Chapter 3 Index

A. The Business of Private Practice
--Interviewing for Private Practice
--Negotiating Contracts for Pediatric Practice
--Managed Care
--Managed Care: A Second Look

Money Pressures in Pediatric Practice

Introduction: I have heard a number of residents about to go into practice indicate that:

A. They want to make a big salary and have a lot of benefits.

B. They do not want to join a practice, which is ruled by “the almighty dollar.”

Managed care makes this situation worse, but the following summarizes the major monetary issues facing private practitioners who must have their productivity be at least double their overhead ie why they must be business people as well as doctors.

I. Overhead:  Most Pediatricians Try and Get Their Overhead Less Than 50%. Overhead is easier to keep down in smaller practices with modest offices.

1. Employees: How many employees do you need and how much do you pay them?  In order to staff our office 14 hours a day 7 days a week, we had 50 employees.

The following is not meant to be accurate in the number of dollars, but to give an idea of cost of having employees.  Employees are always paid before the doctors.

* Fringes for Employees Include: medical insurance, life insurance, pension, and profit sharing plan (percentage of income), disability insurance, dental insurance, malpractice insurance, meetings, Christmas bonuses, free medical care for their children, Hepatitis shots, Flu Shots, vacation days, sick days, maternity leave.

** For new doctors: higher salaries and more fringes: e.g. moving expenses, telephone, car allowance, more money in the pension/profit sharing.

2. Rent/Own Building You Practice In: Less of an issue since so many hospitals have bought practices recently.  However, this is just like a mortgage: the rent must be paid before doctors get paid.  Office needs to be cheery, well-outfitted and near hospital.

3. Equipment - For Lab, For Doctors: e.g. should there be an otoscope in every room?  If have a lab, do you get the more expensive or less expensive CBC machine? 

4. Office Equipment and Repairs: Furniture, wallpaper, rugs, etc.  Major expense: e.g. we spent $25000 on our office in my last year there.  Toys disappear, furniture destroyed, etc. Telephone system, Computer system: huge amounts go for these things.

II. Productivity: How Many Patients and What is Collection Rate?

Even though managed care dictates who can and cannot come to the office, most practices still make money from their private pay patients.  Collection rate needs to be over 95%.

Hospital patients: no overhead for doctor: this is why some overadmit.

Key: Somehow you must always keep patient care more important than money!

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Department of Pediatrics  |  Medical College of Georgia
Please email comments, suggestions or questions to:
John T.  Benjamin M.D.,  jbenj@mcg.edu

February 27, 2004