In our last post, we discussed the basics of what you need to know about a multispecialty practice. Beyond the basics (and after doing quite a number of these, I can tell you that it is that basic). From there, you need to properly set up your financial relationship with the specialist(s) working in your office.
There are several ways to do it, but the most successful fall into 2 different categories, each with varying levels of involvement and risk to you as the owner doctor.
The renter
Here, the specialist comes in to treat his or her own patients on your dark days and pays you a daily rent for the privilege of using your space, equipment and utilities. Rent typically runs $300 - $400 per day. In this arrangement, the specialist’s patients are his/her own, uses his or her own computer systems and any funds collected from those patients belong solely to that specialist. The specialist also agrees to keep the office clean and the equipment in full working order – among other terms. As the owner doctor, you simply collect the rent. If the specialist sees 1 patient or 50 patients per day, you collect the same daily amount.
This differs a bit from the straight sublease deal because of the number of sharing arrangements that arise from these types of deals.
In many cases, the parties involved agree to share common supplies (cotton rolls for example) – while the specialist is responsible for any supplies specific to the tasks he or she will perform. If supplies are shared, there is an additional daily charge, maybe $50 per day. You may have a desire to make that number more accurate by charging for actual supplies used or basing the charge on the number of patients seen each day. That can lead to accounting headaches over relatively small sums of money. Coming up with a fair, flat charge eases that burden.
You may also allow the specialist to utilize the services of the front desk person that would have been at the office on nonpatient days anyway. You are generally reimbursed actual cost for those cases.
Finally, you may also include the specialist on your advertising (if they get patients, that means more potential referrals for you). In this case, simply charge the specialist a piece of your advertising cost depending on how prominent that specialist is mentioned.
The incentive-based contractor
In this case, the doctor comes into your practice on dark days and potentially some regular patient days if space is available. The patients belong to your practice and you set all prices. You bring them into the practice with your advertising or from your regular referrals. But they need treatment from the specialist too and you offer the patients the convenience to be seen for that procedure in your office. All funds collected from patients come to your practice and the specialists are compensated based on the procedures they perform. Two main questions arise:
-Should the specialist be paid based on production or the amount of funds collected from the patient? Obviously, these amounts can differ, especially when insurance is involved.
-Should the specialist be paid when the procedure is completed or when funds are collected from the patients?
To answer this, let me give you my own personal experience. In our practices in Mexico, for reasons of simplicity, accuracy and superior matching of revenue and expenses, we recently changed our system to pay specialists based on the amount collected and we pay them when funds are collected from the patient. Even if the procedure is not completed and the patient makes a partial payment, we pay the specialist. To this point, we have not experienced a problem with a specialist quitting treatment on a patient because he or she received payment early. The reason is because of the ongoing relationship built with the specialist. If our advertising gives the potential for 15 new patients to be seen per month, why would you stop treating the 2 or 3 that have paid in full? That would jeopardize your opportunity to treat and earn income for all of those patients.
Basing compensation on collections aligns your interests more closely with those of the specialists as well. In the end, you want to collect the funds due to the practice. Bunches of production with no income present a sure path to failure. When the specialist is compensated based on collections, he or she becomes much more motivated to assist the practice in ensuring that funds are collected. This means making sure that insurance paperwork is accurate and helping the staff to communicate with the patient about the importance of timely payment.
As far as the percentage of collections to pay, most arrangements I see fall in the 30-50% of collections range. This is generally dictated by the supply of specialists available. If plenty of specialists are vying to fill a role that you have made available, you can pay a lower rate. If you really want a particular specialist or there are a shortage of them, you may be required to pay a higher rate. There’s not really an exact science to this. Obviously, you want to pay a percentage that still allows you to run your practice profitably. If the percentage is so high that the specialist cost plus your overhead means you are losing money on every patient, it means that you are better off not offering that service to your patients.
One important item to note: if you are paying the specialist based on collections and you offer a discounted fee to your patients in your advertising, you may get some push back from that specialist. For example, let’s say you have an implant doctor earning 40% of collections and you decide to discount a $2,000 fee to $1,500 (a 25% discount) for a promotion you are running. That doctor’s income per patient then gets cut from $800 per case ($2,000 * 40%) to $600 ($1,500 * 40%). The implant doctor may be unhappy with this arrangement. In some cases, the owner doctor will agree to pay the specialist based on the full price. If you do this, please make sure to take that into account when coming up with the reduced fee amount. Again, you do not want to make an offer that will cause you to lose money for each patient seen.
Finally, you may want to treat the doctors as regular employees earning a flat salary under this arrangement. These typically don’t work as well unless the doctor is agreeable and you have a substantial volume of patients to provide to that specialist.
Which to choose? Ceteris parabis (liability issues included), it really depends on how involved you want to be with the specialists. Some doctors will say that they don’t really understand the implant business, or general dentistry or whatever the other specialty is. They simply want additional income and not the additional administration involved in incorporating new specialties. You also have a more stable income stream. That would call for the renter arrangement. Others want to incorporate the specialists more fully into the practice. This creates some new issues related to marketing the practice both in attracting new patients and during the consultation. We’ll tackle that next time here at MyPracticeEngine.com.
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