Another billing/income question - Why don't American FM physicians earn more - detailed analysis

[-JAG-]

Curious Canadian wondering why FM docs down south only make 200-300k usually when they have very good billing codes. My apologies for not understanding how the US health system works.

Here's some back of the napkin math for a rural health clinic with one family doctor and one PA.

Family doctor sees 30 patients per day. PA sees 20. Clinic compensated at all inclusive rate of 83$/visit.
Clinic is open 45 weeks a year, bills 933k a year seeing only Medicare patients, I would guess private pays more.
Collection rate of 90% = 840k
Reimbursed 65% of bad debt by Medicare = collections of around 900k
PA costs 160k including benefits and malpractice
Secretary costs 40k
Billing agent costs 50k
Rent costs 60k.
Medical supplies cost 20k.
Two medical assistants cost 70k
Physician malpractice insurance with no surgery or OB costs 20k in a less litigious state.
Overhead costs = 400k
500k EBITDA for physician.
More if seeing private patients or in Alaska.
What am I missing?

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[deleted87716]

My apologies for not understanding how the US health system works.
...
What am I missing?

It appears that you answered your last question with your first sentence.

 

[-JAG-]

It appears that you answered your last question with your first sentence.

This is a realistic portrait of a solo FM practice here in Canada, with a lower rate per patient seen (and no midlevel), but lower malpractice insurance and no billing agent to go along with it. Overhead here is 25-30%. What have I got wrong with this example, where are the missing 250k in expenses?

 

[-JAG-]

I know you said that malpractice costs more, but this says otherwise . (Texas Medical Malpractice Insurance Overview | Get a Free Quote)
For billing costs, even if you hire another full time coder and take out a subscription to a billing software that's still only 50k more per year. Where is the money going in a 60% overhead clinic?

 

[deleted87716]

I'm not in Texas.

Regardless, there's no point in comparing incomes in a solo practice model in a single-payer country like Canada to the (largely) employed physician practices in a multi-payer country like the US. It's apples and oranges, irrespective of exchange rates.

 

[bronx43]

Curious Canadian wondering why FM docs down south only make 200-300k usually when they have very good billing codes. My apologies for not understanding how the US health system works.

Here's some back of the napkin math for a rural health clinic with one family doctor and one PA.

Family doctor sees 30 patients per day. PA sees 20. Clinic compensated at all inclusive rate of 83$/visit.
Clinic is open 45 weeks a year, bills 933k a year seeing only Medicare patients, I would guess private pays more.
Collection rate of 90% = 840k
Reimbursed 65% of bad debt by Medicare = collections of around 900k
PA costs 160k including benefits and malpractice
Secretary costs 40k
Billing agent costs 60k.
Rent costs 60k.
Medical supplies cost 30k.
Physician malpractice insurance costs 30k in a less litigious state.
Overhead costs = 380k
520k EBITDA for physician.
More if seeing private patients or in Alaska.
What am I missing?

You are not accounting for cost of multiple MAs/LPNs and perhaps RN to take your calls. Also, if you're seeing 50 per day between you and your PA, you may need more than one secretary. In most markets, rent is more than 60k given how many rooms you will need.

 

[-JAG-]

You are not accounting for cost of multiple MAs/LPNs and perhaps RN to take your calls. Also, if you're seeing 50 per day between you and your PA, you may need more than one secretary. In most markets, rent is more than 60k given how many rooms you will need.

You’re absolutely right, I forgot about Medical Assistants, I added them to the calculation. In regards to rent, 60k still gets you over 3000 sq ft. of class B office space at 20$/sq ft/year, which is pretty reasonable. That’s about what class B office space costs in the downtown core of a large city like Dallas, very achievable in a smaller place.

Edit: I left out the secretary, but one secretary for a practice that size with two assistants is standard in my province. Not sure why it would be different down south.

 

[deleted480308]

You’re absolutely right, I forgot about Medical Assistants, I added them to the calculation. In regards to rent, 60k still gets you over 3000 sq ft. of class B office space at 20$/sq ft/year, which is pretty reasonable. That’s about what class B office space costs in the downtown core of a large city like Dallas, very achievable in a smaller place.

Edit: I left out the secretary, but one secretary for a practice that size with two assistants is standard in my province. Not sure why it would be different down south.

That’s a real simplistic breakdown, have you owned a business?

 

[bronx43]

You’re absolutely right, I forgot about Medical Assistants, I added them to the calculation. In regards to rent, 60k still gets you over 3000 sq ft. of class B office space at 20$/sq ft/year, which is pretty reasonable. That’s about what class B office space costs in the downtown core of a large city like Dallas, very achievable in a smaller place.

Edit: I left out the secretary, but one secretary for a practice that size with two assistants is standard in my province. Not sure why it would be different down south.

Maybe Canada is different, but no way are you going to be able to efficiently run 30+20 pts with 2 MAs. I would do minimum 3 MAs/LPNs. In the US, patients also call in quite a bit, and MAs are not trained enough to be able to deal with simple medical questions. Most practices have an RN to do this, as well as split other duties.

 

[septoplasty]

Curious Canadian wondering why FM docs down south only make 200-300k usually when they have very good billing codes. My apologies for not understanding how the US health system works.

Here's some back of the napkin math for a rural health clinic with one family doctor and one PA.

Family doctor sees 30 patients per day. PA sees 20. Clinic compensated at all inclusive rate of 83$/visit.
Clinic is open 45 weeks a year, bills 933k a year seeing only Medicare patients, I would guess private pays more.
Collection rate of 90% = 840k
Reimbursed 65% of bad debt by Medicare = collections of around 900k
PA costs 160k including benefits and malpractice
Secretary costs 40k
Billing agent costs 50k
Rent costs 60k.
Medical supplies cost 20k.
Two medical assistants cost 70k
Physician malpractice insurance with no surgery or OB costs 20k in a less litigious state.
Overhead costs = 400k
500k EBITDA for physician.
More if seeing private patients or in Alaska.
What am I missing?

So this might be a problem, I've never managed to work at a place that had 90% collection rate.. probably like 70% in "good" areas.

Also, not sure where you got the $83/visit. Depending on insurance, a patient if you bill a simple 1 problem visit would be coded "99213" for which RVU is around 0.60 (adjusting expense), 1 RVU is reimursed (by Medicare for example) at a rate of $37. You can see the math doesn't add up to $83 a visit. A 99214 pays at 0.85 RVU.

So lets say you did 50/50 visits (15 - 213 visits [0.60 rvu] and 15 - 214 visits [0.85 rvu]) thats 9 + 12.75 RVU = 21.75 RVU total. For simplicity sake, i'll round to 22. So essentially that's $833 that you're billing for. We'll add the PA did 50% of that so another $415 = $1200 billed. Collectively at that pace, you'd bill (medicare) $270k a year. After this you can go down your list and make your calculations.

Anyways, its more complex than this, but sticking to one payer as you're use to with your provincial health system reimbursement.

(PS. Also a Canuck)

I know you said that malpractice costs more, but this says otherwise . (Texas Medical Malpractice Insurance Overview | Get a Free Quote)

I understand what you're trying to get at, but Texas was a bad example.. its got Tort reform that many other states don't have. So malpractice insurance is much higher in other states/cities.

 

[-JAG-]

So this might be a problem, I've never managed to work at a place that had 90% collection rate.. probably like 70% in "good" areas.

Also, not sure where you got the $83/visit. Depending on insurance, a patient if you bill a simple 1 problem visit would be coded "99213" for which RVU is around 0.60 (adjusting expense), 1 RVU is reimursed (by Medicare for example) at a rate of $37. You can see the math doesn't add up to $83 a visit. A 99214 pays at 0.85 RVU.

So lets say you did 50/50 visits (15 - 213 visits [0.60 rvu] and 15 - 214 visits [0.85 rvu]) thats 9 + 12.75 RVU = 21.75 RVU total. For simplicity sake, i'll round to 22. So essentially that's $833 that you're billing for. We'll add the PA did 50% of that so another $415 = $1200 billed. Collectively at that pace, you'd bill (medicare) $270k a year. After this you can go down your list and make your calculations.

Anyways, its more complex than this, but sticking to one payer as you're use to with your provincial health system reimbursement.

(PS. Also a Canuck)




I understand what you're trying to get at, but Texas was a bad example.. its got Tort reform that many other states don't have. So malpractice insurance is much higher in other states/cities.

I used Medicare’s all inclusive rate (AIR), which for 2019, was 83$ per visit for rural health clinics, indexed o inflation, from what I could find online from CMS. I understand Texas may be a bad example, but here are the numbers for Florida, a more lawsuit heavy state,Florida Medical Malpractice Insurance | Get a Free No Obligation Quote, as you can see the average is 15k, which was under my estimation of 20k.

 

[septoplasty]

I used Medicare’s all inclusive rate (AIR), which for 2019, was 83$ per visit for rural health clinics, indexed o inflation, from what I could find online from CMS. I understand Texas may be a bad example, but here are the numbers for Florida, a more lawsuit heavy state,Florida Medical Malpractice Insurance | Get a Free No Obligation Quote, as you can see the average is 15k, which was under my estimation of 20k.

This.
So the average salary you are seeing (200-300k) are not rural health clinics, more urban or sub-urbans where we are hitting the salary figures. Comp is much higher for rural practices, however other factors will probably balance this i.e. % of actual collections etc.

The malpractice insurances are fluid, so not a factor unless you're in an area of >50%tile.

 

[-JAG-]

This.
So the average salary you are seeing (200-300k) are not rural health clinics, more urban or sub-urbans where we are hitting the salary figures. Comp is much higher for rural practices, however other factors will probably balance this i.e. % of actual collections etc.

The malpractice insurances are fluid, so not a factor unless you're in an area of >50%tile.

I used the rural health clinic model simply because it was easier to calculate billings using a single rate. That being said, there are plenty of locations considered rural that are in the CSA’s of major cities like NYC, Boston, Houston, Chicago and Seattle. Rural here doesn’t mean a small shack in the middle of Wyoming.

List of aforementioned “rural” locations, in descending order of population

Torrington, CT, NYC CSA
Concord, NH, Boston CSA
Ottawa, IL, Chicago CSA
Huntsville, TX, Houston CSA
Oak Harbour, WA, Seattle CSA

edit: meant to say for that Medicare to consider your practice rural you don’t need to be in the boonies

 

[septoplasty]

I used the rural health clinic model simply because it was easier to calculate billings using a single rate. That being said, there are plenty of locations considered rural that are in the CSA’s of major cities like NYC, Boston, Houston, Chicago and Seattle. Rural here doesn’t mean a small shack in the middle of Wyoming.

List of aforementioned “rural” locations, in descending order of population

Torrington, CT, NYC CSA
Concord, NH, Boston CSA
Ottawa, IL, Chicago CSA
Huntsville, TX, Houston CSA
Oak Harbour, WA, Seattle CSA

Um.. not sure what you're getting at.
Medicare determines what is considered rural based on practice zip (among other things).
Regardless, comp is higher for rural docs vs. urban. The comp figure you reflected in your OP is more urban (based on our 'standard' MGMA). Rural FM docs pull in more.
Again, none of this is worth **** because FM is broad and the more you do, the more income potential you have, but it is all listed in one pool.

 

[Captain_Falcon]

I used the rural health clinic model simply because it was easier to calculate billings using a single rate. That being said, there are plenty of locations considered rural that are in the CSA’s of major cities like NYC, Boston, Houston, Chicago and Seattle. Rural here doesn’t mean a small shack in the middle of Wyoming.

List of aforementioned “rural” locations, in descending order of population

Torrington, CT, NYC CSA
Concord, NH, Boston CSA
Ottawa, IL, Chicago CSA
Huntsville, TX, Houston CSA
Oak Harbour, WA, Seattle CSA

edit: meant to say for that Medicare to consider your practice rural you don’t need to be in the boonies

Ottawa IL is 90min (84 miles) away from Chicago...it is about half way from chicago to Peoria, and the demographics is just over 93% white.

I dont think you're being fair with your assessments here

 

[septoplasty]

Ottawa IL is 90min (84 miles) away from Chicago...it is about half way from chicago to Peoria, and the demographics is just over 93% white.

I dont think you're being fair with your assessments here

As with Torrington, CT which is a full 2.5-3 hours away but didn't want to point this out. Closer would be Hartford. Can't imagine having to drive 2.5 hours to get my annual wellness visit done.

 

[-JAG-]

As with Torrington, CT which is a full 2.5-3 hours away but didn't want to point this out. Closer would be Hartford. Can't imagine having to drive 2.5 hours to get my annual wellness visit done.

I'm not trying to say that Torrington CT is in NYC or that Ottawa IL is in Chicago, just that you don't need to be Notrees, West Texas to get access to the rural health clinic rates, and that it's possible to open such a clinic in a medium size city in close(ish) proximity to a larger centre.

 

[InternistDO]

I'm not trying to say that Torrington CT is in NYC or that Ottawa IL is in Chicago, just that you don't need to be Notrees, West Texas to get access to the rural health clinic rates, and that it's possible to open such a clinic in a medium size city in close(ish) proximity to a larger centre.

That may be technically true, but as anyone who's ever looked at the geographic distribution of doctors can tell you, people aren't interested in the fact that Ottawa, IL is less rural than West Texas, or that it's technically in the Chicago CSA. Compared to living in Chicago itself, or the suburbs immediately surrounding it, it's a completely different place that is likely culturally much closer to Notrees, TX than it is to Lincoln Park.

If you want to live there, that's fine, but if you're a city person or a big city suburbs person, it's just not going to cut it. It's like telling someone who's sick of the hustle and bustle of living in Manhattan that they can just move to Brooklyn if they don't like it.