Thursday, March 29, 2007

A Practice Update

Well, I had meant to post something on my practice's 3rd year anniversary (Feb 14th) but . . . better late than never.

I recently got mentioned in various media sources: a WSJ article on micropractices, a podcast on the CAFP website. (Perhaps that's why you're here?) So this is an indication to me that word about Micropractices and Practice Redesign is continuing to spread.

Brief background: approximately 3 years ago I left my position as a staff physician in a managed care organization (Kaiser) and opened a solo family medicine office a la the Gordon Moore hi-tech, low overhead model AKA the micropractice model. For the record, I still think Kaiser is a fine organization with many excellent physicians and employees working there. In fact, we still have Kaiser as the health insurance for our own family. But like any large organization, there is a lot of bureaucracy and inconstraints that I found wasn't well suited to the kind of practice I wanted to have. I think Kaiser could benefit from trying a satellite version of a micropractice model.

As I've pointed out last year (and which is still true), my practice is atypical of most solo practices (even for a micropractice) so this should not dissuade anyone who might be thinking of going solo. Most of the solo physicians that I know of who are trying this model generate a much higher income than me. I am fortunate to have a spouse (Hi, honey!) who has a sufficient income so that I can continue to grow my practice slowly. Here are my current statistics (previous years' numbers in parentheses):
Unique patients seen since practice opened: 719 (523) (201)
Total patient visits: 901 in 2006 (805 in 2005) (265 in 2004)
Average # visits per week: 17.33 (15.48) (5.76)
M:F ratio: 49.8% male, 50.2% female
Average age: 37.8 years old
Oldest patient: 97 years old
Youngest patient: 2 months old
Sources of patients: Word of mouth 31%; Relatives of current patients 23%; Insurance provider list 20%; Paid advertisements 6%.
Payor mix: PPO insurance 79%, Cash 13%, Medicare 4%, HMO 0%
Average charge per visit: $128.48 ($133.73) ($114.27)
Average payment per visit: $83.88 ($74.31) ($70.06)
Total charges: $115,760 ($112,400) ($40,785)
Total collections: $67,105 ($54,976) ($17,515)

Bottom line, my practice is still continuing to grow slowly but steadily. I have intentionally closed my practice to new patients at various times during the year in order to control my practice's rate of growth. Currently I have been closed to new patients since the beginning of the year, but will probably open up again next month.

Medical practices have a life cycle, too. As another solo doctor has observed, "I do remember this major all-consuming time of figuring out how to open the practice, followed by the major all-consuming job of figuring out how to bill, make appointments, get efficient, feed the family, survive. Now, it's just figuring out how to keep up efficiently with the health needs of over 1000 people." I am at that "get more efficient" stage.

I still rarely get phone calls in the middle of the night, much to the continued relief of myself and my family. I also rarely make housecalls, mainly because no one is asking for them. I am able to take vacation, thanks to local family medicine colleagues who cover for me.

Speaking of traveling, I am currently attending the California Academy of Family Physicians Annual Scientific Assembly in San Francisco and will be one of 3 speakers at a seminar titled: "The New Family Medicine Practice: New Models to Consider". The other speakers will be talking about their concierge medicine practice and insurance-free (AKA cash-only) practice.

The biggest change in my practice in the past year is that I've engaged the services of a part-time biller to take over my billing duties. She is much more efficient at it than me, plus she has the time and tenacity to wait on hold with health plan agents trying to find out why a particular claim didn't get paid. She has also been helping me catch up on previously unpaid patient bills that I hadn't gotten around to mailing out. Hopefully this will make a big difference in my bottom line.

Tony Tarchichi left a comment asking:
"I'm a med student who's very interested in this type of practice. One question that I keep coming up against in all my reading of micropractices is how do all of them make less money than regular practices. What I mean is everyone physician who I've read about in these practices says that they make less than they used to in a traditional practice. Can you explain why this is happening and is a micropractice a reasonable choice for someone who wants to raise a family, pay off student debt & save for retirement. Ideally I'd like to make around 150K but I'm not sure if that could happen in a micropractice. I'm not putting down micropractices by any means, I'm really just looking for information. Thanks for any help you can offer."

Although my practice is essentially a part-time practice right now, it is possible to extrapolate what a comparable full-time micropractice income might be. Based on the following assumptions:
1. Patient panel size = 1000
2. Average daily visits = 0.75% of patient panel size
3. Average payment per visit = $84.00
4. Work schedule = 5 days/week, 48 weeks per year (assuming 4 weeks of vacation)

Avg daily visits = 0.0075 x 1000 = 7.5 visits/day which translates to 37.5 visits/week or 1800 visits/year.
1800 visits/year x $84 per visit = $151,000/year of gross income.
My annual expenses run about $50,000 so that works out to $101,000 of net annual income, if I had a patient panel of about 1000 patients, which I am working towards.

A patient panel of 1500 with the same numbers = 11.25 visits/day and an annual gross income of $226,800.

Compare this to a more traditional schedule in which a patient is seen every 15 minutes:
1. Average daily visits = 24
2. Patient panel size = 3200
Assuming the same reimbursement rate of $84 per visit, and same work schedule, you would have a gross annual income of $483,840. Of course, there is probably no way a solo physician could handle all the associated work of seeing so many patients, so your expenses would increase dramatically as you'd have to hire a receptionist/scheduler, medical assistant(s), LVN or RN, and one or more full-time billers unless you didn't take 3rd party insurance. In short, you'd end up with the typical overworked family physician's office.

I've heard figures quoted that say a typical physican's office has an overhead of about 60-70%. So assuming this is true, a family physician could net between $145,000 to 193,000/year working at this pace. I think a graduating resident who is full of energy and idealism could happily work this hard for this kind of salary for a number of years. I know I did. But as one who has been on this same hamster wheel of medicine, there eventually comes a time when you say, I don't want to do this anymore.

That is how I ended up here, poorer but much happier. You can't buy happiness, but you can trade for it.

And one last thing . . . Go Bruins!