment before any legislative changes can take effect.

A Word of Caution:  Although your primary goal is to take care of your patients, you must have an office in which to do so. You have to be sure each patient is not costing you money, but is generating a profit so you can keep your doors open.

Indecision is Expensive.




Changing your mind constantly creates costly contracts and chaos.

A physician’s office was in terrible turmoil. His administrator of 13 years had finally gotten on his last nerve. The doctor called me in to solve the problems.

The administrator gave mismanagement a new meaning. After many weeks of unfruitful meetings, the physician took my advice and we terminated the administrator.

The doctor asked me to become the temporary administrator, straighten out the office, get it running efficiently and then hire a permanent administrator.

I kept discovering expensive long term or noncancellable contracts for such things as the copier, postage machine, FAX, telephone and internet monthly usage, telephone equipment, telephone book advertising, even the water cooler. I renegotiated or canceled as many as I could. I saved the doctor $200,000 per annum.

After several months as the Consulting Administrator, I began to see that my client would change his mind about every issue several times, often within the space of an hour or two.

Then I realized why the administrator locked the doctor into these contracts. It was so hard to get him to stick to a decision, that as soon as he said yes to anything for more than three hours, the administrator sealed the deal. Once the document was signed, there was no need to discuss that again for years. What a relief for the administrator. What a disaster for the bottom line of the practice.

Lesson: Allow time for careful consideration and use your diagnostic skills to make profitable practice management decisions.


Word of Caution: Physicians’ offices are facing additional turmoil because of the recent passage of Health Care Reform legislation. Pay attention. Mind your business. It’s your practice.

Do You Have a Practice Plan?

My most successful clients call me in several times during their careers, particularly when they are planning major changes.


These visionary physicians engage me for a three or four day consultation. We spend the majority of our time discussing their philosophical plan for the future of their practice and the practical steps to keep them on course to realize their dream.

Primarily we discuss the growth of the practice. Should he or she hire an associate to become a partner? Should they take add more partners? What is the upper limit to the number of partners? Should they expand the office? Should they buy a building? Do they have a buy-in formula? Does it match the buy out?

We also consider other issues. How many years does my client want to actively treat patients? When will he or she stop performing surgery and /or procedures? How will that affect the practice and its value? Who will take over the practice when he or she retires? Will the founding physician always receive an income from the practice? What benefits will continue after retirement?

Who will take over the administration of the practice? We plan the succession as best we can by considering the short term and long term cost/benefit ratio of each scenario. All of this leads us to an informed decision.

Lesson: You spend many years building a practice that treats patients well. If you have a business plan that parallels your patient treatment plans, your rewards can perpetuate and be multiple.

Word of Caution: Knowing what you want in the near future is particularly important now because of the uncertainty of health care insurance reform legislation.

Are you covered for all the disastrous situations that can affect your practice?

Treat your practice as well as you do your patients.. You take care of other people’s medical emergencies every day. Be prepared for your own. Unfortunately, physicians are not immune to illness.

One of my clients suffered a sudden, unexpected, medical episode rendering him unable to practice for several months. He thought the office overhead would be paid because he had business interruption insurance. Not so. Business interruption coverage is for fire, flood and damage caused by external sources. Business overhead insurance covers your practice if you are disabled. This is separate from your personal disability insurance. He had a personal disability policy. He did not have business overhead insurance. What he considered to be redundant coverage was not.

His colleagues were very generous and covered his solo practice while he was hospitalized. The one thing we didn’t have to worry about was care for his patients.

We had to scramble to pay the bills and prevent the employees from fleeing. His receivables would only flow in for a month or two. His business bank account balance was low. His personal disability policy had a 90 day waiting period. For an accidental injury, such as a broken leg, the receivables would have carried him through to recovery. But his prognosis was poor. We could not borrow from his personal account. It was the perfect storm. One insurance policy would have been his lifeboat.

Lesson - Meet with your insurance agent annually to discuss your entire package of policies. Make sure it is complete. Then, if you ever find yourself in an intensive care unit, all you will have to worry about is your physical recovery.


Word of Caution: The saying,“don’t be penny wise and pound foolish”, is too true to be trite.

Don’t Be An Air Talker

anana

My client is a very successful and busy physician. He thinks quickly and is able to see many patients in a day. He has a large staff to help him care for all his patients.

He would come out of an exam room, face the front office area where there are five women working and tell them what he wanted for the patient he had just seen. Then he was into the next exam room with the next patient in the blink of an eye.

There was only one problem. He never noticed that each of his employees was either talking on the phone or helping a patient. They all were busy. Many did not hear or see him. The ones who did, didn’t know to whom he was talking. So often no one did what he asked.

The level of care was disintegrating as fast as his risk for malpractice was increasing.

He couldn’t understand what was wrong.

I told him either to address a staff member by name or to catch her eye before barking out orders and disappearing. Better yet, hand some one the patient’s chart containing a written order.

I also alerted each employee to watch for him when he came into their area. If he didn’t tell one of them specifically to order the test, set up an appointment with another physician or call the hospital, they could determine who would do it.

Lesson: Make sure your staff knows who is responsible to carry out your orders or no one will.

Word of Caution: Review your charts daily. Every time there is an omission or your staff makes a mistake, it is your license on the line.

She Disappeared in Plain View

She is a lovely woman, a very good physician and terribly shy. She had been in practice for severalyears. Every day, when she walked across the bridge from the medical office building to the doctors’ parking lot,she smiled back and said hello to many colleagues.

Then she got pregnant. She cut her hair. She got contacts. She rushed home to lie down after a busy day.

After the baby was born, she lost her weight very quickly. Now, being a nursing mother, she was even more distracted when she walked to her car. She barely noticed or spoke to anyone. And no one spoke to her.

Her practice began to slow down. Her referrals were dropping off. She called me.

It seemed that her appearance had changed so much; new hairstyle, no glasses, different weights, that no one recognized her. And her natural shyness was exacerbated by her increasing haste to get home.

We decided to have a party to let the doctors who knew her, and those who didn’t, that she was still in practice. I understand that physicians do not usually like to attend social events, particularly where they don’t know anyone. So I included a personal note in the invitations to the doctors on staff whom I knew, but she didn’t, saying she was my client, that I would be there and to please stop by because I would love to see them.

Everyone attended the party, if only for a moment to say hello. She met many physicians. And those she knew were pleased to have some time to chat. Her practice boomed

Lesson: Social interaction with other physicians can be as important to keeping your practice vital as maintaining your medical skills.

Cautionary Word:  Be certain to tell physicians you  meet and those you know, what you do, particularly if it is something new.

Pricing a Practice For Sale

A physician hired me to help him buy the practice of the physician who had inspired him, since his childhood, to become a doctor. My client was honored to be offered the practice.


I knew the seller slightly. We had met at several conferences. He was an officer in the state medical association and highly respected. It was a little intimidating, but a thrill for me to be included.


My client and I met at the seller’s office. It was very cordial until the seller presented us with the asking price, $250,000. The equipment was minimal and old, the office lease wasn’t assumable, the receivables weren’t included and the profit never reached $250,000 in any year. The practice didn’t warrant that amount. We were aghast, but rather than refuse him straight off, we decided to meet again in a few days.


My rules regarding the price of a practice are, the floor is what it would cost to set up a similar office and the ceiling is the current year’s net.


My client and I were discussing our strategy and trying to figure out where the number came from. Suddenly I realized that the seller must have taken a huge loss in the stock market and needed that money to replace his entire retirement fund.


Sure enough, the next time we all met, the seller confessed. That is exactly what happened. I gently explained, no matter how much my client respected the seller, he could not make a living if he bought the practice at that price. We declined the deal.


The older physician still has not sold his practice.


Lesson: The price of a practice can’t be based only on the seller’s needs.

A Word of Caution:   No matter how much you respect a physician’s medical skills, when entering a business deal, always get sound, formal financial documents and rely mostly on them.

The Washcloth Syndrome

thththt


My client was asked by a slightly older physician if she wanted to buy her practice. The seller was pregnant again, this time with twins. She knew she could not continue in practice as the mother of four.


The negotiations went well and then became progressively difficult. The seller was resistant to every purchase price we offered, every plan we devised. We couldn’t understand it.


Then it hit me. When I was ten, I had a sore throat just before I was to leave for summer camp. The doctor came to the house, examined me and said I couldn’t go to camp. He told my parents to wrap my throat in a warm wet washcloth several times a day. When they tried to put it on my throat I wouldn’t let them near me. They couldn’t understand why I didn’t want the washcloth. I didn’t care about the washcloth, I wanted to go to camp, but it was right in front of me and the only thing I could fight.


The resistance of the seller was not the price or the details of the deal. She did not want to give up the solo private practice she had worked so long and hard to create. Once I realized that, we discussed it. My client and I assured the seller that we understood that selling was not her choice, but her only option. The seller relaxed. Her objections disappeared. And the sale went smoothly.


Lesson: Discover the real problem and you can solve it. Just as in diagnosing a difficult patient, the skills of a specialist are valuable tools. An empathetic, experienced, expert third party can make the deal.



A Word of Caution: The advice of a colleague who has done it once or heard about someone who did it once, can create the worst case scenario and be a deal breaker.

You Must Be Proactive to Survive In This Economy



In this unprecedented economic environment, you have to make critical decisions and changes to keep your practice healthy.

Your patients will always need you. Can you be there for them?

How can you continue to provide services at your level of care?

It is almost impossible to understand the economic news. Where do you start to cope with this?

This is what I am doing with my clients. First, decide what you can control. How can you reduce your costs without damaging your practice? Second, determine what you can influence. How can you retain and increase your income?

What You Can Control
Examine your expenses. Determine which costs to eliminate, reduce or leave untouched.

Review your insurance coverage. Is it too much, too little or redundant? Are you covered for what you think you are?

How about your employees? Review their duties, hours, benefits and number. Are you overstaffed?

Do you use outside services? Should you keep them? Or should you discontinue them? Should you increase them and reduce your staff?

Do you have service contracts? Are they protective? Should you cancel them? Should you reduce them? Or is it best to continue them unchanged?

Should you convert to electronic medical records?

What You Can Influence

Evaluate your income. Decide how to retain and build referral sources. Reinforce your long term and best referrers. Reestablish relationships with people who have stopped referring to you. Seek new referrers.

Are your managed care contracts profitable? Should you disenroll, renegotiate or limit the number you participate in? Consider becoming a non participating provider for all third party payors. All of my clients who are now non participating wished they had done it sooner. Physicians provide the highest level of medical care. You are irreplaceable.



Lesson: When facing uncharted waters, don’t plot your course alone. Get expert advice to define the basics of what you need to do to reach your goal. Decide, then row, row, row.

A Word of Caution: Don’t make irrevocable or long term decisions. What Congress does or does not do about Health Care Payment Reform will affect you.

 

Ms. Fox is available to present the following talk to your group:

How to Cut Expenses Without Killing Your Practice

You Can Smell Embezzlement

'
Several years ago, my client and I started his practice. He became very successful. He was beginning to understand the practice management portion of his office. It didn't smell right to him.

He thought one of his employees, Peg, was stealing. Before she left on maternity leave, Peg trained the new receptionist, who was inexperienced, sweet, though not too bright. When Peg was gone, the theft seemed to stop. When Peg returned, it returned. Now they were working together and the front office was not running properly.

He called me in to verify his suspicions.  The staff was told I was evaluating the efficiency of the practice. Peg was very resistant to my questions and did not like me observing her. I asked each employee to fill out a form listing all their duties. Peg was the only one who did not do it.

Over the weekend, the doctor and I were alone in the office. We went through drawers and files in the front office. We found white out in Peg's drawer, something he had forbidden months before. We also found an entire file of referred patients without appointments, a problem he thought he had corrected with Peg before she went on maternity leave.

We didn't think the new receptionist was part of the theft, since she didn't handle the money. But she was not making those appointments, probably following Peg's instructions.

Embezzlers are often insubordinate. Peg trained the new receptionist not to make the appointments which decreased the physician's income. So the amount Peg was embezzling was not as evident.

On Monday, when Peg saw what we removed from her drawer, she was smart enough to know we were on to her. She quit before we could fire her.

Lesson: A swindler plus a sweet and simple employee are a calamitous combination.


A Word of Caution:   Embezzlers make messes in other areas of the office to cover their tracks. This could be more detrimental than the amount embezzled.

Ms. Fox is available to give the following talk to your group

Protect Your Practice
How to Recognize and Prevent Embezzlement

(for Physicians only)

how employees embezzle

procedures to prevent embezzlement

what to do if you find an embezzler