Profit/loss $xxx

The goal of this assignment is to understand the financial impact of adding another physician to your medical practice, as well as to articulate the project management approach you would take as the group’s administrator. Consider the following scenario:
After months of deliberation, it is decided at the practice’s shareholder meeting to move forward expanding the physician practice by adding one doctor. The administrator and president of the group plan to meet early next week to discuss the opportunity for recruitment.
As the administrator, please articulate your plan of action to include the following:
* assign a recruitment firm
* advertise the position
* determine what terms will be acceptable when negotiating an employment contract.
As you approach this assignment, please decide how you will present the expenses related to recruiting another physician to the shareholders, as well as outline the potential benefits both financial and otherwise. Please include a project plan for the various steps involved in this endeavor, including a proposed timeline and a proforma, along with the relevant assumptions. You may use the sample document introduced during Week 3. This will give you flexibility to communicate the status of the project. Also, it will serve as a modeling tool that can be updated as elements of the project change.
Sample document introduced in week 3:
The decisions to recruit physicians and staff are the most expensive decisions in a physician group, and they need to be approached thoughtfully. These decisions by a practice need to be made based on a variety of factors including its mission, geographic location, current physician complement, payer mix, and the needs of the community. It is critically important for the office to develop a business plan for each practitioner. The plan should include qualitative issues such as whether the new doctor would enhance the practice’s image in the community and improve the quality of life for practice principals. It should also include a detailed pro forma of what the financial impact might be of bringing the new doctor on board. Elements of the pro forma include the following:
* Income:
* Direct patient care revenue generated by the new physician
* Direct revenue generated by the new physician resulting from additional ancillary services not currently provided by the practice (either because no current practice principal is present to do so or because the services are outside the typical scope of routine practice)
* Additional revenue from surgery performed by practice principals due to referrals
* Deductions from income:
* Revenue no longer generated in the office by existing practice principals (this is important and is often ignored in financial projections)
* Non-operative physician salaries, benefits, professional liability insurance and other overhead such as occupancy
* Possible decreases in referrals from other doctors in related specialities whose business income has been adversely impacted
The median salary for physician specialties are listed on online salary surveys. For example, for a physiatrist is in the range of $200,000; for a rheumatologist, it is $185,000. Note that different surveys use different methodologies and statistics are not always current. Obviously, whatever salary is ultimately offered to an employed physician will depend on factors such as experience, number of hours worked per week and number of weeks per year, number of patients seen, and anticipated reimbursement from payers and patients.
Below is an example of how volume, revenue and expenses are projected/calculated to determine the impact to the practice when deciding to expand its size. What is very important to consider is that there will likely be a large difference between years 1 and 5, as the start-up costs become less and volume increases. Many times, the pro forma includes data for the first 3 years or more. Another important consideration for this analysis is that all assumptions be footnoted (see below).
Pro Forma Example
Revenue Assumptions*/Volume Assumptions**
Service Description Reimbur. #/Year
Low-level follow-up (99212) $XXXX XXX
New patient visit (99204)
Mid-level consult (99243) $XXXX
$XXXX XXX
XXX
Procedure 1 $XXXX XXX
Procedure 2
Total Revenue $XXXX
$XXXXXX XXX
XXXXXX
Expenditures $/Month $/Year
Rent (1500 sq. ft @ $25/sq. ft.) $XXX $XXXX
Amortized buildout, furniture, and supplies [1] $XXX $XXXX
Physician’s assistant [2] $XXX $XXXX
Medical receptionist [3] $XXX $XXXX
Physician [4] $XXX $XXXX
Computer hardware and information systems [5] $XXX $XXXX
Billing and collections [6]
Total Costs
Profit/Loss $XXX
$XXXXX
$XXXXX $XXXX
$XXXXXX
$XXXXX
*Assuming 30 minutes for a new patient, 15 minutes for an established patient, and a 3:1 ratio of follow-up patients to new patients. Based on 8 hours per day, 20 working days/month.
**Assumes 80% of new patients referred for one of the three services listed above will have indications for procedures and undergo procedure. Does not consider revenue from other diagnostic imaging tests routinely ordered in the clinic.
1. Estimated at $150,000–200,000 over 10 years at 7% (used $175,000).
2. Average salary of $77,000 plus 20% fringe benefits; at 20% effort.
3. [3] Salary.com for Medical Assistant ($9–15/hr, used $12).
4. $200,000, plus 33% benefits
5. $10,000–150,000, used $100,000 over 3 years at 5%.
6. 3% of revenues.
The hospital leaders who are determining the strategic benefit of adding doctors have some other possible threats to consider. Review the except from the following article. It relays the potential issues faced by health systems when hiring or acquiring a physician practice.
Burnett, Sabrina & Hawkins, Cami. Strategic Physician Onboarding: 7 Tactics for Minimizing Losses on Employed Medical Practices. Becker’s Hospital Review.