The Business of The Business of

Medical PracticeMedical Practice

Harold A. Frazier II, MD, FACSHarold A. Frazier II, MD, FACS

Clinical Professor of Urology Clinical Professor of Urology

Director of Urologic Oncology Director of Urologic Oncology

GWUMCGWUMC

Who am I? Who am I?

�� Dartmouth Medical SchoolDartmouth Medical School

�� Residency in the US Navy Residency in the US Navy

(National Naval Medical Center, Bethesda)(National Naval Medical Center, Bethesda)

�� Fellowship Fellowship -- Duke University Med Duke University Med CtrCtr

�� 25 years in the military (AD and Reserves)25 years in the military (AD and Reserves)

�� Chief of Service, Permanente Medical Chief of Service, Permanente Medical GrpGrp

�� Private and Academic Practice Private and Academic Practice -- GWUMCGWUMC

Where have I practiced?Where have I practiced?�� Duke University (Academic Center)Duke University (Academic Center)

�� Durham VA Hospital (VA System)Durham VA Hospital (VA System)

�� National Naval Med National Naval Med CtrCtr, Bethesda (Military), Bethesda (Military)�� Vice Chairman, Vice Chairman,

�� Residency DirectorResidency Director

�� Acting Director of SurgeryActing Director of Surgery

�� Walter Reed Army Medical Center, DC (Military)Walter Reed Army Medical Center, DC (Military)

�� MidMid--Atlantic Permanente Medical Atlantic Permanente Medical GrpGrp ((LgLg HMO)HMO)�� Chief of UrologyChief of Urology

�� Private Practice (Single Specialty Private Practice (Single Specialty GrpGrp))

�� GWUMC (Academic Center)GWUMC (Academic Center)

�� Lots of exposure to many different systems.Lots of exposure to many different systems.

Cost of healthcare. Cost of healthcare.

Healthcare reform.Healthcare reform.

However, there are basic

money and business principles

that still apply. We all need to

be business saavy!

Will it impact us?

Most definitely!

Simple questions. Simple questions.

Profound implications.Profound implications.

�� What is the difference between 99203 and What is the difference between 99203 and 99243?99243?�� Can you still use 99243?Can you still use 99243?

�� When do you use 99203 instead of 99243?When do you use 99203 instead of 99243?

�� What is the difference between an ICDWhat is the difference between an ICD--9 code 9 code and a CPT code?and a CPT code?

�� Can you bill a E/M code and a procedure CPT Can you bill a E/M code and a procedure CPT code on the same day?code on the same day?

�� How is pay determined?How is pay determined?

�� How is overhead distributed?How is overhead distributed?

What does this alphabet soup What does this alphabet soup

mean?mean?

�� ICDICD--99

�� E/M E/M

�� CPTCPT

�� CMSCMS

�� RVURVU

�� RUCRUC

What does this alphabet soup What does this alphabet soup

mean?mean?

�� ICDICD--9 (9 (IInternational nternational CClassification of lassification of DDisease isease --

9th Edition) (Diagnosis codes)9th Edition) (Diagnosis codes)

�� CPT (CPT (CCurrent urrent PProcedural rocedural TTerminology) erminology)

(Procedure codes)(Procedure codes)

�� E/M (E/M (EEvaluation / valuation / MManagement codes)anagement codes)

�� CMS (CMS (CCenter for enter for MMedicare and Medicaid edicare and Medicaid

SServices) (The group who governs ervices) (The group who governs medicaremedicare))

�� RVU (RVU (RRelative elative VValue alue UUnits) (Key to our pay)nits) (Key to our pay)

�� RUC (The RUC (The RRVS VS UUpdate pdate CCommittee)ommittee)

LetLet’’s get down to basicss get down to basics

Personal income = Gross income Personal income = Gross income -- overheadoverhead

LetLet’’s get down to basicss get down to basics

Personal income = Personal income = Gross incomeGross income -- overheadoverhead

What determines gross What determines gross

income for professional income for professional

services rendered?services rendered?

�� A complex formula created by the Center A complex formula created by the Center for Medicare & Medicaid Services (CMS).for Medicare & Medicaid Services (CMS).

�� Medicare Physician Fee Schedule (MPFS)Medicare Physician Fee Schedule (MPFS)�� 7000 + covered services7000 + covered services

�� Physicians services include:Physicians services include:�� Office visitsOffice visits

�� Surgical proceduresSurgical procedures

�� Diagnostic and therapeutic servicesDiagnostic and therapeutic services

Where are the services Where are the services

provided?provided?

�� Physician services are furnished in the following Physician services are furnished in the following

locations:locations:

�� Physician officesPhysician offices

�� HospitalsHospitals

�� Ambulatory Surgical Centers (ASC)Ambulatory Surgical Centers (ASC)

�� Skilled Nursing Facilities (SNF)Skilled Nursing Facilities (SNF)

�� HospicesHospices

�� Outpatient dialysis facilitiesOutpatient dialysis facilities

�� Clinical LaboratoriesClinical Laboratories

�� BeneficiariesBeneficiaries’’ homeshomes

What determines your gross What determines your gross

income?income?

Answer: Answer: The CPT codeThe CPT code

�� There is a relative value unit (There is a relative value unit (RVURVU) assigned to ) assigned to each CPT code (the E/M or procedure code each CPT code (the E/M or procedure code submitted).submitted).

�� The payment rates for services are based on The payment rates for services are based on three components:three components:

1.1. Physician WORK RVU (52%)Physician WORK RVU (52%)

2.2. PRACTICE EXPENSE RVU (46%)PRACTICE EXPENSE RVU (46%)

3.3. Professional liability / MALPRACTICE RVU (2%)Professional liability / MALPRACTICE RVU (2%)

RVURVU’’ss

�� Work RVU (52%) Work RVU (52%) -- Reflects the relative Reflects the relative levels of time and intensity associated with levels of time and intensity associated with furnishing a particular physicianfurnishing a particular physician’’s service.s service.

�� Practice expense (PE) RVU (46%) Practice expense (PE) RVU (46%) --Reflects the costs of maintaining a Reflects the costs of maintaining a practice such as renting space, buying practice such as renting space, buying supplies & equipment, and staff costs.supplies & equipment, and staff costs.

�� Malpractice (MP) RVU (2%) Malpractice (MP) RVU (2%)

CPT CodeCPT Code

�� Each component is multiplied by a geographical Each component is multiplied by a geographical cost index adjustment (cost index adjustment (GPCIGPCI). This is typically ). This is typically updated every 3 yrsupdated every 3 yrs

�� The total RVU is multiplied by a conversion factor The total RVU is multiplied by a conversion factor ((CFCF) to determine your reimbursement.) to determine your reimbursement.

�� The The ““National Reimbursement amountNational Reimbursement amount”” = Total = Total RVU x the conversion factor (CF) (the GPCI is set RVU x the conversion factor (CF) (the GPCI is set at at ““11”” for this calculation)for this calculation)

�� Your reimbursement = Your reimbursement = ““National Reimbursement National Reimbursement amountamount”” x GPCI for your areax GPCI for your area

The full formulaThe full formula

�� [(Work RVU x GPCI) + (PE [(Work RVU x GPCI) + (PE

RVU x GPCI) + (MP RVU x RVU x GPCI) + (MP RVU x

GCPI)] x CFGCPI)] x CF

Source: www.cms.hhs.gov/PhysiciansFeeSched/01_overview.asp

Examples of geographic cost Examples of geographic cost

index adjustment (GPCI) index adjustment (GPCI)

(Medicare 2005)(Medicare 2005)

0.9280.928North DakotaNorth Dakota

0.9490.949West VAWest VA

0.960.960.9570.957VirginiaVirginia

0.9960.996ArizonaArizona

1.0121.012Rest of CaliforniaRest of California

1.0751.075MiamiMiami

1.0881.088LALA

1.241.241.1141.114DC MD/VA suburbsDC MD/VA suburbs

1.321.321.2031.203ManhattanManhattan

1.291.291.2391.239San FranciscoSan Francisco

NonNon--MedicareMedicareMedicareMedicare

Okay, but where is the dollar Okay, but where is the dollar

figure?figure?

�� The TOTAL RVU is then multiplied by a The TOTAL RVU is then multiplied by a

conversion factor (CF) determined by Congress conversion factor (CF) determined by Congress

and CMS to give you the dollar amount paid for and CMS to give you the dollar amount paid for

a professional service.a professional service.

�� The dollar CF for 2009 was $36.067 per RVU.The dollar CF for 2009 was $36.067 per RVU.

�� The dollar CF for 2010 has been approximately The dollar CF for 2010 has been approximately

$36.87. $36.87.

�� This is a moving target. This is also the number This is a moving target. This is also the number

that SGR targets.that SGR targets.

Anatomy of the CPT CodeAnatomy of the CPT Code

and the RVUand the RVU

�� The CPT Code = 5 digit system for The CPT Code = 5 digit system for

physician and nonphysician and non--physician providers.physician providers.

�� Two typesTwo types

�� E&M: evaluation and managementE&M: evaluation and management

�� Procedures/ServicesProcedures/Services

�� There is a RVU assigned to every CPT There is a RVU assigned to every CPT

code.code.

Anatomy of the CPT CodeAnatomy of the CPT Code

and the RVUand the RVU

�� Who sets up these codes and numbers?Who sets up these codes and numbers?

�� AMA / subspecialty organizationsAMA / subspecialty organizations�� CPT advisory committeeCPT advisory committee

�� CPT editorial panelCPT editorial panel

�� RUC (RVS Update Committee)RUC (RVS Update Committee)

�� CMS (CMS (Center for Medicare & Medicaid Services)Center for Medicare & Medicaid Services)

�� Federal RegisterFederal Register

�� Finally the CPT bookFinally the CPT book

It sometimes seems like

these numbers are pulled

out of the sky!

Who determines the RVU?Who determines the RVU?

�� The RUC The RUC -- RRVS VS UUpdate pdate CCommitteeommittee

�� Creates the RBRVS (ResourceCreates the RBRVS (Resource--Based Based

Relative Value Scale)Relative Value Scale)

�� An expert panel of the AMA and the specialty An expert panel of the AMA and the specialty

societies charged with developing relative societies charged with developing relative

value recommendations to CMS (Medicare value recommendations to CMS (Medicare

group). group).

How about other insurance How about other insurance

companies?companies?

�� Most use a similar RVU calculator.Most use a similar RVU calculator.

�� The difference occurs in the dollar amount The difference occurs in the dollar amount

or constant (conversion factor) negotiated or constant (conversion factor) negotiated

with the various third party payers.with the various third party payers.

BillingBilling

�� Complex and frustrating.Complex and frustrating.

�� Important to hire dependable, bright, and Important to hire dependable, bright, and

motivated people to help with the billing.motivated people to help with the billing.

�� Each bill MUST be submitted with a:Each bill MUST be submitted with a:

�� ICDICD--9 code (diagnosis)9 code (diagnosis)

�� CPT code or E/M codeCPT code or E/M code

�� Failure to submit this information will result Failure to submit this information will result

in denial of payment.in denial of payment.

ICDICD--99

�� The ICDThe ICD--9 coding is a numerical way of 9 coding is a numerical way of identifying medical conditions for billing identifying medical conditions for billing and statistical purposes.and statistical purposes.

�� Typically 3 numbers. e.g. 401, 250, 185Typically 3 numbers. e.g. 401, 250, 185

�� However, it can involve a decimal point. However, it can involve a decimal point. e.g. 188.3.e.g. 188.3.

�� NEW codes are coming. ICDNEW codes are coming. ICD--10 has 10 has been developed, the new codes will move been developed, the new codes will move to 5 digit numbers. (Most likely it will not to 5 digit numbers. (Most likely it will not be implemented until 2012)be implemented until 2012)

CPT and E/M CodesCPT and E/M Codes

�� CPT CPT -- CCurrent urrent PProcedural rocedural TTerminology erminology

�� E/M = E/M = EEvaluation and valuation and MManagement.anagement.

�� 5 number code5 number code

�� Range 00100Range 00100--9949999499

�� The E/M codes are the most commonly The E/M codes are the most commonly

submitted submitted ““serviceservice”” that most of you will that most of you will

use. These are the 99xxx codes.use. These are the 99xxx codes.

E/M Codes E/M Codes -- 99xxx codes99xxx codes

SUMMARYSUMMARY

�� 9920x 9920x -- New outpatientNew outpatient

�� 9921x 9921x -- Established outpatientEstablished outpatient

�� 9922x 9922x -- Initial inpatientInitial inpatient

�� 9923x 9923x -- Subsequent inpatientSubsequent inpatient

�� 9924x 9924x -- Outpatient consultOutpatient consult

�� 9925x 9925x -- Inpatient consultInpatient consult

E / M $$$E / M $$$New New outoutpatientspatients

99201: $4099201: $40

99202: $6999202: $69

99203: $10099203: $100

99204: $15599204: $155

99205: $19599205: $195

Established Established outoutpatientspatients

99211: $2099211: $20

99212: $4099212: $40

99213: $6799213: $67

99214: $10099214: $100

99215: $13499215: $134

Initial Initial ininpatient carepatient care

99221: $9799221: $97

99222: $13299222: $132

99223: $19499223: $194

Subsequent Subsequent ininpatient carepatient care

99231: $3999231: $39

99232: $7099232: $70

99232: $10199232: $101

New New outoutpatient patient consultsconsults

99241: $5099241: $50

99242: $94 99242: $94

99243: $12899243: $128

99244: $19099244: $190

99245: $23299245: $232

New New ininpatient patient consultsconsults

99251: $5199251: $51

99252: $7899252: $78

99253: $11999253: $119

99254: $17199254: $171

99255: $20799255: $207

Other CPT CodesOther CPT Codes

�� CPT CPT -- CCurrent urrent PProcedural rocedural TTerminology.erminology.

�� Currently thousands of different codesCurrently thousands of different codes

�� Range of numbers from 00100Range of numbers from 00100--9949999499

�� 0xxxx 0xxxx -- Anesthesia codes.Anesthesia codes.

�� 1xxxx 1xxxx -- 6xxxx 6xxxx -- Surgical codes.Surgical codes.

�� 7xxxx 7xxxx -- Radiology codesRadiology codes

�� 8xxxx 8xxxx -- Pathology and lab codesPathology and lab codes

�� 9xxxx 9xxxx -- Medicine codesMedicine codes

CPT ModifiersCPT Modifiers�� 2 numbers or 2 letters2 numbers or 2 letters

�� These are added to end of CPT codes to These are added to end of CPT codes to ““explainexplain”” unusual situations, claims, etc unusual situations, claims, etc �� Procedure on same day as E/MProcedure on same day as E/M

�� Bilateral procedureBilateral procedure

�� Clinic visit for different ICDClinic visit for different ICD--9 (diagnosis) code during 9 (diagnosis) code during global for surgery.global for surgery.

�� CoCo--surgeonsurgeon

�� Multiple proceduresMultiple procedures

�� Return to OR Return to OR -- ““stagedstaged””

�� Return to OR Return to OR -- unplannedunplanned

�� Challenging Challenging -- takes time to learn.takes time to learn.

Who pays you?Who pays you?

Source: bulletin.aarp.org (Dec 2009)

Other ways to create income Other ways to create income

““AncillariesAncillaries””�� Medical buildingMedical building

�� Ancillary servicesAncillary services�� Equipment (CT scan, Equipment (CT scan, xrayxray, lithotripter, lasers, , lithotripter, lasers, fluorofluoro))

�� Ambulatory surgery centerAmbulatory surgery center

�� Procedure center (i.e. catheterization labs)Procedure center (i.e. catheterization labs)

�� Laboratories (in office, outside office)Laboratories (in office, outside office)

�� Radiation therapyRadiation therapy

�� ResearchResearch

�� Consultation with industryConsultation with industry

�� Lecture for pharmaceutical companiesLecture for pharmaceutical companies

�� Malpractice review and expert testimonyMalpractice review and expert testimony

Other ways to create incomeOther ways to create income

�� A lot of land minesA lot of land mines

�� ALWAYS consult with an honest attorney before ALWAYS consult with an honest attorney before getting involved in many of these ventures.getting involved in many of these ventures.

�� STARK laws have eroded into these STARK laws have eroded into these opportunities.opportunities.

�� Be very careful of conflict of interests, and Be very careful of conflict of interests, and appearance of appearance of ““Self referralsSelf referrals””

�� Be careful of change in practice patterns. IMRT Be careful of change in practice patterns. IMRT units under scrutiny right now.units under scrutiny right now.

LetLet’’s keep goings keep going

Personal income = Gross income Personal income = Gross income -- overheadoverhead

OverheadOverhead�� Office spaceOffice space

�� Own, rent, leaseOwn, rent, lease

�� Staff costs / PayrollStaff costs / Payroll

�� Typically the highest expenseTypically the highest expense

�� SuppliesSupplies

�� Administrative costsAdministrative costs

�� Phone / InternetPhone / Internet

�� TranscriptionTranscription

�� Malpractice insuranceMalpractice insurance

�� EquipmentEquipment

�� Licenses / DuesLicenses / Dues

�� Benefits for MDBenefits for MD’’s and staffs and staff

OverheadOverhead�� Office space (15Office space (15--20%)20%)

�� Own, rent, leaseOwn, rent, lease

�� Staff costs / Payroll (25Staff costs / Payroll (25--35%)35%)�� Typically the highest expenseTypically the highest expense

�� Supplies (9Supplies (9--12%)12%)

�� Administrative costs (2Administrative costs (2--3%)3%)

�� Phone / Internet (2Phone / Internet (2--3%)3%)

�� Transcription (2Transcription (2--3%)3%)

�� Malpractice insurance (10Malpractice insurance (10--15%)15%)

�� Equipment (5Equipment (5--10%)10%)

�� Licenses / Dues (1%)Licenses / Dues (1%)

�� Benefits for MDBenefits for MD’’s and staff (5s and staff (5--10%)10%)

OverheadOverhead

�� How is the overhead distributed?How is the overhead distributed?

�� Is it split equally, or is it based on productivity, or Is it split equally, or is it based on productivity, or on consumption?on consumption?�� Splitting the overhead evenly if practice volume Splitting the overhead evenly if practice volume

(productivity) is balanced between partners (productivity) is balanced between partners -- no no problem.problem.

�� If productivity difference is > 20If productivity difference is > 20--25% then even 25% then even splitting is a real problem. More productive splitting is a real problem. More productive physicians consume more overhead (they use more physicians consume more overhead (they use more employees, consume more papers, supplies, employees, consume more papers, supplies, consumables, etc)consumables, etc)

�� Should all the partners pay for a research nurse if Should all the partners pay for a research nurse if only one partner is benefiting from the income from only one partner is benefiting from the income from the research?the research?

OverheadOverhead�� Who is accountable for the overhead? Does the Who is accountable for the overhead? Does the

business manager or managing partner negotiate business manager or managing partner negotiate well? The overhead costs can be driven down if well? The overhead costs can be driven down if managed properly!managed properly!

�� How much is the overhead?How much is the overhead?�� It can be as low as 35% of collectionsIt can be as low as 35% of collections

�� As high as 60As high as 60--70%.70%.

�� It depends on: It depends on: �� geography, geography,

�� the type of practice (solo, group, multithe type of practice (solo, group, multi--specialty)specialty)

�� the specialtythe specialty

�� the effectiveness of the managing partnerthe effectiveness of the managing partner

�� the ability of the business manager.the ability of the business manager.

BenefitsBenefits

�� Malpractice coverage Malpractice coverage -- a musta must

�� 401 K /457 plans 401 K /457 plans -- a musta must

�� Defined benefit retirement plan Defined benefit retirement plan -- rarerare

�� ““MatchingMatching”” or safe harbor program or safe harbor program -- more more

common.common.

�� Disability Disability -- a musta must

�� Short term Short term -- 00--6 months6 months

�� Long term > 6 monthsLong term > 6 months

�� Personal health insurance Personal health insurance -- a must with the a must with the

practice or with your spousepractice or with your spouse’’s employers employer

BenefitsBenefits

�� Dental Insurance +/Dental Insurance +/--

�� Life insurance Life insurance -- highly recommended through highly recommended through practice. If not, a must through private practice. If not, a must through private insurance.insurance.

�� Long term care Long term care -- highly recommended. Usually highly recommended. Usually not provided by employer.not provided by employer.

�� AD&D AD&D -- nice addition. Uncommonnice addition. Uncommon

�� Travel insurance Travel insurance -- icing on the cakeicing on the cake

BenefitsBenefits

�� How are these paid?How are these paid?

�� If paid out of gross company receipts If paid out of gross company receipts -- they they

will be included in the will be included in the ““overheadoverhead””. This will . This will

raise the overhead from as low as 35 % to 50raise the overhead from as low as 35 % to 50--

60 % depending on the benefits.60 % depending on the benefits.

�� If paid out of personal money If paid out of personal money -- ““overheadoverhead””

should be much lower (i.e. down around 35%)should be much lower (i.e. down around 35%)

Examples of Collection Examples of Collection

minus Overheadminus Overhead

�� LetLet’’s look at an examples look at an example

�� Bill $360 for a 60 min outpt consult (99244)Bill $360 for a 60 min outpt consult (99244)

�� RVU value of 5.14RVU value of 5.14……{multiply this by 36.87}{multiply this by 36.87}

�� Collect $189.53 (47.4% of the bill)Collect $189.53 (47.4% of the bill)

�� Subtract the overheadSubtract the overhead-- 60% ($113.72)60% ($113.72)

�� Keep $75.81Keep $75.81

�� If overhead is only 45% If overhead is only 45% -- you keep $104.24you keep $104.24

Examples of Collection Examples of Collection

minus Overheadminus Overhead�� Another exampleAnother example

�� Bill $3004.00 for a procedure with a code Bill $3004.00 for a procedure with a code of 55224 (fulguration of bladder lesion with of 55224 (fulguration of bladder lesion with or without biopsy).or without biopsy).

�� RVU value of 21.61RVU value of 21.61…….{multiply by 36.87}.{multiply by 36.87}

�� Collect $796.82 (26.5% of the bill)Collect $796.82 (26.5% of the bill)

�� Overhead 60% ($478.09)Overhead 60% ($478.09)

�� Keep $318.73Keep $318.73

�� BUT this is a NONBUT this is a NON--facility fee. WHAT is a facility fee. WHAT is a nonnon--facility fee?facility fee?

Examples of Collection Examples of Collection

minus Overheadminus Overhead�� Same example BUT done at a Same example BUT done at a ““FACILITYFACILITY”” (code word for (code word for

hospital or ASC).hospital or ASC).

�� Bill $3004.00 for a procedure with a code of 55224 Bill $3004.00 for a procedure with a code of 55224

(fulguration of bladder lesion with or without biopsy).(fulguration of bladder lesion with or without biopsy).

�� RVU value of 4.89RVU value of 4.89…….{multiply by 36.87}.{multiply by 36.87}

�� Collect $180.31 (6% of the bill)Collect $180.31 (6% of the bill)

�� Overhead 60% ($108.19)Overhead 60% ($108.19)

�� Keep $72.12Keep $72.12

�� So you can make $796.82 and keep $318.73. OR make So you can make $796.82 and keep $318.73. OR make

$180.31 and keep $72.12. $180.31 and keep $72.12.

�� Which would you choose?Which would you choose?

Facility vs NonFacility vs Non--facility feesfacility fees

�� Facility Facility -- typically is a hospital or ambulatory typically is a hospital or ambulatory

surgery or procedure center (ASC)surgery or procedure center (ASC)

�� NonNon--facility facility -- typically performed in officetypically performed in office

�� RVU value is higher on many procedures if they RVU value is higher on many procedures if they

are done in a nonare done in a non--facility (i.e. office)facility (i.e. office)

�� CMS is purposefully trying to drive procedures CMS is purposefully trying to drive procedures

out of the hospital by using this differentiation.out of the hospital by using this differentiation.

�� It saves Medicare the hospital fees.It saves Medicare the hospital fees.

Moment of silence!Moment of silence!

Do I get to keep anything?!Do I get to keep anything?!

Personal incomePersonal income = Gross income = Gross income -- overheadoverhead

Once the money has been Once the money has been

collected, and overhead has collected, and overhead has

been paidbeen paid…….what next?.what next?�� MANY Models MANY Models -- pros and cons with all.pros and cons with all.

�� Straight salaryStraight salary

�� Base salary plus bonus (based on Base salary plus bonus (based on productivity)productivity)

�� Split a portion of income equally, and the Split a portion of income equally, and the remainder is paid based on productivity.remainder is paid based on productivity.

�� Pure productivity basedPure productivity based�� RVU calculatorRVU calculator

�� Receipts / collections (Amount collected)Receipts / collections (Amount collected)

““It is how much you keep that is important, It is how much you keep that is important,

not important how much you make.not important how much you make.””

Paul OlejarPaul Olejar

Types of PracticeTypes of Practice�� SoloSolo

�� Single specialty group Single specialty group �� small vs largesmall vs large

�� private vs academicprivate vs academic

�� Multi specialty groupMulti specialty group�� private vs academicprivate vs academic

�� HMOHMO

�� Hospital employeeHospital employee

�� GovernmentGovernment�� VAVA

�� MilitaryMilitary

SoloSolo

(Pure productivity)(Pure productivity)�� ProsPros

�� You are the boss. Autonomy.You are the boss. Autonomy.

�� Ability to change relatively easily.Ability to change relatively easily.

�� Significant independenceSignificant independence

�� Chance to own ancillaries in officeChance to own ancillaries in office

�� ConsCons�� Practice builds slowly Practice builds slowly -- one patient at a timeone patient at a time

�� Every dollar spent is your ownEvery dollar spent is your own

�� Less leverage to develop favorable managed care Less leverage to develop favorable managed care contracts with payers.contracts with payers.

�� Must learn to run a business well. Not sheltered from Must learn to run a business well. Not sheltered from adversity.adversity.

Large Single Specialty GroupLarge Single Specialty Group

(All kinds of reimbursements)(All kinds of reimbursements)�� ProsPros

�� Usually automatic referrals from your partners.Usually automatic referrals from your partners.

�� Best for specialists with special skills or nichesBest for specialists with special skills or niches

�� Significant opportunity to own ancillaries (Significant opportunity to own ancillaries (XrayXray, Path, , Path, XRT, XRT, CathCath lab, etc)lab, etc)

�� Better leverage with managed care insurance Better leverage with managed care insurance companies.companies.

�� ConsCons�� High overheadHigh overhead

�� A problem if partners do not get along.A problem if partners do not get along.

�� Problem if the managing partner is self serving.Problem if the managing partner is self serving.

�� Ancillaries highly susceptible to governmental Ancillaries highly susceptible to governmental interference (New Stark laws)interference (New Stark laws)

Multispecialty GroupMultispecialty Group(Salary vs Productivity +/(Salary vs Productivity +/--Bonus)Bonus)

�� PROSPROS�� Automatic patientsAutomatic patients

�� Instant salaryInstant salary

�� Possibility to develop a nichePossibility to develop a niche

�� Has possibility to own other interests / ancillaries if a privatHas possibility to own other interests / ancillaries if a private group. e group. (Not an option in most academic (Not an option in most academic grpsgrps))

�� Stronger negotiating power with managed care insurance Stronger negotiating power with managed care insurance companies.companies.

�� CONSCONS�� High overheadHigh overhead

�� Lack of autonomyLack of autonomy

�� High productivity departments subsidizes lower productivity High productivity departments subsidizes lower productivity departments.departments.

�� Everyone subsidizes management.Everyone subsidizes management.

Hospital employeeHospital employee

(All kinds of reimbursement (All kinds of reimbursement

arrangements)arrangements)�� Variations:Variations:

�� Single practitionerSingle practitioner

�� Single specialty groupSingle specialty group

�� Multi specialty groupMulti specialty group

�� Pros: see previous slidesPros: see previous slides

�� Cons: see previous slidesCons: see previous slides

Government Government -- VA, militaryVA, military

(Straight salary)(Straight salary)�� PROSPROS

�� Automatic referrals.Automatic referrals.

�� Secure salary, even if adversity strikes.Secure salary, even if adversity strikes.

�� Solid defined retirement benefit plan.Solid defined retirement benefit plan.

�� Busy from the first day.Busy from the first day.

�� Historically these practices have not been productivity Historically these practices have not been productivity based (this is changing!)based (this is changing!)

�� CONSCONS

�� No chance to own ancillaries.No chance to own ancillaries.

�� Lack of autonomy.Lack of autonomy.

�� Pay scale has historically been lower than average.Pay scale has historically been lower than average.

�� Quirky government rules / regulations.Quirky government rules / regulations.

�� Hard working physicians are usually not rewarded for Hard working physicians are usually not rewarded for the extra time / effort.the extra time / effort.

How do you choose a How do you choose a

practice?practice?�� GeographyGeography

�� Unhappy spouse / partner = unhappy doctorUnhappy spouse / partner = unhappy doctor

�� The other doctors in the groupThe other doctors in the group�� Do you get along?Do you get along?

�� Do you respect them?Do you respect them?

�� Are they up to date?Are they up to date?

�� Is there volume to support you?Is there volume to support you?�� Overflow because of patient volume in community or Overflow because of patient volume in community or

from young busy doctor from young busy doctor -- goodgood

�� Aged patient population from a retiring doctor Aged patient population from a retiring doctor --usually not as good.usually not as good.

How do you choose?How do you choose?

�� Is your pay based on an equal share, a straight Is your pay based on an equal share, a straight salary, on productivity, or a mixture?salary, on productivity, or a mixture?

�� Is there a bonus? How is this determined?Is there a bonus? How is this determined?

�� How much overhead does each doctor pay?How much overhead does each doctor pay?

�� How much does a How much does a ““successful partnersuccessful partner”” make?make?

�� Starting salary not as important as the long Starting salary not as important as the long term potential.term potential.

�� Are they looking for a partner or a slave?Are they looking for a partner or a slave?

�� Is there a Is there a ““buybuy--inin””??

Success in any kind of Success in any kind of

practicepractice�� AAAAAA

�� AvailabilityAvailability

�� AffabilityAffability

�� AbilityAbility�� In this order!!In this order!!

�� A successful practice is built one A successful practice is built one relationship at a time.relationship at a time.�� Patients and familyPatients and family

�� Referring physiciansReferring physicians

““It is how much you keep that is important, It is how much you keep that is important,

not important how much you make.not important how much you make.””

Paul Paul OlejarOlejar

How much do we keep?How much do we keep?

$275,152$275,152Obstetrics/GYNObstetrics/GYN

$592,811$592,811NeuroSurgeryNeuroSurgery

$500,672$500,672OrthopedicsOrthopedics

$209,873$209,873PediatricsPediatrics

$214,740$214,740PsychiatryPsychiatry

$354,750$354,750PathologyPathology

$454,205$454,205RadiologyRadiology

$214,307$214,307Internal MedicineInternal Medicine

$357,091$357,091General SurgeryGeneral Surgery

$208,861$208,861Family PracticeFamily Practice

Median SalaryMedian SalaryArea Area

Source: The American Medical Group Association (AMGA) 2009

How does this compare?How does this compare?

Average personal yearly income in America (2006)Source: http://en.wikipedia.org/wiki/File:Personal_income.png

Primary source: US Census Bureau, 2006

How does this compare?How does this compare?

Source: Kiplinger.com

LetLet’’s talk personal finance.s talk personal finance.

�� The average education debt of the 2009 The average education debt of the 2009

medical school graduates: $156,456.00medical school graduates: $156,456.00

�� 79% of graduates have debt of > 79% of graduates have debt of >

$100,000.00$100,000.00

�� 58% of graduates have debt of > 58% of graduates have debt of >

$150,000.00$150,000.00

�� 87% of graduating medical students carry 87% of graduating medical students carry

outstanding loans. outstanding loans. Source: AAMC 2009 Graduation Questionnaire.

What are your options?What are your options?

�� Cry!Cry!

�� Complain!Complain!

�� Whine!Whine!

�� Be proactive!Be proactive!

DonDon’’t think like a victim!!t think like a victim!!

Pay yourself first (#1)Pay yourself first (#1)

�� AlwaysAlways put 10% aside (or more if possible, 20% put 10% aside (or more if possible, 20% ?) before paying anything else.?) before paying anything else.

�� Make this Make this automaticautomatic. The money should move . The money should move before you have a chance to put you hands on it!before you have a chance to put you hands on it!�� Why do you think the government requires us to take Why do you think the government requires us to take

out taxes on a monthly basis? out taxes on a monthly basis?

�� Most of us donMost of us don’’t have the discipline to keep our hands t have the discipline to keep our hands off of the money!off of the money!

�� Wealth, like a tree, grows from a tiny seed. The Wealth, like a tree, grows from a tiny seed. The sooner you plant the seed, the sooner it will sooner you plant the seed, the sooner it will grow. (a penny doubled every day for 30 days, grow. (a penny doubled every day for 30 days, vs $1 million)vs $1 million)

Pay yourself first (#1)Pay yourself first (#1)

�� 401 K / 403 B / 457 / Thrift savings plan401 K / 403 B / 457 / Thrift savings plan

�� Always maximizeAlways maximize the amount that you place into the amount that you place into

these accounts.these accounts.

�� Currently $16,500.00 allowed by law (with a Currently $16,500.00 allowed by law (with a

$5,500.00 $5,500.00 ““catch upcatch up”” at the age of 50 y/o).at the age of 50 y/o).

�� Also develop a rainy day fund (at least 3 months Also develop a rainy day fund (at least 3 months

worth of income).worth of income).

�� Ideally 10% of your net income (after retirement Ideally 10% of your net income (after retirement money and tax)money and tax)

�� Learn about investing. Learn about investing.

Pay yourself first (#1)Pay yourself first (#1)

�� Once you set up automatic withdrawals Once you set up automatic withdrawals --

learn about investing. learn about investing. Consult with Consult with

seasoned advisorseasoned advisor

�� Reinvest dividends and capital gains.Reinvest dividends and capital gains.

�� ““Compound interest is the eighth wonder Compound interest is the eighth wonder

of the world.of the world.”” Benjamin FranklinBenjamin Franklin

�� ““Compound interest is the worldCompound interest is the world’’s s

greatest discovery.greatest discovery.”” Albert EinsteinAlbert Einstein

Donate (#2) Donate (#2)

�� Depends on your belief system. Depends on your belief system. �� Church, synagogue, mosque, temple, schoolChurch, synagogue, mosque, temple, school

�� 10% is recommended. 10% is recommended.

�� Many great charities that can use your help.Many great charities that can use your help.

�� Very powerful:Very powerful:�� You will be making a difference. Giving back to your You will be making a difference. Giving back to your

community.community.

�� Realize there is a larger world out there, and we are Realize there is a larger world out there, and we are all interconnected.all interconnected.

Pay off debt (#3)Pay off debt (#3)

�� Critical to keep yourself financially healthy.Critical to keep yourself financially healthy.

�� 10% recommended.10% recommended.

�� Takes pressure off of you. Helps with Takes pressure off of you. Helps with

your credit rating, if you are keeping up your credit rating, if you are keeping up

with payments.with payments.

Budget (#4)Budget (#4)

�� A budget?!?! Ouch!!!!A budget?!?! Ouch!!!!

�� LetLet’’s see:s see:

�� 401K401K

�� 10% savings 10% savings -- rainy day fundrainy day fund

�� 10% donate10% donate

�� 10% debt10% debt

�� That leaves only 60That leaves only 60--70% of my income to live on!!!70% of my income to live on!!!

�� Expand your lifestyle slowly, and deliberately. Expand your lifestyle slowly, and deliberately.

BudgetBudget�� Home Home -- the biggest chunk of your budget.the biggest chunk of your budget.

�� No more than 2No more than 2--2.5 times your yearly income.2.5 times your yearly income.�� Historically banks would give up to 4 times your Historically banks would give up to 4 times your

yearly income (yearly income (espesp with high income earners)with high income earners)

�� Avoid being Avoid being ““house poorhouse poor””..

�� ? Rent for the 1? Rent for the 1--2 years? 2 years? �� High turnover rate of people leaving their first jobHigh turnover rate of people leaving their first job

�� Current economy Current economy -- will make resale of home VERY will make resale of home VERY difficult if you decide to leave / move.difficult if you decide to leave / move.

�� Get to know the market, the places you would like Get to know the market, the places you would like to liveto live

�� Insurances Insurances -- health, life, disability health, life, disability --absolutely necessaryabsolutely necessary

BudgetBudget

�� Car Car -- do you really need a brand new car?do you really need a brand new car?�� A 1A 1--3 year old car with low mileage is a much better 3 year old car with low mileage is a much better

way to go.way to go.

�� Club membershipsClub memberships

�� Other Other ““toystoys”” -- do you always need the latest and do you always need the latest and greatest?greatest?

�� PAY CASHPAY CASH or use debit card (which draws from or use debit card (which draws from a cash filled acct)a cash filled acct)

�� Get rid of credit cards Get rid of credit cards -- only use for TRUE only use for TRUE emergencies.emergencies.

TaxTax

�� A necessary evil!A necessary evil!

�� Taxed based on graduated scale.Taxed based on graduated scale.

�� You will be considered You will be considered ““richrich”” and you and you

WILL be paying more tax. A lot more tax. WILL be paying more tax. A lot more tax.

Get used to it!Get used to it!

�� Pay it and move on. However, make sure Pay it and move on. However, make sure

you have a good and honest Tax advisor you have a good and honest Tax advisor

or accountantor accountant……..to help you navigate the ..to help you navigate the

tax laws.tax laws.

TaxTax

>$373,650>$373,650>$373,650>$373,65035%35%

$171,850$171,850--$373,650$373,650$209,250$209,250--$373,650$373,65033%33%

$82,400$82,400--$171,850$171,850$137,000$137,000--$209,250$209,25028%28%

$34,000$34,000--$82,400$82,400$68,000$68,000--$137,000$137,00025%25%

$8,375$8,375--$34,000$34,000$16,750$16,750--$68,000$68,00015%15%

< $ 8,375< $ 8,375< $16,750< $16,75010%10%

Single FilersSingle FilersFiling JointlyFiling JointlyTax RateTax Rate

Source : United States Tax Code 2010

Tax burdenTax burden

Seven Cures for a Lean PurseSeven Cures for a Lean Purse1.1. Start thy purse to fattening (Pay yourself 10%)Start thy purse to fattening (Pay yourself 10%)

2.2. Control thy expenditures. (Grow budget slowly)Control thy expenditures. (Grow budget slowly)

3.3. Make thy gold multiply. (Invest with Make thy gold multiply. (Invest with profprof advice) advice)

4.4. Guard thy treasures from loss. (Choose advisors Guard thy treasures from loss. (Choose advisors carefully)carefully)

5.5. Make of thy dwelling a profitable investment. (Own Make of thy dwelling a profitable investment. (Own your home your home -- once you have settled down)once you have settled down)

6.6. Insure a future income. (Rainy day fund, Insure a future income. (Rainy day fund, insurances)insurances)

7.7. Increase thy ability to earn. (Study, excel, diversify)Increase thy ability to earn. (Study, excel, diversify)

Source: The Richest Man in Babylon by George S. Clason.

Never lose sight of why we do Never lose sight of why we do

what we do!!!!what we do!!!!

Thank you!Thank you!

References References --

Business of MedicineBusiness of Medicine

�� www.cms.govwww.cms.gov

�� www.cms.hhs.govwww.cms.hhs.gov

�� www.amga.orgwww.amga.org

�� www.amsa.orgwww.amsa.org

�� www.aamc.comwww.aamc.com

�� www.AMA.comwww.AMA.com

�� www.finaid.org/otheraid/medical.phtmlwww.finaid.org/otheraid/medical.phtml

�� www.Kiplinger.comwww.Kiplinger.com

�� www.AARP.comwww.AARP.com

References References -- Personal Personal

FinanceFinance�� The Richest Man in Babylon by George S. The Richest Man in Babylon by George S.

ClasonClason..

�� The Millionaire Next Door by Thomas J. Stanley, The Millionaire Next Door by Thomas J. Stanley, Ph.D., William D. Ph.D., William D. DankoDanko, Ph.D., Ph.D.

�� The Automatic Millionaire by David BachThe Automatic Millionaire by David Bach

�� The Joy of Simple Living by Jeff DavidsonThe Joy of Simple Living by Jeff Davidson

�� The Only Investment Guide YouThe Only Investment Guide You’’ll Ever Need by ll Ever Need by Andrew TobiasAndrew Tobias

�� Secrets of the Millionaire Mind by T. Secrets of the Millionaire Mind by T. HarvHarv EkerEker

�� Rich Dad, Poor Dad by Richard T. Rich Dad, Poor Dad by Richard T. KiyosakiKiyosaki..