I explained previously that a 10% cut is actually a 20% cut (or more). But here's a refresher:
Economics 101 says so.
Lets imagine $400,000 in revenue for a primary care doc in one year.
50% overhead, which in many places is quite generous.
How much is overhead? $200,000 a year
Overhead includes but is in no way limited to.
| Accounting Expenses | |
| Ads-Advertising | |
| Amortization | |
| Ancillary Service | |
| Answering Service | |
| Auto Expenses - Associate | |
| Auto Expenses - Mid Level/PA/NP | |
| Auto Expenses - Shareholder | |
| Bank Charges | |
| Bonus - Associate | |
| Bonus - Mid Level PA/NP | |
| Bonus - Shareholder Shareholder | |
| Bonus - Staff/Employee | |
| Collection Expense | |
| Computer Services | |
| Consulting | |
| Continuing Education - Employee Benefits | |
| Contract Labor - Employee Expense | |
| Contributions - Associate | |
| Contributions - Mid Level PA/NP | |
| Contributions - Shareholder | |
| Couriers & Overnight Mail | |
| Credit Card Fees | |
| Dental Insurance - Employee Benefits | |
| Depreciation | |
| Disability Insurance - Associate | |
| Disability Insurance - Employees/Staff | |
| Disability Insurance - Mid Level PA/NP | |
| Disability Insurance - Shareholder | |
| Drugs and Medical Supplies | |
| Dues& Subscriptions - Administrative | |
| Dues & Subscriptions - Employee Benefits | |
| Dues & Subscriptions - Associate | |
| Dues& Subscriptions - Mid Level PA/NP | |
| Dues& Subscriptions - Shareholder | |
| Education and Seminars - Associate | |
| Education and Seminars - Mid Level PA/NP | |
| Education and Seminars - Shareholder | |
| Electronic Filing Billing Services / Data Processing | |
| Electronic Statements Billing Services / Data Processing | |
| Employee Meals | |
| Employee Parking and Travel | |
| Employment Procurement | |
| Equipment Lease | |
| Equipment Repairs | |
| Fringe Benefits - Associate | |
| Fringe Benefits - Mid Level PA/NP | |
| Fringe Benefits - Shareholder | |
| General Liability Insurance | |
| Gifts & Flowers - Associate | |
| Gifts & Flowers - Mid Level PA/NP | |
| Gifts & Flowers - Shareholder | |
| Group Insurance - Associate | |
| Group Insurance - Employee Benefits | |
| Group Insurance - Mid Level PA/NP | |
| Group Insurance - Shareholder | |
| Health Insurance - Associate | |
| Health Insurance - Mid Level PA/NP | |
| Health Insurance - Shareholder | |
| Interest Expense | |
| Janitorial Services | |
| Lab Fees | |
| Laundry | |
| Legal and Professional | |
| Life Insurance - Associate | |
| Life Insurance - Employee Benefits | |
| Life Insurance - Mid Level PA/NP | |
| Life Insurance - Shareholder | |
| Maintenance - Hardware | |
| Maintenance - Software | |
| Management Fees | |
| Marketing | |
| Meals and Entertainment - Associate | |
| Meals and Entertainment - Mid Level PA/NP | |
| Meals and Entertainment - Shareholder | |
| Medical Reimbursement - Associate | |
| Medical Reimbursement - Employee | |
| Medical Reimbursement - Mid Level PA/NP | |
| Medical Reimbursement - Shareholder | |
| Medical Services | |
| Mileage Reimbursement - Employee | |
| Moving Expense - Associate | |
| Moving Expense - Mid Level PA/NP | |
| Moving Expense - Shareholder | |
| Neurological Tests | |
| Office Expenses | |
| Office Journals | |
| Office Supplies | |
| Paging Service | |
| Parking | |
| Patient Development | |
| Payroll Processing | |
| Payroll Taxes - Associate | |
| Payroll Taxes - Employee | |
| Payroll Taxes- Mid Level PA/NP | |
| Payroll Taxes - Shareholder | |
| Penalties | |
| Plan Administration Fees | |
| Postage | |
| Printed Supplies | |
| Professional Gifts | |
| Professional Liability Insurance | |
| Profit-Sharing Expense - Associate | |
| Profit-Sharing Expense - Employee | |
| Profit-Sharing Expense - Mid Level PA/NP | |
| Profit-Sharing Expense - Shareholder | |
| Property Insurance | |
| Records Storage | |
| Rent Occupancy | |
| Repairs and Maint.-Equipment | |
| Repairs and Maintenance - Occupancy | |
| Salaries - Administrative | |
| Salaries - Associates | |
| Salaries - Clinical Employee | |
| Salaries - Mid Level / PA/NP | |
| Salaries - Office Staff / Employees | |
| Salaries - Shareholder | |
| Service Contracts | |
| Software License | |
| Supplies Billing Services / Data Processing | |
| Taxes and Licenses | |
| Telephone | |
| Transcription | |
| Travel - Associate | |
| Travel - Mid Level / PA/NP | |
| Travel - Shareholder | |
| Uniforms - Employee | |
| Utilities | |
| Workman's Compensation | |
| Yellow Pages - Advertising |
Now lets say, in simple economics 101, you get your 100% revenue from Medicare.
$400,000
What does a 10% cut shave off?
$400,000 *10% = $40,000
So total revenue for the year is $360,000
How much is overhead? $200,000
So your income went from $200,000 a year to $160,000
That kiddies is a 20% hair cut.
So what happens? What is a doctors response?
Increase revenue by...
1) Do more procedures in the office
2) Do your own labs
3) Buy your own xray machine and order xrays on everyone
4) Get a spirometry machine and do one on everyone for any reason at all
5) Do EKG's and do them often.
6) Go hog wild on treadmills
7) Do colonoscopies
8) See patients for one problem only and spend 5 minutes with them
9) Have them come back 10 times a month for each individual problem
10) Turn double book into triple book.
11) If you're a specialist
Do more heart caths, colons, EGDs, shavings, bronchs
12) Biopsy everything, everytime
13) Botox
14) Sell woo in your office
15) Inject everything, every time
16) Buy your own CT scanner
17) Open a spa and offer facial peels and deep body massages
18)
Or decrease costs by
1) Fire your RN'n for cheaper aides
2) Cancel retirement contributions
3) No more TV in the lounge
4) No more raises for your employees
5) Cancel health insurance benefits
Or retire
Or quit
Or go cash only concierge.
The numbers tell the truth. Who hurts the most?
The greatest cost saving enterprise in medicine:
Primary Care
i don't think that's a fair representation of the overhead of most cardiology practices. i think it is more likely to be in the 45-55% range.
ReplyDelete"Do EKG's and do them often."
ReplyDeleteIt is my understanding that EKG's have low reimbursement, about $30. When you consider the staff time to perform the EKG, and the doc time to interpret it, EKG's aren't very pofitable.
anon: I think my blurb said that the average overhead of cardiologists was in the 45% range. But just like any practice, absolute overhead costs vs percentage of overhead costs is determined in large part on revenue generation.
ReplyDeleteFor example. $300,000 in overhead on $600,000 in revenue is 50% overhead. while $300,000 in overhead on $900,000 in revenue is only 33% overhead. Same costs, much more "efficient" practice. (code word for revenue generating)
How busy a practice is determines a lot of the overhead percentage.
It's a heck of a lot easier doing 2 extra heart caths or reading an extra 2 cardiolytes a day in terms of revenue to time generation than it is two book an extra 5 or 6 patients into an already overflowing clinic.
It doesn't matter if you're a cardiologist or a family practioner, the rules apply equally.
Volume will always win in the current system.
Dr Rack, If you had a tech sitting in your intake room and did an EKG on ever patient that walked into your clinic, you could generate $30*$25= $750 a day in revenue from EKG's. Lets say 4 days a week=$3,000 a week.
ReplyDeleteTimes 52 weeks =$156,000 a year doing EKG's on everyone that walks in your door.
What do you think?
I guess some doctors could add a nice chunk of revenue to their practices under that scenario.
ReplyDeleteSince I see about 50 patients a week, I would make only half that (if I ordered an EKG on everyone, which I wouldn't do).
I don't have an EKG machine for my practice, although I do monitor an EKG lead when performing polysomnograhpy.
It's estimated that about 30% of our healthcare dollars go to overhead, most of which is to handle the restrictions imposed on physicians by insurance companies. This is outrageous and the fact that we've allowed that to happen is truly a shame.
ReplyDeleteDoctors need to unite. They need to reclaim their independence.
Put us back in control, and we'll reduce healthcare costs, incorporate new technologies into our practices, and strengthen the doctor-patient relationship.
There is hope. I invite you to check out a very important campaign: http://blog.seankhozin.com/2008/02/12/test/