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According to our 2010 Physician Compensation Survey, group size can be a big factor in how much you earn. Find out how your income stacks up to that of your peers.
He may own a small practice on Hawaii's big island, but pediatrician Wes Sugai is getting the most out of his services thanks in large part to his staff.
Sugai, a solo practitioner in Kailua Kona, spends 20 percent of his time at the local hospital and the remainder at his practice, where he estimates he can see about 225 patients in an 80 to 90-hour week. A schedule that grueling is necessary, he says, to make the income he needs to run his practice and take care of his staff: two registered nurses - including one who does billing - a receptionist, and his administrator and accountant, who is also his wife.
"I've developed my own techniques, so that's how we are able to see a lot of patients during my office hours," Sugai said. "Nurses give all the shots and initial work pre-exams, and then carry out whatever procedures need to be done. So that's how I am able to keep my head above water."
In many ways, Sugai is a throwback: A solo doc who still does hospital rounds, employs his family as staff, and works the equivalent of two jobs to make ends meet.
Yet at least he's surviving. His tenacity has put him among a minority of solo physicians whose income has remained flat compared with last year, according to our 2010 Physician Compensation Survey. By contrast, fully half of solo docs say their incomes declined this year - and of this half, about 70 percent saw big declines of at least 10 percent.
Yet while solo docs seem to struggling most profoundly, financial hardships were hardly limited to the little guys. In short, our compensation survey of nearly 1,000 physicians found that it's been a tough year almost regardless of specialty, practice type, location, or size.
How is your own income stacking up with your peers? Are you coping with the double whammy of the Great Recession and healthcare's long-term business challenges any better than your colleagues?
To find out, let's take a closer look at the data.
On the big island of Hawaii, Sugai says "it has been really tough," as the construction industry - a big business on the island - has been decimated by the recession, with 85 percent unemployment over the last year. That has had a domino effect for him as his number of Medicaid patients has nearly doubled, while more uninsured patients are skipping exams and other routine care.
Sugai admits that without putting in the hours he does and without his staff, there is no way he could sustain his practice, as he is "working harder for less."
That sentiment was echoed throughout our survey. Asked to characterize their feelings about their income and their sense of the future, solo docs like Sugai were the least happy and most pessimistic. But their large-practice peers did not fare much better.
The docs happiest with their incomes, curiously, were those in practices employing two to nine physicians. Respondents in this group size were most likely to call their income "excellent" (12 percent), and the most likely to describe their practice's income as "robust" (36.5 percent).
What explains the relative happiness of small-group (but not solo) docs? Our survey suggests that groups with more physicians provide some protection against the worst economic turbulence - but only up to a point and with significant drawbacks. Physicians in big groups enjoy economies of scale that help them keep costs down and they worry less about keeping the doors open, however, they have problems of their own.
They are often held to production standards that they find difficult to meet and suffer financially if they fall short, yet the average big-group doc lacks the power to influence changes in practice policies. Meanwhile, their income, while perhaps more stable, is limited. Doctors in the biggest groups were no more likely than their solo counterparts to earn the biggest incomes.
"Some organizations are struggling, perhaps, more than others, but it is not only the small practices having troubles, it is the larger ones as well," said David N. Gans, vice president of innovation and research for the Medical Group Management Association.
The small-practice physician, meanwhile, is far less exposed economically than her solo counterparts, yet she is a vital member of her practice. The group practice of fewer than 20 physicians seems to be a happy compromise for independent-minded docs who nevertheless need some protection and support.
Efficiency the key
Gans says practices big and small need two key elements to stay viable: good management and good governance. He says efficiency is critical to a successful practice, as is improving business office operations.
"It is about getting paid for the work you did," he says. "Practices doing this, who may be in the same economic environment as others who don't have business operations, are earning substantially more income for the same work."
To get paid correctly at any size, Gans advises focusing on several key areas of your business:
• Patient collections. Consider implementing credit or debit cards, Gans says, to get as close as possible to 100 percent of the patient's portion of the bill collected at the time of service. The higher the patient's deductible and copay, the more important this is, so Gans suggests knowing ahead of time which patients have high-deductible plans.
• Payer contracts. Gans says "it is very easy to see how practices who have good systems in place are earning substantially more income for the same work." Take steps to ensure that payers live up to the promises they make in their contracts - and contact them when they don't. Examine rejected claims, and appeal those claims that you believe were denied wrongly. For claims denied appropriately, correct and resubmit them when possible, and learn from the rest.
For example, Gans says, "if you don't have good systems in place, you don't know when a patient changes insurers and then you send the claim to the wrong payer and it is rejected. Then you have to file again to get those claims paid. That can be avoided with good business operations."
• Cost efficiency. Gans advises looking at your practice to ensure it is staffed correctly: "Do you have the right people doing the right things with the right training for the right outcomes?
"Getting the right staffing does not necessarily mean having fewer staff," he adds, "but the right staff to optimize the productivity of doctors. Doctors who use nonphysician providers or nurse practitioners or physicians assistants - those are the ones using them wisely and can be very financially successful and increase patient satisfaction and deliver good, quality healthcare."
• Professional management. Gans notes that while smaller practices have "very good clinicians, they [often] don't have professional administration and this can be … penny-wise and pound foolish." He acknowledges that smaller practices may not have a lot of money for professional administrators, but says they should enlist help to maintain operations.
He notes that even some larger practices also lack professional administrative leaders, which in the private sector is almost unheard of. "Think of an $8 million dollar business. Are you going to run it without somebody that has a professional degree?" Gans says. "You can have a five-doctor orthopedic surgeon group with a moderate amount of ancillary services that will also see $7 million to $8 million in business. So you need professional leadership."
The front lines
Family physician Deborah Winiger says there are fewer patients coming into her two-doc group North Suburban Family Healthcare in Vernon Hills, Ill., these days, as unemployment in the community rises.
Winiger is one physician who indicated her net income as "disappointing" in our survey. Still, she says, "it is not enough for me to be worried. We are down about 3 to 5 percent, and in talking to some of my colleagues, I am in better shape than they are."
But, from constantly examining her vendor contracts for the lowest price to looking into pay-for-performance and EHR incentives from the federal government, Winiger says "we are always trying to look for different revenue streams."
In five years, she says, "I hope to maintain this little practice," but may also join more of an IPA-style group or even form a larger group for greater purchasing power and cost-sharing.
Another survey respondent who identified his income as "disappointing" was R. David Cox, a solo family practitioner in Orange, Texas.
Cox says he works hard to keep overhead low, a task made more difficult when his partner left a year ago to become a hospitalist, but he remains hopeful that he can continue to survive and maintain his autonomy by adding staff in the near future.
"I think in terms of solo practices, the life of that is pretty short unless something changes," he says. "So the question is: Does the reform that's supposed to occur in three years come soon enough to save small practices?"
To group or not to group
Family physician Mary Knauss of Pearland, Texas, is almost ready to give up on solo practice. She tried incorporating cosmetic services to boost revenue, but the sagging economy reduced demand.
"I like the practice I have, but I can't afford it," she says. "I tell people this is the most expensive hobby I've ever had … so in order to retire, I'm going to have to find a job working somewhere in a group."
Billy D. Adkisson, CEO of Adkisson Consultants, a Bloomington, Ill.-based physician recruitment firm, foresees "huge consolidation" on the horizon, with smaller practices joining larger groups and more practices accepting hospital ownership. Consolidation allows for shared costs and drives efficiencies.
"Together, as a unit, we can drive down the cost, give better healthcare and do it in a faster, better pace, and that's what has to be done," argues Adkisson, whose business specializes in placing doctors together as groups as well as with hospitals.
As for solo practices, he says, "You can't do business that way anymore, it is highly inefficient. … I don't think you'll see many solo practices left in five years."
In Bedford, Ind., pediatrician Dan Dusleag has seen the impact of power in numbers. Dusleag is one of 20 physicians who comprise the Bedford Regional Medical Center (BRMC). Despite a drop in patient volume for the practice, Dusleag described his income as "robust" in our survey.
"I am very confident," Dusleag says. "I have a large volume of patients and I have been here long enough that I am established. Even if I get hit a little, I'm not worried that I'll have to relocate or fold up my practice."
He does, however, note that the current drop in volume would be worse if he were a solo practice.
"We have more help in a larger group and are protected," he says. "That makes it a little easier to have done more work for the same amount of money and even a little less."
But Gans doesn't agree that solo practice is doomed. He says he has been hearing about the pending demise of the solo practice for nearly 25 years and that it is still "alive and well." Solo practices function differently than larger practices, but not necessarily inefficiently.
"Larger groups have economies of scale and more negotiating clout, but at the same time, there are many small practices that can be, because of their ability to be more nimble and fit market niches, more financially successful if they have good management," he says. He goes on to say, no matter the size of your practice, there is always room for streamlining functions and increasing efficiency.
Our survey respondents echoed Gan's assessment: A majority of groups (of all sizes) said in the next five years they expect to continue practicing medicine as they have been.
Keith L. Martin is associate editor of Physicians Practice. He can be reached at firstname.lastname@example.org.
This article originally appeared in the November 2010 issue of Physicians Practice.