Office overhead was about 50% for an FP back in 1990. And it has risen steadily. A recent New York Times article described a doc with 70% overhead which salary is now down to the 5 digits even though he works full time seeing lots of patients.
If you have not run a small office---the kind where the nurses know the patients by name---you have no idea how many employees contribute to every visit, even the most uncomplicated. Let's see. There is the operator who took the phone call. (You really will need a designated operator, because of the sheer volume of calls from patients, pharmacies, labs etc.) Then, there is the receptionist who scheduled the appointment. Except sometimes the call goes to the nurse first to see how soon the patient needs to be seen. She juggles that in between rooming patients/assisting the doctor and giving shots such as flu and allergy shots and calling in drug refills to pharmacies and calling patients about test results. So, make that two nurses. There is a computer system for the appointments. When that breaks down, there is chaos, so someone has to back it up daily and print out the appointments in advance so there is a hard copy. Once the patient finally gets to the office, someone has to call the insurance to make sure that it is 1) active 2) the doctor is the PCP of record and 3) find out what copayments must be charged. Not collecting the copayment (except in emergencies) is considered fraud and will get you dropped from an insurance plan and prosecuted by the federal government. The receptionists has to make sure that a copy of the patients living will is on the chart (if the patient has one) and has to verify ID.
Then, a nurse gets the patient back to the room, does vitals, goes over the medications etc. Then, the doctor sees the patient. For a really simple visit, he writes a prescription which the nurse copies, the patient goes back to reception. A bill is completed. You will need diagnosis codes. There is an encyclopedia size book for this. You have to make sure your procedure code (type of office visit in this case) is justified by the record, or else Medicare will nail your ass to the wall. That means writing down everything. Or dictating---but that can cost thousands a month in transcription fees.
The billing sheet then goes to the person who bills the insurance. All of it gets entered into a computer. If you are lucky, the HMO pays the bill. You enter the check into a computer and it goes to the bank. However, insurers routinely deny a certain percentage of claims so that they can sit on the interest payment. When a claim is denied, the biller has to copy records and resubmit the bill. Sometimes, she is force to get on the phone and stay there forever until she can talk to someone who actually knows something and is willing to help. Sometimes the doctor has to take time out from seeing patients to file an appeal. If he has to dictate a letter, that will probably cost more than the fee he is trying to collect.
Now, if the patient needs any tests or a referral to a specialist it is even harder. Each insurance has its own list of preferred providers. The doctor is expected to keep a library of provider lists, one for each insurer. Someone will have the job of finding the right specialist for the patient's insurance. This is a thankless job that no one enjoys so turn over is high. Many insurance plans have a very limited provider directory, since this saves them money. So, you can not give the patient the referral and tell him to make the appointment. No, the office staff has to do it, to make sure it is done in a timely manner. Then, the referral clerk has to call the insurance to make sure the test/referral/lab will be covered by the insurer. Nothing makes patients madder than doing what the doctor said and then finding out that their insurer won't pay the bill. However, insurers often refuse to authorize payment for necessary tests or referrals, until the doctor gets on the phone. It is a game they play, to limit the amount of money they spend.
Did I mention all the federal and state laws that medical offices have to follow? OSHA requires that you have an MSDS sheet for every f***ing thing in the office---even Liquid Paper- and that staff has routine in-services about safety and that the office have a designated safety director and a written safety plan and everyone has to have immunizations that are updated regularly, and when OSHA comes through to inspect someone has to take time off work to show OSHA around. And you'd better pray that OSHA doesn't need money or you will be fined for something. Anything. Then, there is CLIA. The same applies for CLIA. And Medicare and every other insurance plan you have a contract with will expect to be taken on a tour and will expect charts to audit on a regular basis. Right now, offices all over the country are tearing their hair out trying to go electronic. This will allow hackers like the Chinese Government and Microsoft and the FBI and Big Pharm to access all your private medical records, which is why the law was called the Patient Privacy Act. It's a joke, you see. You are about to lose your privacy---and your doctor is being forced to pay top dollar to make it happen.
Someone has to do payroll including withholding. Someone has to pay the bills. Someone has to order supplies. And a doctor's office uses lots of supplies. Vaccines are an especially big problem. They cost a lot and if the refrigerator is not checked regularly by a nurse, they can all spoil. If you order too much, you eat the cost.
What else? Be sure to check the oxygen tank regularly and calibrate the EKG machine. Go through meds and eliminate any that are expired. If you have a sample closet, log in every sample you receive, every one you hand out and have someone rotate the samples and get rid of expired drugs on a regular basis.
Laundry! You could eliminate this one by going paper, but that is not eco-friendly and it costs more.
And then there are all the regular expenses/problems associated with a business like the phones, the leaky roof, handicapped access.
Oh, and you have to provide an interpreter at no charge to the patient if she speaks a foreign language. So, bilingual staff is a must and you will have to use an expensive phone translation for all your Urdu/Ebong/Kurdish speakers.
And everything that is marketed for doctors is sold at two or three times the price a non physician would be charged for a similar product or service. And reimbursements----the amount a doctor is paid for a service only go in one direction. Down. If one insurer cuts its rate (say, for instance Medicare) all your other insurance companies demand the same discounted rate. It is in your contract. Because they figure if you can see one patient for $5 (after overhead) you can see all your patients for $5 (after overhead).
"I live my life in seven-minute intervals," says Laurie Green, a obstetrician-gynecologist in San Francisco who delivers 400 to 500 babies a year and says she needs to bring in $70 every 15 minutes just to meet her office overhead.
http://online.wsj.com/article/SB10001424052702304410504575560081847852618.htmlAnd OB-Gyns make a lot of their money in the hospital (where they have no overhead except for the office staff that sends on the bill for the delivery or surgery).
And this NYT piece about the long time family doctor whose overhead is now 75% is a must read.
http://www.nytimes.com/2011/04/23/health/23doctor.html?_r=2&pagewanted=3Altogether, Dr. Sroka employs 10 part-time employees, or the equivalent of five full-time workers. He does not provide his staff members with health insurance. His expenses amounted to $420,000 last year, or about $200 an hour. Most of his patients have either Medicare or CareFirst, the local Blue Cross Blue Shield plan, which pays him $69 (including a $20 co-pay) for most consultations. At that rate, he breaks even at three visits an hour and needs a fourth to turn a profit.
While Medicare reimbursements have been unchanged for 10 years, private reimbursements have declined twice in that period while his costs — and those of family practices across the country — rose steadily.
If you are seeing just colds, you can see 6 or more patients an hour. If your patients actually have real medical problems, 3 or 4 is the max. I am a very efficient doctor, but I try to see no more than 3 an hour, because most of the folks have a huge list of diseases, disease being the number one cause of unemployment, poverty and lack of health insurance in this country. If I were in private rather than public practice, I would never be able to give my patients the care they need. Imagine trying to manage diabetes, coronary artery disease, chronic pain from spinal stenosis, Hepatitis C and depression in one visit. I do this three times an hour. I shudder to think that some doctors may have to do this five or six times an hour.
One solution is the Canadian model. Give everyone a card. You read the card and send the (one insurer) a bill. Every specialist is on the plan so there is no need for a separate referral clerk. You could cut the five employees per doctor down to three that way.