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.

 

[trophyhusband]

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.

Are the referrals they'll give you ones that you would want? And can you reject them? This seems like a great way to offload all of the problem patients from their EDs that they can't currently find outpatient docs for...

 

[clozareal]

How do they know that they can pay you 30-40% more of what you make currently? is it just solely based on the contracted rates? There's so much more in private practice that is beneficial financially: business deductions, higher retirement contributions from the employer side of a solo 401k/SEP-IRA or even a defined benefit plan, control over business expenses. Is that 30-40% after benefits and payroll taxes? Are they guaranteeing you a minimum of that? Can you still accept private referrals or can you only take them from the hospital?

I agree with @comp1 that 5 years is a long time for an employment contract esp when psychiatry is in such high demand... If there's no escape clause for poor fit, non-compete or non-solicit clauses that limit your exit options, claims based malpractice without them paying for tail, then this would be a bad choice if you can't negotiate for an opt-out clause in 1-2 years and rights to your patient panel if you leave.

I would probably not do it because I highly value autonomy, control over a manageable caseload, my branding/identity as a psychiatrist without all the institutional transference, and bureaucratic headaches to get any changes made.

 

[hallowmann]

You'd be losing a lot of autonomy for not much of a benefit in my opinion. Unless you see them edging out all the local psychologists/PCPs, I wouldn't do it. I'd view it as way toward either ending clinical private practice or transitioning to academia, not as a way to do the same thing, but with more money. Its OK, if that's what you want, but you should go in with eyes wide open.

 

[Dr. Pookie]

Are the referrals they'll give you ones that you would want? And can you reject them? This seems like a great way to offload all of the problem patients from their EDs that they can't currently find outpatient docs for...

Yes - I'd be able to screen out patients I don't feel would be a fit for the practice, just like I do now. Only difference would be that I'd be taking all insurances and wouldn't be able to refuse on the basis of insurance alone. They mentioned that they would need a specific designated slot in the schedule for patients with Medicaid, for example.

 

[Dr. Pookie]

You'd be losing a lot of autonomy for not much of a benefit in my opinion. Unless you see them edging out all the local psychologists/PCPs, I wouldn't do it. I'd view it as way toward either ending clinical private practice or transitioning to academia, not as a way to do the same thing, but with more money. Its OK, if that's what you want, but you should go in with eyes wide open.

I actually was considering this more of an option when I'm looking to transition to retirement. Like you said, more as an exit strategy than a thing to do in my early-mid career.

 

[trophyhusband]

Yes - I'd be able to screen out patients I don't feel would be a fit for the practice, just like I do now. Only difference would be that I'd be taking all insurances and wouldn't be able to refuse on the basis of insurance alone. They mentioned that they would need a specific designated slot in the schedule for patients with Medicaid, for example.

Ok, you'd be able to screen for now. Just be aware that these types of arrangements tend to get altered when the "need" arises and the hospital system defines the need (just play the Star Wars scene with Lando and Darth Vader about altering the deal in your head if you need a specific idea of how the conversations go).

The other thing you need to be aware of is unfortunately once you start taking Medicaid you start getting more and more Medicaid patients as the other patients in your practice start to drop once they start seeing Medicaid patients in your waiting room/leaving your office. We saw this at some of the hospital clinics for a large hospital system I worked for... the clinics went from all commercial insurance patients to mostly Medicaid patients once they started accepting Medicaid. When we looked at the data the people with commercial insurance moved to private practices that didn't take Medicaid or to other clinics that didn't accept it. Again, if you can screen out the psychotic ones and the others who tend to scare away the people on commercial insurance it should be ok for a while.