Practice comparison: Own the AP lab vs PC + Part A practice

[NuclearDust]

Hey guys, so I'm trying to compare two different practices, and I'm trying to determine how much of a difference that owning the AP lab makes in terms of a practice.

Practice 1: Owns their own free-standing AP lab for all H&E and IHC for all outreach work and has their own billing dept. They get a good amount of outreach and then contracts with several hospitals for their path work, but gets no part A.

Practice 2: Major contract with a large hospital conglomerate. The group manages their labs and gets part A, and then gets all the AP material for the hospital conglomerate and bills the Professional component for all of the AP material.

Both practices say that they are partnership tracks. Practice 2 has a relatively minimal buy-in. The buy-in for Practice 1 is unclear and will be determined at the time of partnership eligibility, but I imagine is more considerable. Partnership salary is clearly stated at practice 2, but has not been stated at Practice 1, and is unclear.

I guess my question is this... how much of a difference does owning the lab make? I know there are a lot of things that come into this, payor mix, number of pathologists caseload, etc. but assuming those are all equal, what is the difference in terms of compensation etc.

Thanks for your input and help.

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[NuclearDust]

bump... any opinion

 

[AZpath]

The free standing AP Lab has some advantages if the operation is run efficiently.
Mainly that they independent of the hospital operation.

It hard to tell which practice would do better in lieu of zero part A. (Typically it averages about 75 K per pathologist)

I would be concerned about practice #2.

* They have zero independence from the hospital system.

* Hospital billing departments typical do poorly with pathology billing.

If they actually doing well with billing.

The hospital could easily make them employees with a cut in pay; they are 95% there now.
You are then looking at 250-300k per pathologist and may be 300-400k a for director if is in desirable urban / suburban area.

This is what HCA is doing system wide. Knowing exactly what the group makes make it easy for a hospital system to do this.

 

[NuclearDust]

The free standing AP Lab has some advantages if the operation is run efficiently.
Mainly that they independent of the hospital operation.

It hard to tell which practice would do better in lieu of zero part A. (Typically it averages about 75 K per pathologist)

I would be concerned about practice #2.

* They have zero independence from the hospital system.

* Hospital billing departments typical do poorly with pathology billing.

If they actually doing well with billing.

The hospital could easily make them employees with a cut in pay; they are 95% there now.
You are then looking at 250-300k per pathologist and may be 300-400k a for director if is in desirable urban / suburban area.

This is what HCA is doing system wide. Knowing exactly what the group makes make it easy for a hospital system to do this.

Okay, thanks for the input. Well practice #2 does not have the hospital doing their billing. The group is just hiring a billing company like McKesson or something. By not doing their own billing I meant they are not employing their own billers etc. in house.

 

[LADoc00]

I would take medical directorship aka passive income you can count on over TC income any day of the week.

But you are asking the wrong ?s. Personality match is so utterly key. Stop thinking of this as a partnership track and think more in the mentality that this is a marriage, serious level commitment. Where do you want to live? What type of people are these?

Finding dollars are easy, finding life satisfaction however is not.

 

[AZpath]

Okay, thanks for the input. Well practice #2 does not have the hospital doing their billing. The group is just hiring a billing company like McKesson or something. By not doing their own billing I meant they are not employing their own billers etc. in house.

That is much better.

 

[Dave CX]

The lack of transparency on the first group is troubling.
What is their current partner/non partner ratio?
Also, what is the time to partnership for each group?

 

[NuclearDust]

I would take medical directorship aka passive income you can count on over TC income any day of the week.

But you are asking the wrong ?s. Personality match is so utterly key. Stop thinking of this as a partnership track and think more in the mentality that this is a marriage, serious level commitment. Where do you want to live? What type of people are these?

Finding dollars are easy, finding life satisfaction however is not.

Thanks. Yeah, I get that, I was actually having less trouble this way. I thought that I meshed well with both actually. But in terms of location, I think that Practice 2 was a lot more fitting.

 

[NuclearDust]

The lack of transparency on the first group is troubling.
What is their current partner/non partner ratio?
Also, what is the time to partnership for each group?

Yes, that bothered me some.

Practice 1: 2yrs, P/NP ratio= 0.42

Practice 2: 3yrs (but are willing to write it more concretely into the contract), P/NP ratio= 0.7 (but the non-partners are part-time)

 

[NuclearDust]

The free standing AP Lab has some advantages if the operation is run efficiently.
Mainly that they independent of the hospital operation.

It hard to tell which practice would do better in lieu of zero part A. (Typically it averages about 75 K per pathologist)

I would be concerned about practice #2.

* They have zero independence from the hospital system.

* Hospital billing departments typical do poorly with pathology billing.

If they actually doing well with billing.

The hospital could easily make them employees with a cut in pay; they are 95% there now.
You are then looking at 250-300k per pathologist and may be 300-400k a for director if is in desirable urban / suburban area.

This is what HCA is doing system wide. Knowing exactly what the group makes make it easy for a hospital system to do this.

I had worried about that a little bit. Is there a way to shield yourself from this possibility? A way to create leverage to prevent the hospital from attempting to force the purchasing of the group?

I suppose the other thing to mention is that the large hospital conglomerate that contracts with Practice 2, has a separate contract with a large corporate lab company for the technical processing of the specimens and the clinical lab.

 

[Dave CX]

Regarding practice 1, two years is an excellent partnership track, but I don't like the ratio. In this business, trustworthiness is the #1 consideration. Lots of pathologists, especially successful ones who own their own labs (which doesn't have the value that it used too) are greedy lying bastards. I'm not saying this about group 1, but please trust your instincts, same as you should with a tough case. Listen to that voice in the back of your head ALWAYS, unless you are an idiot, then ignore it. Group 2 seems a bit less interesting, but probably more reliable and trustworthy.

 

[Dave CX]

I had worried about that a little bit. Is there a way to shield yourself from this possibility? A way to create leverage to prevent the hospital from attempting to force the purchasing of the group?

I suppose the other thing to mention is that the large hospital conglomerate that contracts with Practice 2, has a separate contract with a large corporate lab company for the technical processing of the specimens and the clinical lab.

Don't even think about that. Out of your control and putting the cart in front of the horse. Focus now on getting into a group with people who you seem comfortable with and who seem like professionals. Then focus on becoming a good community based hospital pathologist. This is enough. LA had some good insights also. I suggest you heed them.

 

[AZpath]

Yes, that bothered me some.

Practice 1: 2yrs, P/NP ratio= 0.42

Practice 2: 3yrs (but are willing to write it more concretely into the contract), P/NP ratio= 0.7 (but the non-partners are part-time)

The % of non partners are a concern for #1. Has anyone made it to partner or is there a ton of turn over because no one makes partner ? Do just ask too much to buy in to the lab??
Not worth the time if there are one or two good old boy that don't want anyone to really be partner

Btw, how big are the groups?? Even 70% is on the high side.

 

[NuclearDust]

The % of non partners are a concern for #1. Has anyone made it to partner or is there a ton of turn over because no one makes partner ? Do just ask too much to buy in to the lab??
Not worth the time if there are one or two good old boy that don't want anyone to really be partner

Btw, how big are the groups?? Even 70% is on the high side.

I don't think that they have offered partner to anyone in a while, they said that they are looking for someone that wants to actively participate in the business, not just sign out cases.

Practice 1: 7 people
Practice 2: 10 people

 

[AZpath]

Practice 1 still a concern.

Are you interested learning the business?
This is not for everyone.

What parameters are they going use to make you a partner?

What kind of buy in is it? How much will it cost?
When will they disclose the financials on the lab?
How will the purchase be financed.?
Does a partner plan to retire?

You may be the golden ticket for them or vice a versa.
Small labs doing TC can still be a good deal for you but the devil is in the details including all the financial liabilities.

Changes in reimbursement can effect the outcome. The good new is TC has already had big cuts . Therefore the buy in risk is way down.

It is another revenue stream.
That means that there is some diversification away from the hospital system too.
I see this as a good thing in the long run.

Remember insurance is pushing stuff to outpatient. Often this is outside of the hospital system.
People that own there own TC can compete. Hospital only pathology may shrink over the next 20 years.

 

[NuclearDust]

Practice 1 still a concern.

Are you interested learning the business?
This is not for everyone.

What parameters are they going use to make you a partner?

What kind of buy in is it? How much will it cost?
When will they disclose the financials on the lab?
How will the purchase be financed.?
Does a partner plan to retire?

You may be the golden ticket for them or vice a versa.
Small labs doing TC can still be a good deal for you but the devil is in the details including all the financial liabilities.

Changes in reimbursement can effect the outcome. The good new is TC has already had big cuts . Therefore the buy in risk is way down.

It is another revenue stream.
That means that there is some diversification away from the hospital system too.
I see this as a good thing in the long run.

Remember insurance is pushing stuff to outpatient. Often this is outside of the hospital system.
People that own there own TC can compete. Hospital only pathology may shrink over the next 20 years.

Yes, I am looking to learn the business aspects of practice and I am also looking to grow my own client base. Unfortunately, some of the other questions have been left unanswered.

1. What parameters are they going to use to determine partnership? --> unknown
2. What kind of buy-in is it? How much will it cost? --> Unknown (but the buy-in includes buying into the brick and mortar lab)
3. When will they disclose financials on the lab? --> Unknown
4. How will the purchase be financed? --> Unknown, but there was a suggestion that it would likely be paid for through an augmented salary over some period of time.
5. Does a partner plan to retire? --> Yes

It seems that the answers to questions 1-3 will remain unknown until I become eligible for partnership. Is that normal?

 

[thebackwardsman]

I'm wondering why practice 1 is hiding the important details. Partnership parameters, buy-in, lab financials, financing of purchase, these are all key questions if someone's going to commit to owning a business. How do they expect someone to accept their terms if they won't even tell people what the terms are?

 

[AZpath]

Yes, I am looking to learn the business aspects of practice and I am also looking to grow my own client base. Unfortunately, some of the other questions have been left unanswered.

1. What parameters are they going to use to determine partnership? --> unknown
2. What kind of buy-in is it? How much will it cost? --> Unknown (but the buy-in includes buying into the brick and mortar lab)
3. When will they disclose financials on the lab? --> Unknown
4. How will the purchase be financed? --> Unknown, but there was a suggestion that it would likely be paid for through an augmented salary over some period of time.
5. Does a partner plan to retire? --> Yes

It seems that the answers to questions 1-3 will remain unknown until I become eligible for partnership. Is that normal?

First LA Doc has it correct "Finding dollars are easy, finding life satisfaction however is not."
Trust is big part of the deal as he put it.

The liability side with many lab deals, billing compliance and taxes.

Paying with a outside loan or you own cash is a bigger risk. Medicare , insurance, IRS may request a big check if the business was not run correctly. If it is bad enough the lab closes and you are out your investment.

That's why it pays to discuss these thing in advance. Ask the questions, see if they really talk Frankness is part of the deal with a future partner.