Finance/business aspect of surgical group practice

[PoorMD]

How does the billing get taken care of? Who is in charge of recruiting patients? Is advertising effective in newspapers, radio etc? is there a way to decline medicaid and only take the high quality insurers to keep reimbursements higher? Do group practices allow for more relaxed schedules, i.e. a month off while the other surgeons cover? Is there a lot of turnover in the nurses and assistants who work for the MDs? How much do we have to pay the help? How much money do we (the MDs) each get?? anyone have any answers to these, I would appreciate.

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[Pilot Doc]

How does the billing get taken care of? Who is in charge of recruiting patients? Is advertising effective in newspapers, radio etc? is there a way to decline medicaid and only take the high quality insurers to keep reimbursements higher? Do group practices allow for more relaxed schedules, i.e. a month off while the other surgeons cover? Is there a lot of turnover in the nurses and assistants who work for the MDs? How much do we have to pay the help? How much money do we (the MDs) each get?? anyone have any answers to these, I would appreciate.

Wow ... lots of questions. For starters, the ACS has a practice managmement CD you can order. They also have a residents program at the annual meeting that covers some of this. The various medical finance throwaways are also good. I like Medical Economics. (www.memag.com)

Medical group practice is a small business - similar in many respects to a dry cleaner or a fast food restaurant. There is an owner (the partners), they hire employees (nurses, techs) and have expenses (rent, supplies, malpractice.) They have customers (patients) who pay for the services they receive. The owner pays all the bills and keeps what remains. No guarantees and every expense comes directly out of your pocketbook.

Billing: you hire someone. Successful large practices have a billing staff to negotiate rates and terms and handle billing. It has become a very complex process. There are LOTS of private courses (including the ACS) on billing alone

Patients: Most of the volume in a general surgery practice is breast, hernia, lap chole and lumps and bumps. Those referrals come from primary care physicians. (CT surg referrals come from cardiologists ... you get the idea.) You get more patients by making your referring docs happy. Some of this is making your patients happy so they say good things about you to the PCP. The other part is being easy to work with, quickly scheduling appointments, keeping the PCP updated with the patient, etc. Advertising has very little role in most surgery practices (cosmetic and bariatric being notable exceptions.)

Insurance: You don't have to take Medicaid (government insurance for the poor.) You don't have to take Medicare (government insurance for the old.) You don't have to take commercial insurance at all. You can demand payment in cash, upfront. The question is how do you bring in enough business to support yourself that way. The dermatologists manage to run cash only practices because they have limited the supply of new dermatologists being produced. Surgery hasn't done that and in most places surgeons don't have much leverage about which insurance to accept. In areas where demand>supply (typically rural areas and small cities), surgeons have better pricing power

Schedule: 4 weeks vacation in one block is certainly more possible in a group practice than solo practice. I don't think it's common because it would make life difficult on your partners (taking more call, seeing your patients in follow-up, doing more cases), your patients (having to schedule followup with another doc) and referring docs (I'm sorry, Dr. X's next appointment is 6 weeks away) The other issue is length of annual vacation - 4 weeks/year is relatively typical. The surgery business model doesn't accomodate 8-12 weeks of annual vacation like anes/rads do.

Staffing: Turnover - not if you are a good place to work. Pay - people do surveys on this. You can find out what 25/50/75th percentil salaries for an LPN in a small town in the south is. This isn't really an issue for surgeons because their practice expenses are pretty limtied. Most surgeons spend 1/2 to 1 day per week in clinic. That means that 5 surgeons can probably share 1 receptionist and 1 medical assistant. On the low end, figure that the expenses to pay those people is $50K/yr = 10K/surgeon. Double that and 20K isn't so bad. The bulk of a surgeons time is spent in the OR where the hospital covers all the overhead. Contrast this to a PCP who is in clinic 40 hrs/week and depends on a very efficient clinic staff to move patients through quickly. In that case, each PCP might need to support 2-3 full time employees.

How much money: It just depends. How many cases do you do? How much do they pay? What are your expenses? If you are fast and live in a high-reimbursement, low-expense community, $500K is doable, likely more. Live somewhere else and you might be literally struggling to stay in business.

 

[-Goose-]

How much money: It just depends. How many cases do you do? How much do they pay? What are your expenses? If you are fast and live in a high-reimbursement, low-expense community, $500K is doable, likely more. Live somewhere else and you might be literally struggling to stay in business.

Excellent post, pilot doc.

Just curious as to what constitutes a high-reimbursement, low-expense community? Low medicare/aid payer-mix? No state income tax? etc.

 

[Pilot Doc]

Excellent post, pilot doc.

Just curious as to what constitutes a high-reimbursement, low-expense community? Low medicare/aid payer-mix? No state income tax? etc.

Do a search for posts by FliteSurgn. He's an attending in a HR, LE enviroment and has put some good stuff up. He's the only attending who comes to mind who has posted much stuff on the business side of things.

Things to look for that will maximize your income

1) High volume - the more you operate, the more you make. Look for places that have a low surgeon/patient ratio. The caveat to this is that popular areas are popular for a reason, likewise unpopular places. If you are lucky, you can find a place whose attributes are a plus to you but a minus to other people.

2) Payer mix. Medicaid is generally really bad, with some exceptions. (In some very competitive urban markets, they may pay as well or better than commercial insruance) Medicare isn't great but it has the advantage of being completely transparent and generally low hassle. Private insurance is, of course, the holy grail. Too much of it attracts lots of docs and the prices go down. What you want is an area that has a strong economic base - lots of employees with insurance coverage - but is not big or popular. My parents live in a town of 30,000 people that is, as the recruiters like to descibe such places "an easy drive to 3 major metropolitan areas" Translation:75 miles to the nearest interstate highway and 100, 150, and 200 miles to metro areas of 1 million, 500K and 1 million, the most notable of which is Birmingham, AL. The area has a lot of small manufacturing, several universities, some goverment projects, etc. Physicians there do really well. You need to find someplace like that where you want to live.

3) Low expense - Cities that fit with #2 will generally have low real estate and employment expenses. Your other major overhead expense is Malpractice and that varies wildly by state. Indiana is great, Illinois and Ohio are bad, for instance. No state income tax doesn't play into this per se since that doesn't affect your practice revenue and expenses. But it is an item to consider. (Something else to consider is that the state has to get its money from somewhere. Unless a state has a large and unsual source of reveneu (e.g. Alaskan oil field taxes), the budget comes out of the citizen's wallet somehow. Most states that have low or no income tax make up for it with high sales tax and/or property tax. As a physician you can more comfortably control your sales and property tax bills compared to an income tax, but depending on your lifestyle, you could be better off in an income tax state.)

 

[PoorMD]

Wow ... lots of questions. For starters, the ACS has a practice managmement CD you can order. They also have a residents program at the annual meeting that covers some of this. The various medical finance throwaways are also good. I like Medical Economics. (www.memag.com)

Medical group practice is a small business - similar in many respects to a dry cleaner or a fast food restaurant. There is an owner (the partners), they hire employees (nurses, techs) and have expenses (rent, supplies, malpractice.) They have customers (patients) who pay for the services they receive. The owner pays all the bills and keeps what remains. No guarantees and every expense comes directly out of your pocketbook.

Billing: you hire someone. Successful large practices have a billing staff to negotiate rates and terms and handle billing. It has become a very complex process. There are LOTS of private courses (including the ACS) on billing alone

Patients: Most of the volume in a general surgery practice is breast, hernia, lap chole and lumps and bumps. Those referrals come from primary care physicians. (CT surg referrals come from cardiologists ... you get the idea.) You get more patients by making your referring docs happy. Some of this is making your patients happy so they say good things about you to the PCP. The other part is being easy to work with, quickly scheduling appointments, keeping the PCP updated with the patient, etc. Advertising has very little role in most surgery practices (cosmetic and bariatric being notable exceptions.)

Insurance: You don't have to take Medicaid (government insurance for the poor.) You don't have to take Medicare (government insurance for the old.) You don't have to take commercial insurance at all. You can demand payment in cash, upfront. The question is how do you bring in enough business to support yourself that way. The dermatologists manage to run cash only practices because they have limited the supply of new dermatologists being produced. Surgery hasn't done that and in most places surgeons don't have much leverage about which insurance to accept. In areas where demand>supply (typically rural areas and small cities), surgeons have better pricing power

Schedule: 4 weeks vacation in one block is certainly more possible in a group practice than solo practice. I don't think it's common because it would make life difficult on your partners (taking more call, seeing your patients in follow-up, doing more cases), your patients (having to schedule followup with another doc) and referring docs (I'm sorry, Dr. X's next appointment is 6 weeks away) The other issue is length of annual vacation - 4 weeks/year is relatively typical. The surgery business model doesn't accomodate 8-12 weeks of annual vacation like anes/rads do.

Staffing: Turnover - not if you are a good place to work. Pay - people do surveys on this. You can find out what 25/50/75th percentil salaries for an LPN in a small town in the south is. This isn't really an issue for surgeons because their practice expenses are pretty limtied. Most surgeons spend 1/2 to 1 day per week in clinic. That means that 5 surgeons can probably share 1 receptionist and 1 medical assistant. On the low end, figure that the expenses to pay those people is $50K/yr = 10K/surgeon. Double that and 20K isn't so bad. The bulk of a surgeons time is spent in the OR where the hospital covers all the overhead. Contrast this to a PCP who is in clinic 40 hrs/week and depends on a very efficient clinic staff to move patients through quickly. In that case, each PCP might need to support 2-3 full time employees.

How much money: It just depends. How many cases do you do? How much do they pay? What are your expenses? If you are fast and live in a high-reimbursement, low-expense community, $500K is doable, likely more. Live somewhere else and you might be literally struggling to stay in business.

awesome post, thanks for the in depth response. I know that won't pay you back for the time you invested on the post, but I did appreciate it.

 

[Blade28]

Is Medical Economics free?

 

[Surgeon24]

Are all surgeons partners (owners) when working in a group? Or do you have to work a certain amount of time with the group before ?

I suppose this type of practice is more for an outpatient setting (hernias, lap chole), but can you do 'bigger' cases (i.e. colon resection)? What happens if the patient needs to stay for a couple of days post-op, are there nurses/beds?

How does the on-call works? What type of problems you encounter when on call?
(I suppose a general surgeon getting called for an ortho patient won't know how to handle it????)

 

[Pilot Doc]

Is Medical Economics free?

The website is free. They send the print version to some residents; I've tried unsuccessfully a couple times to get it.

 

[Pilot Doc]

Are all surgeons partners (owners) when working in a group? Or do you have to work a certain amount of time with the group before ?

I suppose this type of practice is more for an outpatient setting (hernias, lap chole), but can you do 'bigger' cases (i.e. colon resection)? What happens if the patient needs to stay for a couple of days post-op, are there nurses/beds?

How does the on-call works? What type of problems you encounter when on call?
(I suppose a general surgeon getting called for an ortho patient won't know how to handle it????)

I'm guessing you're a premed. Some of your questions some of your questions come from a lack of understanding the medicine side of medicine. I'll stick to the business side for this post.

Typically, a surgeon is employed by a group - just like a receptionist - for one to two years before being offered partnership. The time period varies - generally longer for more attractive opportunities - and may also involve a payment to the other partners to buy their share of the business. Partnership isn't automatic and new hires are sometimes fired if they aren't compatibile or the partners don't want to take on another partner.

 

[Surgeon24]

Thanks for the answers.

Your guess is wrong though, I'm no premed.
I'm a resident in surgery in quebec, canada...the health system here is so different, I'm just trying to find out how it works down south.
We are far from private practice, I'm just curious to see if it could apply here.

 

[Pilot Doc]

Thanks for the answers.

Your guess is wrong though, I'm no premed.
I'm a resident in surgery in quebec, canada...the health system here is so different, I'm just trying to find out how it works down south.
We are far from private practice, I'm just curious to see if it could apply here.

Ahhhh. Makes sense now. In the US system, hospitals and physicians are separate businesses. Physicians refer patients to the hospital who then bill them for non-physician sevices (room fees, OR fees, lab tests, etc) Inpatient surgeries are performed at a hospital where the patient can recover. Many surgeons split their time between inpatient cases at a hospital and outpatient cases at dedicated surgery centers.

Hospitals maintain on call lists when emergencies arise. General surgeons do not have to cover other surgical specialites (e.g. ob/gyn, ophto, ortho, neuro, cardiac, ENT, urology)

 

[supercut]

They have customers (patients) who pay for the services they receive.

I disagree with your business analogy a bit. Patients are not customers in the sense that they do not pay for your services (the vast majority don't, anyway). In fact, that is a large reason why our medical system is in such a mess. The insurance companies pay for your services.

Compare this to hiring a plumber to fix your pipes. You choose the plumber from the phone book or from talking to your friends. He or she does the job and gives you a bill. You pay him or her the amount on bill.

For the patient needing surgery, however...the pt is referred to the surgeon by the PMD. You do the surgery and send the bill to the insurance company. The insurance company pays you what they have decided you deserve to be paid for your services...maybe...if you haven't left a comma out of the massive amount of paperwork the insurance company requires you submit.

Then good luck trying to bill the patient for anything beyond what the insurance company decides you should get. Most people in this country don't think they should have to pay a penny out of their own pockets for their health care.

To stay in business as a surgeon, you have to kiss the a$$es of PMDs, patients and insurance companies (unless you are one of those rare people who can put together a cash only practice). It's a crazy system.

 

[Pilot Doc]

I disagree with your business analogy a bit.

All good points. I left them out for the sake of clarity.

That said, if insurance drives you nuts, there are ways to minimize the pain. Working for a VA or university insulates you somewhat. You can join a big multi-specialty group that has negotiating power and/or a robust billing staff. You can practice in an area thats either almost all Medicare and/or has a surgeon shortage.