Weigh your options, and do the math when adding a new provider

June 10, 2013

Physicians with busy practices need to carefully consider whether to add a new provider, and if so, whether the provider should be another physician or a midlevel.

It seems like a good problem. Your practice is so popular that new patients can’t get in fast enough, and your established patients are clamoring for appointments. While you try your best to accommodate everyone, your family and staff complain that the practice’s work hours are being stretched.

Eventually, you conclude you need to add a provider to keep up with demand. But then the question arises, do you add another physician, or bring in a midlevel provider, such as a nurse practitioner or physician’s assistant?

Chances are your patients would prefer to see a physician, and a physician can bill at a higher level than a midlevel.

On the other hand, a physician will also command a higher salary than a midlevel. If you’re in solo practice you may not have the space to accommodate another physician. And if the new physician doesn’t work out, terminating his or her employment can be awkward and bring negative attention on the practice within the community.

If you don’t want to add another physician, a midlevel may be a viable alternative. Midlevels bill at a lower rate-most payers reimburse for 80% of what they pay an MD.  A midlevel can help free you from some routine patient management and phone work, and allow you to use your time more productively. The midlevel might, for example, focus on chronically ill but stable patients, leaving you time to see patients with more complex problems and/or acute same-day needs. And the potential problems stemming from dismissing a midlevel are less severe than with a physician.

The drawback of adding a midlevel is that it may cause unhappiness among some of your patients who had been used to getting their care from you, which may cause some of them to leave. Also, some managed care contracts do not allow for midlevels, so be sure to check that yours do before bringing a midlevel on board.

What will a new provider add to your practice’s bottom line? That will vary depending on your practice’s circumstances and the provider’s skills, experience, and efficiency, but the calculation is straightforward. Revenues will be whatever the provider bills for. Costs will be the provider’s base salary plus about 25% for insurance and taxes. You will also need to include supplies, an amount that is generally set at 6% of a practice’s collections. Whatever is left is additional profit to your practice.

Adding a new provider is among the most important, and difficult, decisions a medical practice owners face. Carefully weighing all the factors in advance can avoid harmful consequences later on.

The author is a principal with Practice Performance Group, La Jolla, California, and a Medical Economics editorial consultant. Send your practice finance-related questions to medec@advanstar.com.