Practice Management Q&As

March 18, 2005

Lab fees; splitting overhead; embezzlement protection

Marking up fees for lab workQ The group I belong to has negotiated discounted fees with the lab that handles most of our work. Must we charge patients or their insurers the negotiated rate we pay the lab, or can we charge more?

A If your state allows it, you can charge your commercial fee-for-service patients more. Check with the medical society, the lab, and your indemnity insurers. If the law doesn't prohibit markups on lab fees, your contracts may. And, of course, charging patients more isn't an option when the payer is Medicare, Medicaid, or a managed care plan that pays the lab directly or specifies what patients must pay.

If you are allowed to charge more, make sure your additional fee represents your office's processing fee. Our experts caution against just tacking on an extra amount as pure profit.

A Sue the patient and the insurance company. Depending on your state, the insurer may be held liable for the entire amount owed you if the patient doesn't reappear. Next time, get a lien or letter guaranteeing payment, signed by both the patient and his lawyer, before you accept the patient for treatment.

A fairer way to split overheadQ Two of our six FPs spend only 10 hours a week in the office. They put in the rest of their work time in hospitals and nursing homes. But the practice's staff handles all of their phone calls, faxes, mail, managed care referrals, and credentialing. These tasks are labor-intensive and time-consuming, often requiring our nurse's expertise. How should we allocate overhead to these two doctors?

A Decide which expenses are fixed and which are variable. Everyone should share fixed expenses equally, but variable expenses should be allocated based on use. Rent, for instance, is usually considered a fixed expense (although you could split it according to, say, the number of office hours worked). The use of clinical staff and supplies, on the other hand, varies from doctor to doctor. If you find that your staff spends 25 percent of its time working for those two doctors, allocate the cost of staff salaries and benefits accordingly.

Another protection against embezzlementQ Should our practice bond the employees who handle money?

A Absolutely. Bonding is both a theft deterrent and a guarantee that stolen funds will be replaced (provided you can prove to the insurer that your practice has appropriate safeguards against embezzlement). Considering how inexpensive premiums are, it's a small price to pay for a measure of financial security.

Alternatives to restrictive covenantsQ My state doesn't enforce restrictive covenants. What can I do to make sure the young physician who will soon be joining me won't leave and set up shop across the street?

A If your state allows it, you may establish liquidated damages-a sum the new physician would have to pay you if he left the practice. The amount should be enough to compensate you for helping him get established. But it shouldn't be so large that he'd feel compelled to stay in a situation that's not working out, or to challenge the agreement in court.

Another way to prevent an ex-employee from opening a competing practice might be to include a clause in his employment contract that reduces or eliminates payouts he'd otherwise be entitled to for accounts receivable, goodwill, and other assets. You could also include a nonsolicitation clause that covers patients, employees, and managed care contracts.