Faculty Practice/MCO Model

[Dr. Pookie]

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I'm a solo private practice. The local hospital faculty practice proposed doing my admin for 15% and turning me into a W2 (w/ benefits, etc.). They would give referrals, do my billing (take all insurances), and branding would be the hospital's. They said the rates they get from insurances would allow them to pay me 30-40% more than what I make currently. Thoughts? Would you do it? Anyone done it and have experiences to share? Contract would be for 5 years. Thanks.

 

[Stagg737]

Biggest thought is that 5 years is a long time. What happens if you decide to leave? Do they keep all your patients that you’ve build up? Will they be covering your overhead? How certain are you that your rates would increase that much? Have they show you the actual numbers?

Could potentially be good, but I’d be asking what they’re getting from you out of this other than just another employee to shorten their waitlist.

 

[tr]

Huh. I'm suspicious. Faculty practice is pretty much never a good deal financially compared to private practice. The institution skims a ridiculous amount off the top, otherwise it wouldn't be worth their while to offer. What you describe sounds superficially OK but there must be a hidden turd somewhere. I would be really hesitant to give up an established successful private practice, assuming you are otherwise happy with your life and your work.

If you want to make more money, why don't you just drop some of the lower-paying insurances?

 

[theduderino]

Interesting offer. At its core, they are buying your already built up practice and not paying you an upfront fee for doing so

It is definitely plausible they are getting higher rates than you are. I take 3 insurances. One insurance pays everyone the same (including hospital groups). The other two have a decent amount of variability. You should look at the details of what insurance rates you can potentially get. They would ideally show you the rates you'd be getting, since it will be an income split and you can do the math after your first paycheck. You can still sort of find out if they refuse to disclose (though this isn't a good sign in general for a partnership with them) by setting up an intro call with one of those firms that specialize in negotiating physician contracts. They have databases that they buy which can give you pretty granular insight into where you fall on the reimbursement scale for a particular insurance payor. That analysis is usually done up front (over the course of a few minutes, should be free) because these firms want to make sure it's worth negotiating on your behalf because they often want a piece of the back-end when they re-negotiate a contract.

What expenses are going to fall under that 15%? If you're a w-2, they should be taking care of everything including malpractice and office space. Is there a non-compete or non-solicit attached? What's the retirement package look like? There are a lot of benefits to being a high earning 1099, particularly around tax deductions if you're maxing out a solo 401k/sep IRA. The math should be in your favor if you move forward. I would do these calculations myself and probably run it by a CPA.

Did you ever have thoughts of hiring a therapist or other clinician? This sort of closes the door on that.

85/15 for a w2 w/ good benefits is a solid deal in a vacuum, but all the little details will need to add up to something that works for how you want to practice in the future. I probably would only consider this if a.) no interest in ever hiring other people in the future b.) soft/no non-compete c.) solid department with good relationships d.) some sort of upfront acquisition fee (because they are buying your practice, no matter how they're framing it) e.) interest in being at an academic institution f.) control over patient flow/patient selection/modality of care being offered (I wouldn't want someone telling me to see patients q20 minutes).

 

[Stagg737]

Huh. I'm suspicious. Faculty practice is pretty much never a good deal financially compared to private practice. The institution skims a ridiculous amount off the top, otherwise it wouldn't be worth their while to offer. What you describe sounds superficially OK but there must be a hidden turd somewhere. I would be really hesitant to give up an established successful private practice, assuming you are otherwise happy with your life and your work.

If you want to make more money, why don't you just drop some of the lower-paying insurances?

I agree that being wary is important. Best case scenario they collect significantly more than OP does and the amount they skim off the top gives them a decent pay to make covering OP's admin worthwhile while still adding enough income to OP's collections (either by increasing collection rates OR collection amount/case) that OP's income significantly increases as well. I could see this being the case where the reason for the 5 year contract is they hope to negotiate even higher rates from insurance going forward essentially giving themselves a raise while being able to pay OP the same rates in year 5 as they would now, then hope OP would be okay with just re-signing out of convenience.

Obviously, there's plenty of other shady things that could be done that would be much worse. Just pointing out that even in the best case scenario for both parties the employer could still end up taking advantage.

 

[comp1]

5 years is soooo long. See if it could be shorter in case this turns into a mess. Of course there should be nothing like a non-compete/non-solicit if you do ultimately decide to go your own ways at the end. I'm W2 for life, but this transition from private practice sounds confusing and challenging.