Private practice overhead

[vadim1980]

Hey guys, I have been checking out this forum for a while now and appreciate all the info here, both clinical and not. I have a non clinical question, which may have been discussed previously to some extent, but I would appreciate any input.

I’m about 5 years out of fellowship, working in private practice in a medium sized Ortho group. I’m currently not a partner and do most of my procedures in office, with a only kyphos and some scs in a ASC. The practice provides me with a secretary and MA and is pretty good with marketing, so all I really have to worry about is seeing patients. Since day one my contract has been approximately 40% of collections. There are no ancillary income opportunities, but I do get health/malpractice insurance and basic CME funds

Obviously since I started I was able to ramp up my volume and at this point I’m bringing in close to 1.2 mil a year in collections. I’m going to try to renegotiate my contract pretty soon. The way I think about it is that 1. That 40% of collections is on the low end and that 2. Even if 40% is not on the low end, the overhead after a certain point of collections should decrease after my direct costs and practice overhead are covered. My direct costs are my salary, secretary/MA, c-arm lease payments, X-ray tech time, injection supplies. The practice overhead is obviously standard stuff similar to other practices

I talked to the practice manager briefly about this and he basically said that they go by a formula that is standard for all the employees, and that the 60% overhead is not usually adjusted as collections increase. In my view that is obviously great for the partners, but def not fair for me

What are your views as far as the standard overhead numbers for a typical pain guy in an Ortho group and what kind of points can I argue to increase my compensation for time worked.

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[Laryngospasm]

You are at a disadvantage and will never know the true numbers without an audit which they won’t let you do. They will tell you the number they want you to hear etc. The practice manager is in bed with the partners and will always try to screw non partners. This is how this game works.. I have been there.

 

[RoloTomassi]

You should be doing kyphos in office. Lookup the pro fee in office vs ASC. Can you do trials in office or do they own and want those done in ASC?

If you are unhappy and they value you, you should be able to negotiate. Ask for tiered %collections, as this will incentivize you to produce. Ask for ASC buy-in, if that interests you.

 

[Ferrismonk]

Agree with above. I would also add that it may help your argument if you can figure out the real costs of your overhead. How much does your staff actually cost? How much is your share of the c-arm payment? Supplies? Rent? This will help your negotiation.

I would think with the numbers you listed you should be able to negotiate a buy-in to partnership/ASC if that interests you. They certainly won't want to see you (at that fat collections number) go.

At the absolute bare minimum you should be able to increase percent collections to at least 45%.

 

[Taus]

If it’s just not gonna happen re true eat what kill minus overhead model…. Which it prob won’t in your set up….. I’d push for tiered threshold model of % collections. Increasing % as net collections go up. Also, as above, even if not true/full partner…. At least get a little slice of ancillaries, asc, etc.

 

[vadim1980]

If it’s just not gonna happen re true eat what kill minus overhead model…. Which it prob won’t in your set up….. I’d push for tiered threshold model of % collections. Increasing % as net collections go up. Also, as above, even if not true/full partner…. At least get a little slice of ancillaries, asc, etc.

I agree a tiered collections mode would be the fairest. Hopefully this is something they agree to do. Otherwise besides partnership not too many options

 

[drusso]

Hey guys, I have been checking out this forum for a while now and appreciate all the info here, both clinical and not. I have a non clinical question, which may have been discussed previously to some extent, but I would appreciate any input.

I’m about 5 years out of fellowship, working in private practice in a medium sized Ortho group. I’m currently not a partner and do most of my procedures in office, with a only kyphos and some scs in a ASC. The practice provides me with a secretary and MA and is pretty good with marketing, so all I really have to worry about is seeing patients. Since day one my contract has been approximately 40% of collections. There are no ancillary income opportunities, but I do get health/malpractice insurance and basic CME funds

Obviously since I started I was able to ramp up my volume and at this point I’m bringing in close to 1.2 mil a year in collections. I’m going to try to renegotiate my contract pretty soon. The way I think about it is that 1. That 40% of collections is on the low end and that 2. Even if 40% is not on the low end, the overhead after a certain point of collections should decrease after my direct costs and practice overhead are covered. My direct costs are my salary, secretary/MA, c-arm lease payments, X-ray tech time, injection supplies. The practice overhead is obviously standard stuff similar to other practices

I talked to the practice manager briefly about this and he basically said that they go by a formula that is standard for all the employees, and that the 60% overhead is not usually adjusted as collections increase. In my view that is obviously great for the partners, but def not fair for me

What are your views as far as the standard overhead numbers for a typical pain guy in an Ortho group and what kind of points can I argue to increase my compensation for time worked.

40% is in the ballpark. Surgical practices tend to have a higher overhead. Your production is on target. Keep in mind most hospitals can't even compute their real costs.

Are you worried that the partners and business/practice manager aren't good at keeping overhead low or are not good stewards of resources?

 

[geauxg8rs]

40% is in the ballpark. Surgical practices tend to have a higher overhead. Your production is on target. Keep in mind most hospitals can't even compute their real costs.

Are you worried that the partners and business/practice manager aren't good at keeping overhead low or are not good stewards of resources?

What happens if you add a PA? Does the percent change? Do you get something for overseeing? This will also lead to having an MA hired. It really should stay the same.

 

[vadim1980]

40% is in the ballpark. Surgical practices tend to have a higher overhead. Your production is on target. Keep in mind most hospitals can't even compute their real costs.

Are you worried that the partners and business/practice manager aren't good at keeping overhead low or are not good stewards of resources?

I guess neither of this is acceptable overhead numbers. I just keep on hearing that 60percent for overhead is high. But then still the overhead for the first day 600 collected should not be same as the overhead for the subsequent 600k

 

[drusso]

I guess neither of this is acceptable overhead numbers. I just keep on hearing that 60percent for overhead is high. But then still the overhead for the first day 600 collected should not be same as the overhead for the subsequent 600k

How do you figure?

 

[vadim1980]

How do you figure?

Most of the costs are fixed. So me seeing 120 patients a week versus 170 patients a week will drastically raise the collections, but will not incur any significantly extra overhead other than potentially minimal cost of injection materials and x-ray time. The cost for my secretary, MA, rent, etc are going to remain the same

 

[RoloTomassi]

60% is just an arbitrary number because overhead is a relatively fixed amount. Let's say overhead is 420k. It's only truly going to be 60% for a specific collections amount: 700k. If you collect 1M overhead is 42%. If you collect 420k, overhead is 100%.

Using a number like 60% makes the accounting easy but can take advantage a hard worker, disincentivize you too push yourself. Tiered system makes more sense.

 

[TIVAndy]

60% overhead is fair for ortho group. if you are doing most injections in office and you are busy, you should be collecting a lot more. if u can get tiered overhead more benefit to you, but not sure if that would happen as a non partner

 

[drusso]

Most of the costs are fixed. So me seeing 120 patients a week versus 170 patients a week will drastically raise the collections, but will not incur any significantly extra overhead other than potentially minimal cost of injection materials and x-ray time. The cost for my secretary, MA, rent, etc are going to remain the same

But, if I understand your situation correctly you don't control the costs. You only control your production. Are you looking for ways to reduce your costs (become more efficient) so you can take home more money?

 

[vit8bsm]

But, if I understand your situation correctly you don't control the costs. You only control your production. Are you looking for ways to reduce your costs (become more efficient) so you can take home more money?

he's saying the harder he works, he's making exponentially more for his partners and not himself as costs are fixed. he wants to negotiate a higher % because MD/DOs that work for a big group actually rightfully so should get a higher percentage of their collections if the actual collection $$ is higher, because most of the cost is FIXED. so that extra, let's throw up a number, like 300k in collections he got maybe this year compared to last, 40% of that is going to the physician (him) and 50+% going straight to the partners pockets because the cost has barely changed since the prior year. it's very simple.

OP, you have a strong case against the practice and the reality is that a fixed % for collections isn't the based incentive based system for you when you think about it. if the cost of you working , aka the expenses to the practice went up proportionally to the amount you collected, then yes, it'd be fine, but it's definitely worth sitting down with the practice managers and discussing it, although the biggest key to negotiating a good deal for ou would be offering to leave if they don't get you a better set up.

it's very clear when you sit down and run the numbers. let's say you collected 800k for the practice and got paid 320k, (40%) their overhead is 300k (hypothetically) so they make 180k off you.

now, if you make 1.4million (which you're not far off) and get paid 560k, (40%), their overhead is probably still in the 300s, let's say 400k. now they made 440k. you collected double, your income didn't double, but the amount they made 2.5x'd almost.

technically while it is incentive based, the harder you work, the more you exponentially make them. if you collected double, and overheads barely change, they should not be 2.5x their profit off you while your income doesn't even double. so yes, you should do something about it.

 

[nvrsumr]

If you are a rainmaker then you deserve a bigger cut of the pie and even consideration for partnership. If injection robot for orthos then they can always find someone else if you push too hard

 

[drusso]

he's saying the harder he works, he's making exponentially more for his partners and not himself as costs are fixed. he wants to negotiate a higher % because MD/DOs that work for a big group actually rightfully so should get a higher percentage of their collections if the actual collection $$ is higher, because most of the cost is FIXED. so that extra, let's throw up a number, like 300k in collections he got maybe this year compared to last, 40% of that is going to the physician (him) and 50+% going straight to the partners pockets because the cost has barely changed since the prior year. it's very simple.

OP, you have a strong case against the practice and the reality is that a fixed % for collections isn't the based incentive based system for you when you think about it. if the cost of you working , aka the expenses to the practice went up proportionally to the amount you collected, then yes, it'd be fine, but it's definitely worth sitting down with the practice managers and discussing it, although the biggest key to negotiating a good deal for ou would be offering to leave if they don't get you a better set up.

it's very clear when you sit down and run the numbers. let's say you collected 800k for the practice and got paid 320k, (40%) their overhead is 300k (hypothetically) so they make 180k off you.

now, if you make 1.4million (which you're not far off) and get paid 560k, (40%), their overhead is probably still in the 300s, let's say 400k. now they made 440k. you collected double, your income didn't double, but the amount they made 2.5x'd almost.

technically while it is incentive based, the harder you work, the more you exponentially make them. if you collected double, and overheads barely change, they should not be 2.5x their profit off you while your income doesn't even double. so yes, you should do something about it.

How do you determine how much of someone else's profit you should get? Since you don't control the other factors and costs it seems that focusing on how much profit the owners are getting and backing into how much YOU should get is confusing...they can control the business risk and the costs.

You can only control your production. What kind of compelling response can you give to the answer, "If you want to make more money, work harder and smarter. That's what we incentivize you to do."

 

[vadim1980]

How do you determine how much of someone else's profit you should get? Since you don't control the other factors and costs it seems that focusing on how much profit the owners are getting and backing into how much YOU should get is confusing...they can control the business risk and the costs.

You can only control your production. What kind of compelling response can you give to the answer, "If you want to make more money, work harder and smarter. That's what we incentivize you to do."

I guess the response I’m ready to give is “show me the money “. Your points are valid, but another part of the equation is fair compensation both the worker and the practice.

 

[drusso]

I guess the response I’m ready to give is “show me the money “. Your points are valid, but another part of the equation is fair compensation both the worker and the practice.

Just preparing you for the Dojo...

 

[RoloTomassi]

the biggest key to negotiating a good deal for ou would be offering to leave if they don't get you a better set up

Good point. Before you start playing hardball you need leverage. Get some other offers. Small non-compete radius is also leverage, as is your referral base, but only if they are loyal to you and not the practice, otherwise you're replaceable.

 

[SC Tian]

My experience of working in ortho group is that overhead can be fairly high, 50-60% is common based on your current level of revenue. Share of ASC is very beneficial for intervention pain physicians to gain extra income. IMO, 20-30% more than you can make now easily.

 

[drusso]

 

[bimmer79]

You are at a disadvantage and will never know the true numbers without an audit which they won’t let you do. They will tell you the number they want you to hear etc. The practice manager is in bed with the partners and will always try to screw non partners. This is how this game works.. I have been there.

Agree 100%

 

[Agast]

Overhead is going up for me. Just gave everyone a raise so they don’t jump ship for greener pastures.

 

[HyperSonic]

Hey guys, I have been checking out this forum for a while now and appreciate all the info here, both clinical and not. I have a non clinical question, which may have been discussed previously to some extent, but I would appreciate any input.

I’m about 5 years out of fellowship, working in private practice in a medium sized Ortho group. I’m currently not a partner and do most of my procedures in office, with a only kyphos and some scs in a ASC. The practice provides me with a secretary and MA and is pretty good with marketing, so all I really have to worry about is seeing patients. Since day one my contract has been approximately 40% of collections. There are no ancillary income opportunities, but I do get health/malpractice insurance and basic CME funds

Obviously since I started I was able to ramp up my volume and at this point I’m bringing in close to 1.2 mil a year in collections. I’m going to try to renegotiate my contract pretty soon. The way I think about it is that 1. That 40% of collections is on the low end and that 2. Even if 40% is not on the low end, the overhead after a certain point of collections should decrease after my direct costs and practice overhead are covered. My direct costs are my salary, secretary/MA, c-arm lease payments, X-ray tech time, injection supplies. The practice overhead is obviously standard stuff similar to other practices

I talked to the practice manager briefly about this and he basically said that they go by a formula that is standard for all the employees, and that the 60% overhead is not usually adjusted as collections increase. In my view that is obviously great for the partners, but def not fair for me

What are your views as far as the standard overhead numbers for a typical pain guy in an Ortho group and what kind of points can I argue to increase my compensation for time worked.

How many patients per day/week do you see, how many procedures per week/month do you do?

 

[vadim1980]

How many patients per day/week do you see, how many procedures per week/month do you do?

Avg about 150-160 visits a week. That includes about 50 procedures

 

[drusso]

Avg about 150-160 visits a week. That includes about 50 procedures

Is this 0.5 FTE? What do you do the other half of the day?

 

[vadim1980]

Is this 0.5 FTE? What do you do the other half of the day?

Read the SDN posts 😊

 

[Ducttape]

he is being sarcastic.

 

[vadim1980]

he is being sarcastic.

So was I 😊