The traditional doctor visit is at risk. According to the 

, the average number of annual visits to a doctor’s office has declined since 2001-a trend that has only been strengthened by new online services offering virtual care to patients who do not have time to see their personal doctor and are in need of a fast remedy. However, the catch is these services connect patients with a doctor they have never met before and who does not know their background or medical history, which can hinder the quality of care.  

For medical practices to remain competitive, grow revenue and maintain established relationships with their patients, it is imperative physicians incorporate telemedicine services into their practices and provide patients with the option for treatment through virtual care. 

Here are five reasons why integrating telemedicine into a medical practice benefits both physicians and their patients:

It has been proven that patients are far more likely to be satisfied with a virtual appointment when it is administered with a doctor they know and trust. According to 

, 93 percent of patients who use telemedicine to meet with their personal doctor have a positive experience that meets their healthcare needs. By offering telemedicine services in addition to in-office care, patients are more satisfied and more likely to remain loyal to their doctor.

Provides a convenient solution for more than just the patient. 

New technology is creating safer and more effective platforms for patients to comfortably and conveniently talk with their doctors on a personal device, such as a smartphone or computer. The video conference capability that comes with virtual care also allows for multiple people, including long-distant family members, caretakers and other doctors or specialists, to virtually join the appointment and collaborate on providing optimal care. 

Work, conflicting commitments and personal schedules inhibit many patients from seeking care through traditional in-office visits, especially for needs such as follow-ups, to review lab results or discuss how a new medication is working out. Telemedicine makes it easy and convenient for patients to stay engaged with their treatment plan and receive a stronger clinical outcome.  

Allows doctors to see more patients without adding hours. 

When hospitals and private practices extend their patient capacity with virtual visits, they are able to see more patients. According to 

, physicians typically work 50.7 hours a week, with only 67 percent of the time directed to face-to-face patient care. The remaining 33 percent of their weekly hours are used to consult family and other physicians and for administrative tasks and other office responsibilities. Telemedicine allows for the doctor to combine these tasks, like contacting patients, families and other doctors, freeing up time to accommodate more virtual patient visits during normal work hours.

Seeing more patients goes hand-in-hand with increasing revenue. By offering telemedicine, physicians can be reimbursed for a number of interactions that do not actually need to have a patient present in-person. A practices’ telemedicine provider should equip them with the tools and information needed to help them understand how to bill for telemedicine, how to follow telemedicine policies by state and how reimbursement guidelines differ for Medicare, Medicaid and private payers. In all, doctors can add up to tens of thousands of dollars per year in new revenue with just a limited number of virtual care visits per month.

Telemedicine has grown in popularity among patients and will be 

. New technologies and offerings, such as ExamMed, are making it easy and safe for doctors to incorporate virtual care into their practice. While telemedicine isn’t for every occasion, it is a tool that physicians must offer to complement and expand their current healthcare offerings, or they will continue to risk losing patients to more accessible healthcare options online.

Articles

Five reasons why doctors need to offer telemedicine in their practice.

Virtual care is best performed through an established patient-physician relationship

Annual Physician Report surveyed 1,300 physicians nationwide and provides benchmarks on compensation for primary care and many subspecialties. The report also examines trends in malpractice insurance, work-life balance, and technology utilization.

Just over half (52 percent) of physicians surveyed reported that compensation was about the same as last year, but income dropped for more than a quarter (26 percent) of respondents. 

More than 70 percent of physicians indicated uncompensated tasks, such as prior authorizations, were the primary cause of lost productivity and revenue. Other factors included:

About 22 percent of physicians said their compensation increased. The primary reasons included:

Salary results are presented for physicians in private practice, hospital-owned practice, in-patient hospitals, nonprofits, and government. Specialties in this report include internal medicine, family medicine, pediatrics, cardiology, obstetrics/gynecology, dermatology, and urology.

Data was collected November 2018, and the report has a 3 percent margin of error with a 95 percent confidence level.

90th annual Physician Report data slideshows

Financial state of practice: Uncompensated tasks stalling practice growth

Salary: Salaries stagnant, declining for most doctors

Malpractice: How much doctors spend on malpractice insurance

Productivity and staffing: Despite challenges, doctors remain productive

Respondent demographics: Who took our survey

How to drive revenue growth in your medical practice

How practice owners should set their own salaries 

This exclusive, annual report provides data from your peers about the state of physician’s today, and timely strategies you can use to run a more efficient practice and improve patient care.

90th annual Physician Report 

I read the March 10, 2019 cover article on Sharing Patient Data with great interest.  

As a practicing family physician with a well-functioning EHR I do not need and do not want access through a HIE to monster databases. What I and every primary care physician wants is simple. We need point of service access to the data that is clinically relevant for the patient in front of us, now, today. 

There is a way to do that that by now should be obvious:  put the records in the hands of the patient, and let that patient give access to their doctors!

Thanks for the direct primary care articles

Kudos to Rob Lamberts, MD, for explaining direct primary care.

This is truly a revolutionary movement removing insurance companies, government, and hospitals from the doctor patient relationship.

Not only will it lower costs and increase both doctor and patient satisfaction, but it will stimulate more idealistic medical students to desire to enter primary care.

Melissa Young, MD, FACE, FACP in “Back to solo practice” (The Last Word, March 10) tells us the challenges she faces after her partner left their endocrinology practice.

I admire her courage to stay the course as a solo practitioner.

Going from seeing 8-12 patients a day to 24-28 patients a day represents a huge change. At the end of the day she must be exhausted from the emotional and physical strains. It would be interesting to know whether her partner simply retired or left to join a large group or a hospital network.

These days it is almost impossible to be a solo practitioner in most specialties and many physicians are leaving private practice to join large groups or hospital networks.

The days of the solo practitioner are coming to an end.

Your voice: Give patients control of medical records 

While some evidence suggests that rising physician prices drive growth in healthcare spending on the privately insured, a new study theorizes that increases in hospital prices, not physician prices, are causing healthcare costs to rise.

The study, published in the February, 2019 issue of 

, examines hospital and physician prices for inpatient and hospital-based outpatient services using actual negotiated prices paid by insurers. 

“Prices for hospital-based services grew substantially over the time-period we studied with prices for inpatient services increasing by about 37 percent and prices for outpatient services growing by about 21 percent,” says one of the study’s authors, Stuart V. Craig, a PhD candidate at the University of Pennsylvania’s Wharton School.

Typically, he explains, hospitals and physicians bill insurers separately for the services they provide. For example, the surgeon who performs a hip replacement gets a payment directly from the insurer, and the hospital gets a separate payment. 

“We looked at the differential growth rates of these two components of price, the total price paid, and found that the payments to facilities grew much faster than those to physicians,” Craig says. “This is especially important because facility payments are typically much larger than physician payments at baseline. Roughly 89% of total price growth came from increases in prices paid to hospitals rather than physicians.”

Therefore, Craig says, efforts to reduce healthcare costs should focus primarily on addressing rising hospital prices.

“The fact that hospital prices are larger than physician prices in the first place means that hospital price growth would be a bigger driver of spending growth, even if their growth rates were the same in percentage terms,” he says. “But we find that there is a large difference in relative growth rates as well.”

For example, the researchers found that physician services costs associated with Cesarean sections increased by 5.9% between 2007 and 2014, while facility services costs associated with Cesarean sections increased by 41.9% during that period. 

The cost of physician services associated with Cesarean sections increased at a rate slower than Consumer Price Index (CPI) inflation, while the cost of facility services increased at a rate faster than the CPI. 

After accounting for inflation, the physician services component of a Cesarean got smaller, while the facility services cost of a Cesarean increased. Therefore, all of the true increase in cost came from increases in facility services costs.

Adam C. Powell, PhD, president of Payer+Provider Syndicate, a management advisory and operational consulting firm for the managed care and healthcare delivery industries, says the findings suggest that costs for a number of physician services, although increasing, have largely just kept up with inflation. 

“The 2007-2014 era was a time during which there was a strong emphasis on reducing costs and increasing value in healthcare,” he says. “Physicians likely had less leverage when negotiating with insurance companies than did hospitals, due to the far less concentrated market for physician services than for hospital services.”

While physician prices are growing slower than those for hospitals, Craig says these prices are the result of negotiations between providers and insurers, and therefore reflect more than simply the underlying costs of providing care. In particular, the relative bargaining leverage between providers and insurers are an important determinant of prices. 

Theresa Hush, MPA, CEO of Roji Health Intelligence, a Chicago-based healthcare strategy firm, says hospitals have been able to negotiate higher rates with insurance companies, impacting the numbers the study found.

“Increased hospital pricing reflects the greater negotiating power that consolidated hospital systems now have with insurance companies,” she says. “Several studies of healthcare consolidation show that larger systems, rather than creating economies of scale, have driven costs up. Consolidation has increased investments in electronic records and medical technology, the acquisition of physician practices, and higher administrative costs.”

And when consolidated systems have greater geographical breadth, insurers can’t easily walk away from negotiations because of demands for higher reimbursements. 

Powell says it’s not surprising that hospital prices grew faster than physician prices, as hospitals often have far more bargaining power. “There are many regions where hospitals are relatively scarce, and insurers must decide between contracting with them or limiting access to care,” he says. “Meanwhile, there are often multiple physicians providing services related to particular specialties in a given region.”

Additionally, physicians and physician groups may have affiliations with one or more hospitals. As a result, insurers may be able to provide an adequate network while being more selective in their physician contracting. Thus, hospitals have more bargaining power than physicians.

David Belk, MD, an internist in Alameda, Calif., notes that a major hospital might see several thousand outpatients and hospitalize a few hundred people each week, while contracting with at least a couple dozen insurance providers, each of whom pays a different rate for the thousands of separate outpatient and inpatient services that hospital provides. 

“Rather than trying to keep track of each individual payment, hospitals simply grossly inflate all bills and take what they can get from each insurance company,” Belk says. “Most doctor offices do exactly the same thing, just on a smaller scale. Since the payments to individual physicians are less chaotic than they are to hospitals, doctors aren’t pressured to over-bill by nearly as much.”

Christopher K. Lee, MPH, CPHQ, clinical solutions manager for Family Health Centers of San Diego, says a major reason physicians are impacting prices less is managed care penetration. 

“Under fee-for-service, physicians were paid for every service rendered. This incentivizes unnecessary, wasteful, and inappropriate care,” he says. “Under managed care arrangements, physicians are paid a capitation rate-that is, a per member per month fee-regardless of the number of patients seen or services provided in a given month. They are motivated, therefore, to only perform necessary services.”

Kyle Varner, MD, an internist in Toppenish, Wash., says hospital expenses are growing at an out-of-control rate because almost every U.S. hospital has a local monopoly. 

“In 35 states, it is essentially illegal to build new hospitals, and in the remainder of the states a mountain of regulation makes it nearly impossible even though it may technically be legal,” he says. “This means hospitals have all the power, and consumers have none.”

Why hospitals-not doctors-are driving up costs.

What’s driving healthcare prices? Not doctors

Welcome to Medical Economics' blog section

 which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The opinions expressed here are that of the authors and not Medical Economics.

The old saying you get what you pay for is generally true-except in healthcare. In America, though healthcare costs continue to rise, outcomes have gotten worse. Many lay the blame on doctors. However, the real culprits appear to be the executives at the top.

Apparently, the big money is not in providing medical care, but in overseeing those who do. Data show that while doctors’ pay has remained flat or declined in recent years, top executives at major health systems have enjoyed a considerable boost in compensation. And their ranks are multiplying.

According to one study published last fall, from 2005 to 2015, mean annual compensation for major nonprofit medical center CEOs increased 93 percent, from $1.6 million to $3.1 million. 

During that same time, these CEOs went from making three times more than an orthopedic surgeon to making five times more, and from making seven times more than a pediatrician to making 12 times more. This study was not the first to show that hospital management compensation frequently exceeds that of most physicians.

While this is not a world in which the person with the most years of schooling wins, something is amiss when our nation’s most highly educated individuals make one seventh of someone with half the education. These top hospital executives make multiples more despite never having touched a patient, ordered a test, made an incision, or shouldered the responsibility-and liability-of signing a patient chart. If they work at a nonprofit, they don’t even have stock shares on the line. They just get large, steady paychecks. Of course, the salary figures don’t tell the whole story. Top executives often earn much of their compensation in non-salary forms. 

Meanwhile, the average primary care physician earns somewhere in the neighborhood of $250,000 per year.

As the pay gap between doctors and administrators has grown, the number of healthcare administrators has also increased. Between 1975 and 2010, the number of U.S. physicians grew 150 percent, in keeping with the nation’s population. Meanwhile, the number of healthcare administrators increased 3,200 percent. The cost of that administrative burden today accounts, conservatively, for 20 to 30 percent of our healthcare spending.

Now, if patients were consuming more healthcare services and getting better results, maybe we could justify some of this. However, our consumption of healthcare services has been stagnant for a decade. What’s more, despite spending about twice what other high-income nations do on healthcare, our life expectancy has declined for the first time in 100 years. Meanwhile,  the cost of healthcare closes in on 20 percent of GDP and shows no signs of slowing. 

The answer to getting more affordable care and better results does not lie in paying doctors less. It lies in paying administrators less, and having a lot fewer of them. 

is the executive director of the Association of Independent Doctors.

The answer to getting more affordable care and better results does not lie in paying doctors less. It lies in paying administrators less, and having a lot fewer of them.

Time to address the widening pay gap between hospital ­execs and physicians

The challenges to sustaining a successful medical practice are numerous-declining reimbursements, government regulations, and third-party interference, among others, all play a role. But even in the face of these obstacles, many practices continue to hold their own financially. When asked about the financial state of their practice as part of the 

 2019 Physician Report, 22 percent of respondents said their practice is doing better than a year ago, 52 percent are doing about the same, and 26 percent are doing worse.

So what makes the difference between a booming practice and one stuck in neutral, or worse? The majority of physicians doing better than the previous year attributed their success to seeing more patients, enabling them to increase revenue. Yet many physicians work long hours already and wonder how seeing more patients or making other operational changes is even possible.

As a starting point, physicians should figure out where their practice ranks compared to others of their size. “Look at the financials and benchmark them to get an idea whether you are performing as an average practice should,” says David Zetter, CHCC, CHBC, senior healthcare consultant for Mechanicsburg, Pa.-based Zetter Healthcare and member of the National Society of Healthcare Business Consultants (NSHBC). Look at the number of patients seen per day, the average reimbursement levels, and revenue per provider to figure out where the practice is lagging. 

Once physicians know where to focus their efforts, financial improvements can often be generated by increasing staffing, improving productivity, embracing value-based care, or renegotiating payer contracts.

Add staff to increase patient capacity 

Adding staff can increase patient capacity. And while it means higher operating costs, in many cases, the extra help pays for itself in multiple ways. Sterling Ransone, MD, FAAFP, a family physician in Deltaville, Va., had reached a point where he couldn’t see any more patients in a day. When he couldn’t find another physician willing to relocate to the area, he opted to hire a nurse practitioner instead. Now, he is able to focus on more of the chronically ill patients who require complex care. 

“For us, it was mainly about capacity, because when we didn’t have [a nurse practitioner], we were super busy,” says Ransone, whose wife is also a physician in the practice. “Part of the benefit to me is knowing that patients get to see someone and that I’ll be involved in the mix for their care. It’s been well worth it to my personal bottom line.”

This includes the benefit of having more time with his family during non-business hours. “In the early years, I took calls 24/7,” he says. “Once we started hiring midlevels, they could take some of the calls for us, freeing us to travel with our kids or be places the phone doesn’t reach.”

Similarly, Marc Price, DO, a primary care physician practicing in Malta, N.Y., found that whenever he took time away from the office, he was losing money because there was no patient revenue being generated. Adding a non-physician provider has helped with office efficiency and finances, even though those weren’t the only reasons he made the hire.

“I hired one not specifically for revenue, but more for lifestyle and service to patients,” says Price. “When it comes to income, they make more than what you pay them.”

Price says the physician assistant helps him keep up with patient messaging, prescription refills, lab reports, and other administrative duties, freeing up more of his time to spend with patients. 

Another staff addition that can pay for itself is a scribe. Ransone has been using one for 15 years, and says he went from averaging about 20 patients per day to 23-24, with between 22 and 23 being the break-even point on cost.

“The length of time required for any one patient was shortened and all the extraneous computer stuff was being done by someone else,” says Ransone. “I could get in more patients and wasn’t spending all my time following up on referrals and other administrative tasks. It’s been as good for my patients as it has been for my sanity.”

Larry Brooks, AIA, principal of Practice Flow Solutions in Roswell, Ga., and member of NSHBC, says that patients want an efficient visit, and a scribe helps accomplish that not only in reduced wait times, but also in patient satisfaction.

“Using a scribe, a doctor can spend eight to 10 minutes with eye contact,” says Brooks. “A patient feels a lot better about that than a 15-minute visit with the doctor looking at a computer one-third of the time.” 

When looking at staffing that can boost revenue, don’t forget about billing, says Zetter. “Not following up on denied claims or unpaid claims can be costly,” he says. “Revenue growth is about understanding the whole practice-can you add patient revenue, ancillary services, or something like chronic care management [CCM]? If you have a patient population that needs CCM, bringing in another staff member to handle the paperwork for that is a no-brainer to get that $40 a month per patient.”

Experts say there are often pockets of wasted time in a physician’s schedule or inefficiencies in how patients flow through the practice. Eliminating these means more patients can be seen during the workday.

A small practice using a receptionist to triage patients might not have time to check in patients if the phone lines are busy. Or maybe vendors or drug reps are tying up the time of the front desk staff, even to the point where the doctor is coming out to talk to them for a few minutes. That time isn’t accounted for in the schedule, so it quickly creates backlogs and reduces the number of patients that can be seen in an average day, says Zetter.

Brooks says doctors often spend their time on non-productive tasks, such as walking a patient out after an appointment or trying to figure out which patient is next in line to be seen. And if the office space is laid out poorly, the doctor can waste time walking between exam rooms. 

“These are all small things, but if you are doing them 30 or 40 times a day, eliminating them might save enough time for another office visit,” says Brooks.

An optimal design for a practice with four exam rooms is two rooms across from each other, not four in a line. That cuts down the amount of time the doctor spends going from room to room. The layout should also help patients navigate their way back to the front desk without the need for an escort, so the doctor can quickly move on to the next patient, says Brooks. 

Poor scheduling can also contribute to practice inefficiency. Too many patients with chronic conditions scheduled together can create backlogs, while too many patients with simple problems can create gaps.

“There’s a fine line to getting the right type of patient mix at a rate that keeps the doctor busy,” says Brooks. “Make sure there are always one or two patients ready, not six or eight waiting an hour.”

Increase revenue with value-based contracts

As Medicare and private payers continue to incentivize value-based care, experts say physicians need to understand how these contracts can benefit their practice. “If you have Medicare patients, you have the ability to gather information right now on some of the value-based principles and measures Medicare is looking at,” says Zetter.

Assemble the information and compare it to similar practices to evaluate practice performance. Then go to each payer and ask if they have any quality-based incentives appropriate for the practice. 

When potential earnings have been determined, practices can make a return-on-investment calculation based on how much work is required to collect and report the data. “If it makes sense, go ahead and sign up, because you might be able to earn several thousand dollars a quarter, with no cost to sign up,” says Zetter.

Price’s practice takes part in the Medicare Shared Savings Program’s Comprehensive Primary Care Plus model, is a Level 3 Patient-Centered Medical Home (PCMH), and has one value-based contract with an insurer. “Don’t pass up value-based opportunities or think they are too daunting,” says Price. “Look at how you can do it with maximum efficiency and capture the rewards.” 

Obtaining certification for PCMH status can be costly, but Price found a program from an insurer that would pay for the transformation of his practice. “They paid the fee and I reap the benefits,” he says. 

Many risk-sharing contracts will require either adopting an Alternative Payment Model (APM) or becoming part of an Accountable Care Organization (ACO), says Pam Ballou-Nelson, RN, Ph.D, principal consultant with the Medical Group Management Association. She says researching any potential partners is vital.

“The way to lose money in a value-based contract is to join any group and not understand how they are structured or how they are making sure care management and coordination are done so they can share savings,” Ballou-Nelson says. 

Practices must study patient data to understand how to succeed in value-based care, no matter the practice model. “If your EHR cannot produce data or registries and can’t produce outcome data, then you can’t improve what you are doing,” Ballou-Nelson points out. “If you are paid on controlling the risk of a population, you better know what the risk scores are and make sure those patients get into the office and do everything they need to do.”

Physicians who think they can’t negotiate better payer contracts are usually wrong, says Zetter, but it takes preparation. “Everybody can negotiate. Many people don’t because they don’t think they have any leverage,” he says.

Leverage starts with understanding the value the practice offers the payer. Ballou-Nelson says practices have to evaluate their patient data so they can tell a story about what they bring to the payer, pointing out how they excel in areas that the payer values.

“If you are not bringing value to the payer and understanding what the payer needs you to report on, you are of no value to the payer,” she says. “Look at payers’ report cards on you. If you are not doing a good job in the metrics that are important to them, there is no reason they would give you a better contract.”

Zetter suggests examining two years’ worth of claims data. In some cases, this will reveal that a practice isn’t executing the financial basics, leaving money uncollected through denied claims or services that were billed incorrectly. “Fix the internal stuff first,” he says. “There is no reason to negotiate with you if you are throwing money away.”

Patient satisfaction is becoming a bigger factor in how payers view physicians, and if a practice isn’t measuring that, they may be missing out on leverage with payers, Zetter says. “A practice needs to find out what they need to do better with patients and act on it,” he adds. “If you have high scores on surveys, payers love that.”

If physicians want to improve their practice finances and be successful, they also have to improve their attitude, says Ballou-Nelson. “Doctors that feel they are victims of the system or of payers are often the ones struggling,” she says. “Those with more optimistic views on how to make changes based on the reality of the landscape are the ones that tend to be more successful. I worked with a physician who was struggling and his attitude was, ‘It’s all a game.’ Well, if you don’t play the game, you are not going to get the money.”

Plotting a financial path to practice success

Physicians who own their own practices can enjoy a work-life environment that likely can’t be found if they were employed by a physician group or hospital system.

But the question of how much a physician practice owner should pay him or herself isn’t as easy to answer as it might seem. There are many factors that the owner must take into account, physicians and other experts say. 

Physician practice owners have to understand they are business owners and revenue generators, says Kenneth T. Hertz, FACMPE, principal consultant for Medical Group Management Association (MGMA) Health Care Consulting Group. “As business owners, they have to step back and look at the practice from that point of view.” 

Doctors prefer not to think of themselves as businesspeople first. “But it is often said, ‘no money, no mission,’” says Salvatore Volpe, MD, a practice owner in Staten Island, N.Y., and

 editorial advisory board member. “I’m trained as a physician, but I’ll go belly up if I don’t think like a businessman.”

Sometimes, thinking like a businessperson means taking a reduction in salary, paying themselves last or taking no salary at all for a period of time. There is the staff to think about; overhead costs, such as lease, utility and malpractice insurance payments; and investments in equipment needed to keep the practice up to date. 

“There is no doubt that some practice owners resist the idea of paying themselves last,” Hertz points out. “The reality is that practice owners have to pay the staff first. Owners get paid last.”

 editorial advisory board member who runs a family practice in Randolph, Wis., agrees.

“I think of my employees’ salaries as being a fixed cost, comparable to the mortgage,” Lucarelli says. “There would never come a time when the mortgage isn’t paid. It’s the same with staff salaries. If I can’t afford to pay my staff, I have a problem.”

Once a practice is on sound financial footing, there are many variables, foreseen and unforeseen, that play a role in salary, says Jeffrey Kagan, MD, a majority owner of a two-physician practice in Newington, Conn., and 

“The lifestyle of physicians is a factor, as is the type of practice they want,” Kagan points out. “It also depends on how many patients owners want to see on a daily basis and how much time they want to spend with those patients.”

To keep the other physicians in the group and staff happy and to be sure there is ample revenue to reinvest in the practice, owners should always have a salary plan, Kagan says.

In anticipation of the next year, Kagan says, his practice’s accountant creates a budget based on the revenue from the previous two years. Since salary is partially based on productivity, two years is taken into consideration so if Kagan or his partner don’t produce as much revenue as expected, the decrease in income is more gradual, he
	explains. 

At the same time, the accountant tries to predict whether practice expenses will be higher or lower for the coming year. Kagan bases the amount of salary he will receive on this forecast. 

“If we know we have a costly capital expense coming up, we add that to the calculation,” he says. “As we go through the year, we’ll give ourselves bonuses if there is extra money. If there’s not enough money, the partners miss a paycheck. 

“The staff always gets paid,” he adds. “But there have been times when our physicians miss a paycheck. We take a check every two weeks, so sometimes there will be a month where we only get one check.”

Their accountant reviews the practice’s numbers each quarter. “As we go through the year, if there is extra money, we bonus ourselves,” Kagan says. “If there is not extra money, we miss a paycheck.”

Dave Gans, MSHA, FACMPE, senior fellow, industry affairs for MGMA, says physicians who own their own practices don’t receive salaries in the traditional sense.

Instead, physicians take what is called a draw, the revenue that’s left after practice expenses are calculated. The owner takes a percentage of the excess revenue on a predetermined bi-weekly or other periodic basis with occasional adjustments based on the practice’s financial statement. 

The amount of the draw is based on the profits, not the percentage. The percentage is based on the number of shareholders or partners and whether the shareholders or partners have equal or unequal shares of the business. For example, if four doctors are equal partners, each will take one-fourth of the excess, if there are three partners, each will take one-third.

“You want to be able to pay salaries within the context of [the practice’s] market,” Gans says.

The owners’ draws are the same as a salary, and they can choose the timing for when to reconcile their periodic biweekly or monthly draws to the total profits. Most practices do this quarterly, so they can adjust their draw higher or lower to avoid a “December surprise.” 

However, there is no reason why the owners couldn’t choose to wait until the end of the year and take the distribution as a single payment, Gans says. As to leaving the profits in the business, the legal organization determines whether this is possible.

Lucarelli, who has run her family practice since 2001, says a financial consultant advised her early on that her salary should be within the market range. 

“It doesn’t mean you pay yourself the highest amount of money for your particular type of practice in the region,” she says. “But you can put yourself in the ballpark of the average salary.”

Since opening her practice, Lucarelli says, she reviews regional salary surveys and adjusts her pay accordingly. A good source to reference, she says, is Doximity’s salary survey, which is broken down by region and metropolitan area.

In a short period of time, physicians can go from residency to owning a practice with a six-figure salary. Thus it’s important to have a good financial strategy, including a personal budget and retirement plan.

“I’ve seen practices where the partners are overextended through personal issues,” Hertz says. “When a practice gets into a difficult financial situation and money starts to get tight, you start to discuss salary. That’s when the personal financial needs of the individual physician rise up to a high level and get in the way of having reasonable discussions of what compensation ought to be.”

Starting and contributing to a “rainy day fund” is also important for times when reimbursements are slow and money becomes tight, Hertz advises. The fund can help owners avoid borrowing against the practice to meet payroll or monthly expenses. 

The easiest way to create a rainy day fund is for physicians and management to agree on an amount of money to set aside every month for future protection, Hertz says. This is similar to placing money in a savings account for personal finances, before it even makes it into your checking account. At the end of the year, absent any special needs or emergencies, the funds are distributed to physicians along the lines of the compensation plan.

Developing a budget for compensation is based on several factors, Hertz notes. The practice must understand the relationship between what the physician wants to earn and how hard they want to work. More work equals more production, more production equals more revenue, more revenue equals the ability to earn a larger salary. 

Researching industry normative data, such as the MGMA Physician Compensation Survey, is a good way to understand the relationship between productivity and compensation, as well as getting a good understanding of what’s happening in the industry.

The other piece of compensation is a pretty simple formula: Revenue minus expenses equals compensation, where expenses represent all the costs of running the practice. Since physician owners are paid last in a very simplistic way, they receive what is left at the end of the day, Hertz says. “This is why financial planning is so important,” he points out.

The practice itself has to be a consideration. “An owner can’t drain the checkbook for a salary,” he cautions. “There won’t be anything left to cover unforeseen circumstances or for capital expenses.” 

Startup costs have a bearing on salaries 

Opening a practice is just like opening any other type of small business. There are capital expenditures – purchasing equipment, renting space, hiring staff, etc. – that will impact how long before the practice becomes profitable.

Typically, physicians won’t initially take a salary if they’re investing in a new practice, says Erik Doerr, CPA, partner and tax manager for Enestvedt & Christensen, LLP of Burnsville, Minnesota. They are allowed to loan the company funds to cover initial startup costs. As revenue increases and physicians see the need to continue to invest, they can continue to loan the business money if they don’t want to borrow it.

There are capital contributions and loans from investors or owners. In a single-owner operation, it’s easier to call it capital contributed to the business instead of a loan, Doerr says.

“We typically recommend that capitalization is done by utilizing a low stock purchase with one or more promissory notes.” he says. “When a profit is generated, those notes would be paid off. The cash can be taken out of the business as a repayment of those notes instead of a distribution or draw.”

New practices typically lose money for at least the first one to two years while they build a patient base and invest in operations, Doerr says.

During that time, practice owners have control over how much salary they can take. However, Doerr points out, practice owners are allowed to skip taking a salary where there is a reasonable basis for doing so.

“I normally recommend that owners avoid taking a high, regular salary until the business becomes profitable,” he says. “Taking a salary on day one when you’re not profitable does not make sense.”

“If a physician elects not to take a salary, they must ensure that they have adequate savings to fund the business, as well as their personal financial obligations,” Doerr adds.

There are many variables to consider for physicians contemplating their own practice. The first consideration should be to establish reasonable expectations. Then, create a vision and plan for how to proceed – “mapping out the road you want to travel,” says Kenneth T. Hertz, FACMPE, principal consultant for Medical Group Management Association (MGMA) Health Care Consulting Group.

“It can be tremendously rewarding [owning a practice],” Hertz stresses. “But it will be hard work. It absolutely can and will be rewarding if done properly. And the physician can build wealth.”

How much should practice owners pay themselves? 

Best practices in setting your own salary 

In Texas, a primary care physician working in a Denton County clinic discovered she was being paid $34,000 less per year than a male physician who performed the same duties. She questioned the matter and was later fired by administrators, who cited poor job performance.

The Equal Employment Opportunity Commission (EEOC) brought the doctor’s claim to federal court. In a resolution reached late in 2018,  a judge ordered the county to pay the female doctor $115,000 in damages and to correct its compensation policies. 

In spite of numerous equal-pay regulations and ongoing EEOC enforcement, female physicians are chronically underpaid compared to their male counterparts. 

“For every specialty and every geography, there is a significant gap,” says Christopher Whaley, Ph.D., an adjunct assistant professor at the University of California, Berkeley School of Public Health, who has studied the gender pay gap.

 found in its survey of primary care physicians that female physicians reported a median annual income of $175,000, while male physicians reported an income of $275,000. In other words, the women surveyed earn 63 cents for every $1 that men earn. At the highest end of the pay scale, 10 percent of male respondents say they earn $500,000 or more compared with only 3 percent of female respondents.

These results are similar to other industry studies, including one conducted in 2017 by Doximity, a social network of medical professionals. In its study of more than 65,000 physicians, the organization discovered that industrywide, women earned 27.7 percent less than men. When examined by specialty, data provided to 

 show  women family medicine doctors earn $212,535 annually, or about 83 cents per $1 that their male counterparts earn. 

Based on the dollar figures reported in the surveys, it’s clear the lost lifetime earnings for a female physician can add up to $1 million or more. Whaley, who was the lead author on the Doximity study, says it’s surprising that medicine-with its intensive education requirements and high standards applied uniformly to all professionals-would demonstrate such wide discrepancies in compensation between men and women.

“It’s not as if a woman in the study sample had inadequate training,” he says.

The Equal Pay Act of 1963 was the first law making it illegal for employers to pay women less than men for doing the same job. Subsequent state and federal rules have aimed to reinforce pay equality, but the regulatory stick hasn’t been enough to level out earnings. Census Bureau data from 2016 show America’s working women are earning just 80 cents for every $1 that men earn.

Implicit bias is often to blame for the historic pattern of discrimination, experts say. For example, women are less likely to be  perceived as family breadwinners or as loyal workers willing to put in long hours, says Theresa Rohr-Kirchgraber, MD, FACP,  executive director of the Indiana University National Center of Excellence in Women’s Health and a chief physician executive at Eskenazi Health. Rohr-Kirchgraber has studied gender pay gaps for years. 

She advises female physicians-many of whom are in fact the breadwinners in their households-to avoid talking about personal issues at work. If a woman declines a meeting invitation because of childcare concerns, for example, it’s in her own best interest to skip the explanation. Talking about outside demands can give the impression that professional duties aren’t a priority.

“It set us up to look as if we’re not as enthusiastic about our jobs,” Rohr-Kirchgraber says.

Yet she doesn’t believe men in medicine are deliberately acting with a gender bias, or worse, encouraging it to gain their own financial advantage. “There is plenty of work to go around,” she says. “Guys are just as confused as women as to why this is happening.”

Another reason for pay gap's persistence is that organizations often keep workers’ salaries and bonuses confidential. Without that data, women can’t quantify discrimination, making it  extremely difficult to address.

Sharona Hoffman, JD, LLM, professor of law and bioethics at Case Western Reserve University School of Law in Cleveland, says women in medicine need to start asking questions and advocating for transparency. “It might seem impolite, but if women are serious about closing the pay gap, they need the data,” Hoffman says.

Ana MarÃ­a LÃ³pez, MD, FACP, president of the American College of Physicians (ACP), says even if an organization won’t reveal comparative compensation data, physicians have a responsibility to do their own research. Other factors determine pay, such as regional market differences, years of experience, or hours of clinical time in proportion to other professional duties. Such data can build a case for negotiating higher pay.

“At my first job as an assistant professor, I remember being told my starting salary,” LÃ³pez says. “I just said 'thank you,' and I had no idea that I could have done research and negotiated anything.”

She recommends that physicians explore data from the American Association of Medical Colleges to get a general idea of salary ranges. Additionally, academic medical centers tend to have some safeguards in place to ensure equal pay, so they can be a source of benchmark data, she says.

In May 2018, the American College of Physicians published a position statement in the 

 addressing equal pay. The statement supports a number of solutions, including increased transparency in compensation data, training to reduce implicit bias, and requirements that women be included on boards and committees. 

“We need more inclusive decision-making bodies to come up with better solutions, including moving equity from a lofty goal to something that we practice,” LÃ³pez says.

Conversations about pay don’t have to be confrontational. It makes sense during annual reviews or contract renewals for female physicians to ask whether the organization is at least aware of any gender pay gaps, Hoffman says.

“They might not tell you the truth, and they might squirm a little bit,” she says. “But you have shown that you’re sensitive to the issue.”

Women who suspect gender discrimination can file a complaint with the EEOC, but it’s difficult to prove without supporting data, according to Hoffman, who worked for the EEOC from 1992 to 1998 as a senior trial attorney.

“I don’t remember a single case that was purely pay discrimination, and that’s because it’s very difficult to get that information,” she says. “It’s hard for an employee to show evidence that she is earning ‘X’ while her male counterpart is earning more.”

Why female physicians make less, and how to fix it. 

April 25, 2019 edition

Virtual care is best performed through an established patient-physician relationship

90th annual Physician Report

Your voice: Give patients control of medical records

What’s driving healthcare prices? Not doctors

Time to address the widening pay gap between hospital execs and physicians

How to drive revenue growth in your medical practice

Best practices in setting your own salary

How to close the physician gender pay gap

Entertaining patient wait times

90th annual Physician Report: Salaries stagnant, declining for most doctors

90th annual Physician Report: How much doctors spend on malpractice insurance

90th annual Physician Report: Despite challenges, doctors remain productive

90th annual Physician Report: Who took our survey

90th annual Physician Report: Uncompensated tasks stalling practice growth

April 25, 2019 edition

Virtual care is best performed through an established patient-physician relationship

90th annual Physician Report

Your voice: Give patients control of medical records

What’s driving healthcare prices? Not doctors

Time to address the widening pay gap between hospital ­execs and physicians

How to drive revenue growth in your medical practice

Best practices in setting your own salary

How to close the physician gender pay gap

Entertaining patient wait times

90th annual Physician Report: Salaries stagnant, declining for most doctors

90th annual Physician Report: How much doctors spend on malpractice insurance

90th annual Physician Report: Despite challenges, doctors remain productive

90th annual Physician Report: Who took our survey

90th annual Physician Report: Uncompensated tasks stalling practice growth

Time to address the widening pay gap between hospital execs and physicians