Wednesday, July 13, 2005

Jumping off the hamster wheel

I am a solo-solo physician, without any employees. I answer my own phones, schedule my own patients, take vital signs and give shots myself, do my own medical billing, order my own supplies, mop my own floor, scan and shred all documents myself (except when I pay my daughter 5 bucks to do it).

No, I am not crazy. Yes, I have way more control over my professional and personal life. No, I don't make anywhere near the money I did at my previous job. Not yet, anyways. Yes, I am happier.

I am emulating Dr. Gordon Moore, who helped pioneer a low-overhead practice model. The basic idea: if you keep your overhead low, you don't need to see as many patients to have a financially sustainable practice. And if you don't have to see as many patients, you can spend more time with them. And if you can spend more time with them, you and your patients will be healthier and happier.

Dr. Moore started a Practice Improvement website to bring together those who are interested in improving their medical practices. As part of this website, there is an e-mail listserve, where others (mostly primary care physicians) trade notes and experiences, or just learn about the possibilities of a practice free of corporate constraints. Some physicians on the listserve are completely solo, like me. Others, including Dr. Moore, have at least one nurse or receptionist/assistant. Some charge a retainer fee. There are many variations of this practice model.

Lately, some have written updates on their practices so far, which I hope to be able to share on this blog. Here is one physician couple's story:
My wife and I are practicing together in a small town of 10,000. Draw area is reportedly about 50,000. We have managed to bill about $144,000 over the first year with about 1200-1300 visits between the two of us. Collections were $84,000 with about $40,000 left in accounts receivable. Collection percentage has remained stable at 79.8% of billed charges. THAT WILL DROP WHEN MEDICAID STARTS PAYING AGAIN.

Startup costs were $60,000 which included $34,000 for EMR, IT, and 5 computer network, Fujitsu high speed scanner, $14,000 for equipment supplies including two exam tables - one motorized for disability access. The remainder of overhead runs $60-70,000 per year for phones, malpractice insurance, etc. I have a spread sheet that I may share when I have time to update it.

Our largest expense was salaries of $120,000 with $60,000 for myself, $30,000 for my wife 1/2 time, and $20,000 for my individual 401k at Fidelity and $10,000 for my wife. Total first year expenses including salaries = $240,000. Operating loss of $150,00-160,000. Fortunately, the local hospital supported us throught the first year. We are targeting the same overhead and salaries for the second year without support.

Breakeven for this next year will likely be 2000 visits and $185,000 net practice revenue or $232,000 gross charges. We averaged 5.41 visits/day over 48 weeks, 5 days per week. We believe 7 patients per day will be enough to sustain our practice and keep the mortgage paid. Obviously not the salaries of 1.5 FTE internists. The key is similar take home pay minus income needed for student loans as these have been forgiven.

In our former employment, at a large multi-specialty group, we were each seeing between 18-24 patients per day with management looking for 28-30 patients per day and annual gross charges of around $400,000. Overhead was high at 55-65%. Salary was ok for 2 years, but production-based compensation was poor. My wife wanted to go part-time and income would have dropped to $130,000-140,000 and resulted in revoked shareholder status and profit sharing, added overhead expense of malpractice and health insurance. Key is we would have been working much harder and longer for slightly more pay ($20,000) than we receive now. But student loans were eating $20,000 per year. Taxes would have been higher and real income lower.

What a blessing to jump off the hamster wheel of the corporate practice of medicine. The problem was there was an inflection point because of 50% medicare and PPO, 50% HMO. When everyone increased productivity from 18/day to 28/day, the only real increase in pay was 5 visits because the other 5 were already prepaid hmo care. Overhead increased 30-40% and actual incomes continue to drop for the physicians there.

We both like the time we now spend with patients. I loathe dealings with insurance companies. Patients pay 30-40% of actual receipts with insurance paying the remainder. Net receipts per visit is about $75-95 including accounts receivable at current collection percentage. Otherwise, $64 per visit and only 60% of gross charges collected to date. (Insurance companies and deadbeats laughing in the background.)

Patients are starting to talk about our clinic. They tell their friends that "The doctor answers the phone!" Others note that we take time to figure out their problems. One patient, after a bout of cellulitis and 4 day hospitalization, suggested that the hospital staff and I restored his trust in humanity by the kindness and concern we showed to him. He had become jaded working as a HVAC contractor and receiving healthcare in the city and suburbs. I have had the time to spend with dying patients and their families. I have returned a patient to health after an attempted suicide by caustic ingestion. A twenty-year-benzo user has stopped after successful treatment of her depression. She almost died of C. diff colitis after routine antibiotic therapy for a dental abscess. Her care was free until public aid approved her disability from my detailed notes. She just turned 65 and lived through the ordeal of being uninsured with multiple serious medical problems at age 64. The list goes on. I am very happy with my practice and medicine today.

Our challenges this year remain improved patient care that can be documented to insurance companies for higher reimbursement. I plan to add laboratory services in addition to my Cholestech cholesterol machine because I can use the revenue, but also because self pay and high deductible patients do not need $300-500 lab bills from a hospital lab. I don't want to bite the hand that fed me, but this borders on extortion. We hope to use Quest, but there may be an interface fee of up to $5000. If so, faxing lab results into e-MDs, our electronic medical record, should work just fine.

Brent and John, I am happy your practices have taught you so much and bring you satisfaction after multiple challenges. I am proud to be a member of this group which reflects and embodies so many of the things I have gone through myself in the last two years, First, when I was contemplating a practice and now, after living it the last year. Our collective knowledge is priceless as we move forward in our own practices and for those who follow the thread of starting their own practices from scratch.

Sincerely and Thank you all !!!

It isn't easy to get off the hamster wheel, but it can be very worthwhile to actually get somewhere for a change. Thanks, K. for letting me post your story and I wish you continued success for you and your wife in your new practice!

Those who wish to check out the Practice Improvement listserve can do so by sending a blank e-mail to

To unsubscribe, send a blank e-mail to