Thanks for sharing. Would you say that $200 is the average billing fee per patient for all podiatrists? I'm curious, because, let's say that you see 20 patients/day, and you bill each patient for $200. 20 x $200 each is $4,000; if you've tamed overhead and other expenses to 50% of your gross, then that's about $2,000 take-home for you each day. If you work five days a week (and don't take any vacations), that's
$480,000 in one year.
Am I missing something here? This sounds totally awesome, but why is the average yearly income for a practice owner reported by the APMA to be $150,000? Do most pods not see nearly 20 patients on an average day (nor charge each of them $200)?
Eager for your insight.
*Note: I'm not trying to challenge your anecdote or stir-up any kind of trouble, so I hope my tone doesn't come off as skeptical -- I'm genuinely curious*
I do not know what the average billing is for all podiatrists, but I have worked with some that did take home figures like you're calculating, and then some. To do so one has to work a lot and be pretty business savvy.
What you bill and what you actually take home are not even close. I expect to collect somewhere between 2/3 to 3/4 of what I billed, so $4K billed means around $2500-$3000 collected. After you've collected that money, then you have to pay for your overhead expenses. After you've done that, you pay yourself (and don't forget to pay 25%-30% to Uncle Sam).
Can someone dig up the APMA figures for average gross income? Wasn't it somewhere near that $500K mark?
Overhead expenses tend to be close to the same amount each month, so it's inaccurate to take the amount you collect each month and simply multiply by 50% (or whatever your average overhead is) to find out your net. It doesn't work that way. You have to pay your expenses first. If your monthly expenses run $15K and you only collected $15K, then your overhead that month was 100% and you made bupkus. If you collected $30K then your overhead was 50%. You look back at your books over time to be able to say, "My overhead is X percent."
To collect higher amounts one needs to see more patients. To see more patients, one needs to work more quickly. To work more quickly, one needs to have more support staff, more space, etc. More staff and more space costs more money. So to make huge amounts of money you typically have to spend huge amounts of money. As long as there are incoming patients, then the machine produces a lot. It's when the patient count (input) decreases that your income (output) decreases, yet you still have to pay all that staff, rent, utilities, etc.
The preceding paragraph describes how some large groups function. They have a lot of staff and square footage to pay for, so expenses are high. Patient flow tends to be greater than in a small group, so you can see more patients, bill more, collect more. Heaven forbid your production drops a little (e.g., vacation days) though, because suddenly your overhead calculates out to 75% or 80% for a given month and you worked your butt off for little net income. Some call big groups a treadmill, because as long as you keep running you're okay, but you can't let off production or you risk getting ejected.
I like to make an analogy to car engines (please forgive me). If you want a lot of horsepower (money), you typically need a big motor (big practice) and feed it a lot of fuel (patients). As long as the fuel is flowing, you get the power. It uses up that fuel pretty quickly though, so you'd better hope you have plenty of fuel (money) to put in the tank.
One of the most useful lessons a former Attending told me was, "It's not just how much you make, but how much you don't spend." In my opinion, to help support a good quality of life it's all about controlling your overhead.
Nat
p.s., Henry, there's an old thread somewhere that discusses salary as an employee and salary as a Partner. It might be worth finding. I recall saying that as a business owner, even if you collect an unusually large amount you don't necessarily have to increase your own salary (since you'd just have to increase your payroll taxes too). Sometimes paying yourself a higher salary just means you pay more money to The Man.
You have to pay yourself a "reasonable income" and after that can take money as dividends or figure out how to pay for stuff as a business expense. Taking seminar vacations is one common example of doing things as a business expense. You can also just leave the money in your business.
Northwest Podiatric Foundation's Kauai conference last October:
