What is an appropriate % overhead in PP?

[PistolPete]

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I'm thinking of joining a group private practice as an independent contractor. The group practice would take 30% of my collections (this is an insurance-based practice) in exchange for providing office space, billing, secretary, etc. Is this appropriate? What have you guys run into in the past?

I would have to buy my own health insurance, not sure about malpractice. I've already got my own disability insurance.

 

[F0nzie]

30% sounds good. I have seen closer to 40%. But what is their collection rate and no show policy?

This is the fine print of pp.

If billing is only able to collect 50% of all your billing and there is no charge for no shows... You got problems.

 

[AcronymAllergy]

It might be different for psychiatry, but 30% is the number I've most often seen thrown about in terms of a fair overhead in psychology for the types of services you've listed.

There are sometimes sticking points with us (i.e., psychologists) in terms of whether patient panels or referral sources are provided or must be establishing independently, but I don't think that'd be quite as tough to do in psychiatry.

 

[TexasPhysician]

30-40% is typical

 

[Thewonderer]

30-40% is typical. Agree with F0nzie. 30% is a high number if the practice has a no show rate of 50% and no no-show policy in place. 40% is a better number if no-show rate is less than 5% and they charge full no-show fees.

Very simple math.

One practice has 25% no-show rate (not uncommon, mind you) and has zero no-show policy. Out of 100 patient hour at $200 per hour, you collect $10,500 while the practice takes $4,500 at 70/30 cut.

Another practice has 5% no-show rate and for each no show, has shown the ability to recover at least $100 out of $200/hour potential fee. Out of 100 patient hour at $200 per hour, you collect $11,700 while the practice takes $7,800 at 60/40 cut.

In the latter practice, both the doctor and the practice win.

I run a tight ship and I would never allow less than 35-40% cut from the owner side of things. I would personally be very wary of practices that offer you 70/30 split because it means a) they accept all comers (both the quality of doctors and quality of patients suffer. they don't pre-screen their patients), b) they run a loose ship, c) they have terrible collection ability (or screw you by not releasing you the exact collection data every month) or d) they have a lot of MediCaid patients.

 

[PistolPete]

Thanks for the good advice, TheWonderer. I'm not sure what the no-show rate is, and I'll ask, but I know they charge a set fee (credit card is on file) for no-shows, it's about 50% of the missed visit. The clinic doesn't take Medicaid, only commercial insurance. Not sure if they pre-screen their patients, will have to ask also.

 

[smalltownpsych]

30-40% is typical. Agree with F0nzie. 30% is a high number if the practice has a no show rate of 50% and no no-show policy in place. 40% is a better number if no-show rate is less than 5% and they charge full no-show fees.

Very simple math.

One practice has 25% no-show rate (not uncommon, mind you) and has zero no-show policy. Out of 100 patient hour at $200 per hour, you collect $10,500 while the practice takes $4,500 at 70/30 cut.

Another practice has 5% no-show rate and for each no show, has shown the ability to recover at least $100 out of $200/hour potential fee. Out of 100 patient hour at $200 per hour, you collect $11,700 while the practice takes $7,800 at 60/40 cut.

In the latter practice, both the doctor and the practice win.

I run a tight ship and I would never allow less than 35-40% cut from the owner side of things. I would personally be very wary of practices that offer you 70/30 split because it means a) they accept all comers (both the quality of doctors and quality of patients suffer. they don't pre-screen their patients), b) they run a loose ship, c) they have terrible collection ability (or screw you by not releasing you the exact collection data every month) or d) they have a lot of MediCaid patients.

Of course if the show rate is too high how am going to get caught up on my paperwork. 😉 Actually, having a high show rate leads to the ability to block consistent times for documentation or other office tasks and it becomes a more efficient practice. The 10 to 15 minutes of limbo while waiting for a non showing patient can be a real time stealer.

 

[Thewonderer]

For PistolPete, the bottom line is, do you trust the people who run the group? A basic amount of trust is important. And if your independent contractor gig is dependent on collection, are they forth coming about their private insurance rates? I mean how can their private insurance rates be confidential to you if they want to do a 70/30 split? I am glad that they don't take MediCaid. If they collect 50% of the typical no-show fee, then my guess is they charge $30 for no-show and they are probably asking you to do med checks, 3-4 per hour, at about $60 negotiated rate per 99213 med check visit with these insurance companies.

 

[Shikima]

I'm thinking of joining a group private practice as an independent contractor. The group practice would take 30% of my collections (this is an insurance-based practice) in exchange for providing office space, billing, secretary, etc. Is this appropriate? What have you guys run into in the past?

I would have to buy my own health insurance, not sure about malpractice. I've already got my own disability insurance.

Negotiate for 25%. My office is at 20%.

 

[PistolPete]

Yes, I do trust the group owners. I've worked with them previously and they are quality people. So, they actually charge $75 for missed appointments (about the cost of a 99213).

The way I understand it, I would be negotiating with the insurance companies for my rates, since I'd be working for myself, and I'd "owe" the practice 30% of what I collect for rent/secretary/billing etc. But you're right, I'm not sure how the private insurance rates would/wouldn't remain confidential.

 

[F0nzie]

Negotiate for 25%. My office is at 20%.

You have a big heart my friend 🙂 There is no way I am managing anybody and their overhead for 20%... I would probably feel like I was working for free and setting myself up for liability. Your company has enormous value and it takes most people years of lost income to replicate so you should receive compensation for it. You can always use the extra income to invest it in ways that would benefit the company as a whole and also protect yourself from losses.