PRACTICE FUNDA
Calculating physician fees requires market knowledge and flexibility
Physicians just starting out may not be certain of how to calculate fees for their medical services. While it is tempting to charge large fees in order to resolve debts and build a savings quickly, new physicians probably will not attract enough patients to sustain a clinic if their rates are too high. Conversely, setting your fees too low puts your clinic at risk of not covering expenses and going into further debt.
"I was the first subspecialist in my community and pegged my fees at 150 percent of what the internists were charging,” says Sanjay Kalra, MD, DM, consultant and head of the Bharti Research Institute of Diabetes and Endocrinology at Bharti Hospital. “Given another chance, I would begin at a higher rate."
Key Point: Calculating your fee requires a careful consideration of your personal financial goals, competitors’ rates, and your patients’ resources.
When calculating fees for your clinic, consider the following recommendations from experienced physicians:
1. Study what other clinics or private hospitals are charging in your area for comparable services and base your fees accordingly.
2. Do not overcharge, but setting fees too low may affect patients’ perception of your quality.
3. Patient feedback regarding fees can be helpful, but do not let it compromise your clinic’s financial health.
4. Reassess fees every year or two, then adjust for inflation and changes in the market.
A 10 to 20 percent increase once in two years is not a huge increase when you look at the starting point and inflation in India, which is 6 to 8 percent per year." - Thomas Alexander, MD, DM, FACC, FICC, FCSI, interventional cardiologist and head of the Division of Cardiology at Kovai Medical Center and Hospital in Coimbatore and a member of mdCurrent-India’sEditorial Advisory Board
Study the market
What other clinics and private hospitals are charging is not protected information or difficult to discover, says Thomas Alexander, MD, DM, FACC, FICC, FCSI, an interventional cardiologist and head of the Division of Cardiology at Kovai Medical Center and Hospital in Coimbatore.
Every couple of years, the hospital revises its charges—including consultation and procedure fees—usually based on input from the consultants and fees from other local hospitals. Fees can increase 10 to 20 percent between revisions.
"A 10 to 20 percent increase once in two years is not a huge hike when you look at the starting point and inflation in India, which is 6 to 8 percent per year,” Alexander says. For example, outpatient consultation fees at Alexander’s hospital were Rs.100 in 1993 when he joined and have only climbed to Rs.200. "However," Alexander warns, "those doing private practice outside a hospital setting can and do charge consultation fees between Rs.300 and Rs.500."
Consider patient financial situations
Physicians say they do not formally survey patients about what they are able to afford for medical services, or recall any objections when fees have been raised. Regardless, affordability should be a consideration, says Raghavendra D. Kulkarni, MD, professor and head of the Department of Microbiology, SDM College of Medical Sciences and Hospital, Dharwad, Karnataka.
"We want to offer services at a minimum possible cost to patients without incurring losses,” says Kulkarni, whose department typically charges 30 percent more than the actual material expenses for each of its tests. “It is always successful,” he continues. “Patients can compare the charges with those of other service providers. They are happy with what we are charging."
New physicians, especially, should be aware of what patients expect to pay for services. But be careful not to charge too little, says Pragnesh M. Vachharajani, MBBS, PGDMCH, a family physician in Ahmedabad, Gujarat, with a special interest in obesity and lifestyle-related disorders. "Patients underestimate physicians who undercharge," he says. "When you are new, you do not want to take risks."
Like most physicians and private hospitals, Vachharajani re-examines his fees every year or two, and typically raises them based on rates in his market.
"Now, after 10 years, depending upon patient feedback and following some leaders in the practice, I can afford to take risks and charge more for some services than my colleagues in the area,” he says. “It all depends on one’s growth and satisfaction.”
Find a balance
In the end, regardless of the method chosen to calculate your fees, experienced doctors recommend finding a balance between your personal financial goals, the market, and your patients’ financial resources.
“Try to minimize the profit margin,” says Kulkarni. “Do not expect too fat returns for the service component. We are doctors, not businesspeople."
(Available from: http://mdcurrent.in/business-of-medicine/calculating-physician-fees-requires-market-knowledge-and-flexibility/)
How to set fees for your medical services that are 'just right'
One of the great mysteries of medicine for patients is why doctors charge what they do. Some are amazed at the fact that bright young doctors are willing to work long hours for patients whom they do not know, for an income that is not bad, but that is much less than other professions such as bankers command.
Patients admire the fact that doctors are willing to work for 24 hours at a stretch and that they sometimes get up at 2 in the morning for emergencies. It can be an arduous lifestyle that disrupts the physician’s personal life – something that you can’t compensate for even with money.
On the other hand, many patients also feel that doctors charge too much. They envy the Mercedes that some doctors drive and the fact that they might take off an occasional Wednesday to play golf. Many resent the fact that they have to pay hundreds of dollars for medical procedures that may take just a few minutes.
Also, it’s a well-known fact that the fees charged by doctors can vary considerably – not only from doctor to doctor – but from patient to patient as well. Patients would be much happier if medical costs were transparent.
Key Point: Since you don’t learn how to be a business person in medical school, sometimes the operational aspects of running a medical practice can be challenging. In India’s free market, fees for the same services can vary wildly from doctor to doctor, and even from patient to patient. It’s important to charge consistently for your services and to set your fees low enough that patients can afford them, but high enough that you have plenty of operational funds with revenue left over to upgrade equipment and update your professional skills.
Inconsistent fee setting
The truth is that the amount that doctors charge can sometimes be a mystery even for doctors themselves. Many doctors are not very good business people, and the inconsistencies in the fees they charge reflect that.
Since doctors are used to working for free or very low wages during medical training and residency, young doctors often quite uncomfortable collecting fees for their professional services when they first start practicing. Most use market criteria to set their fees and charge what other doctors are charging. While this is a useful rule of thumb, in many cases it can be too much—while in others, it’s too little.
Many doctors who are idealistic when they are young charge enough to make a comfortable living so that they can cover their expenses and still have enough to keep the family happy. This is easier to do in smaller towns in India, but it would be extremely difficult in the United States, for example, where doctors often start their practices often owing hundreds of thousands of in debt from medical school.
Even some experienced doctors who are financially quite comfortable are willing to charge just enough to cover their costs, especially if their practice overheads are low. They charge enough to cover their staff salaries and electricity costs for example, but they often end up underpaying themselves. Ironically, even though these doctors charges less because they feel that they don’t need much money to be contented, the disadvantage of charging low fees is that it often mistakenly conveys to patients that the quality of services may not be as good.
This is why it’s quite common to see an escalation of prices. Once one medical clinic in a region increases its fees, the others often do so as well to toe the line. This can be true in the other direction as well—if one doctor drops his or her prices, many others will do so as well in order to stay competitive.
Market considerations
Some doctors who are savvy business people take a pragmatic viewpoint. They conduct an informal market survey to determine how much patients in their community are willing to pay for their services – and set their prices accordingly.
Some doctors will deliberately charge higher fees than the competition. This is especially true for senior doctors, who often feel that they have earned the additional income because of their experience and expertise. Others do so because they want to create an air of exclusivity about them, because they know that patients often misinterpret high fees as being equal to a better quality of service.
This approach is especially prevalent in fields such as cosmetic surgery, where nearly all patients pay directly for their services, and there is intense competition for patients. Some doctors deliberately charge a premium, not just in order to maximize their income, but to attempt to convey that they are better than the rest. However, higher is not always better. On the other hand, lower fees are not always a bargain, either.
International trends
In industrialized countries such as the United States where third-party payers dominate the market, the ability for doctors to set their own fees is practically zero. They pretty much have to charge what a government-run insurance plan or private payer is willing to offer. As medical insurance becomes more common in India, this trend may become more common here, too, with the insurance companies starting to call the shots.
In regions such as the United Kingdom, which have nationalized health services, doctors do not have to determine how much to charge, because this is a decision that is taken out of their hands. For many doctors, this can be a blessing.
Doctor and business person
While many doctors pride themselves on their professional skills and take pride in the fact that they couldn’t be bothered about money, the fact remains that medical private practice is also a business, and unless doctors learn how to charge the right amount for their services, they will often end up underpaying themselves.
In the long run, undercharging for your services may mean that you won’t be able to invest in updating your professional skills or buying state-of-the-art equipment, both of which can enhance the medical care that you provide. You could then put yourself at risk of losing patients to corporate hospitals, which are extremely good at maximizing their profits.
It’s important to find the right balance so that you can enjoy your financial income as well as your emotional income. Earning money is not a sin just because you are a doctor—and if part of the revenue that you bring in is used to improve patient care, it’s a win-win for both you and your patients.
(Available from: http://mdcurrent.in/business-of-medicine/how-to-set-fees-for-your-medical-services-that-are-just-right/)
How to know when the time is right to add another physician to your practice
Judgments about when and whether to add a new physician to your medical practice are among the most difficult and important business decisions that you are likely to confront.
A new physician can provide a clinic with increased revenue opportunities, a fresh perspective on clinical care and business operations, plus improved work-life balance for the practice’s existing physician(s).
“A badly organized practice can find it hard to assimilate a new doctor—and if there aren’t enough patients to keep doctors busy, this will create a lot of unhappiness.” -AniruddhaMalpani, MD, medical director of Malpani Infertility Clinic in Mumbai, India
Conversely, adding a new physician has the potential to saddle a practice with a slew of additional expenses, lead to conflicts with staff and other doctors, and potentially upset patients who have grown comfortable seeing the same doctor for years.
Key Point: Deciding whether it’s time to add another doctor to your practice can be challenging. It’s important to ask yourself: whether it makes financial sense, how busy the practice’s existing physicians are, and whether you can find a physician who will be a strong fit with your practice’s culture and approach to patient care.
“A new doctor is likely to improve efficiency as he/she brings in new blood,” said AniruddhaMalpani, MD, medical director of Malpani Infertility Clinic in Mumbai, India, and author of a physician and patient education blog at www.drmalpani.com.
“However, a badly organized practice can find it hard to assimilate a new doctor—and if there aren’t enough patients to keep doctors busy, this will create a lot of unhappiness,” said Malpani, who is a member ofmdCurrent-India’s Editorial Advisory Board.
Additionally, deciding whether to add the new physician as a partner or associate comes with its own set of challenges.
Adding up the pros and cons
To a large extent, the answers to the following 3 questions will help practice owners determine whether it’s the right time to add another doctor:
- Does it make financial sense?
- How busy are the practice’s existing physicians?
- Can you find a physician who will be a strong fit with your practice’s culture and approach to patient care?
Like virtually all business decisions, finances are the most important consideration when contemplating the addition of a new doctor.
“By and large, if you find yourself very busy and tired of attending to unlimited calls and emergencies from patients, that is one of the main reasons for adding another doctor.” -PragneshVachharajani, MBBS, family physician in Ahmedabad, India
First, develop an estimate of how much a new physician is likely to cost your practice in terms of salary, new support staff, new equipment, added insurance costs, attorney or accounting fees, and the like.
Then determine roughly how many patient encounters per year would be required to break even on those costs. Is it likely that your local market can provide those additional patient visits?
Your own schedule is a valuable starting point for determining whether your market is ripe for a new physician. How busy are you? If new patients have to wait longer than a week or 2 for an appointment, that’s a strong indication that there’s enough demand to support a new doctor. For another hint, check with physicians who refer patients to you. Are they sending as many patients to you as they once were, and are you able to see those patients in a timely manner?
“There is no calculation that will work for every practice, but by and large, if you find yourself very busy and tired of attending to unlimited calls and emergencies from patients, that is one of the main reasons for adding another doctor,” said PragneshVachharajani, MBBS, a family physician in Ahmedabad, India, and a member of mdCurrent-India’s Editorial Advisory Board.
Partner or associate?
If you’ve determined that adding another physician makes sense for your clinic, the next question becomes whether that new physician should be brought in as a partner or associate.
That depends largely on the needs of the practice: Will the new physician bear a significant amount of responsibility for growing the practice? If you’re pushing to aggressively grow the practice and the new physician is expected to work long hours and bring in new patients, a partnership would seem the best choice.
“A part-time doctor would be best as an associate, while a partner helps in the growth of the practice by practicing in more than 1 location, and can also work as the practice’s backbone in case you’re sick or on holiday,” Vachharajani said.
Next, it’s critical that the new physician is a strong fit with the practice’s existing physician(s) in terms of culture, personality and work style. This factor becomes even more important if the new physician will assume a role in making key decisions about the practice’s future.
“Adding a new doctor can be quite disruptive, and this is especially true if he/she is not a team player and does not know how to get along with other staff members,” Malpani said.
Still, a new doctor also holds the potential to boost feelings of collegiality, especially when a practice moves from 1 physician to 2. The new physician can help improve the practice’s patient care routine and business operations, ideally adding valuable insight and experience.
“It’s great to have someone else with whom you can discuss complicated cases; 2 heads are often better than 1,” Malpani said. “Another doctor can provide emotional support when you are having a bad day, and it can be helpful to vent when you are fed up of filling in all the paperwork!”
(Available from: http://mdcurrent.in/business-of-medicine/how-to-know-when-the-time-is-right-to-add-another-physician-to-your-practice/ )
How you can build your practice even if you’re not a ‘famous’ doctor
It’s quite common to see patients waiting for hours on end to see senior doctors in India today. These very busy doctors have waiting rooms packed full of patients. Although most people do not like to wait, they do so in order to see a famous doctor who has been recommended to them.
“Doctors who are helpful and are willing to answer questions will stand out and will be able to build trust and confidence in patients.” -AniruddhaMalpani, MD, medical director of Malpani Infertility Clinic in Mumbai, India
Key Point: Many doctors who are expert clinicians seeking to establish new practices don’t have high patient volumes. Others, considered to be “famous” doctors, have so many patients that they may wait for hours for their appointments. The best way to build your practice is to establish yourself as a medical expert in your community, both through a Web site with patient questions that you answer and via community health talks on high-interest topics.
On the other hand, there are plenty of extremely well qualified experienced doctors who don’t have enough patients. Some of these doctors are starting or joining a new practice after training overseas for many years, so they are well-trained clinicians. They also might be experienced physicians who have relocated from another area of the country, or perhaps they left a practice to start their own venture.
However, many patients choose to wait for hours on end to see the famous doctors rather than considering these other technically competent doctors whose waiting rooms aren’t as busy.
Why does this occur? Mostly, it’s a question of patients managing their perceived risk. They are worried when they are sick, and they want to make sure that they get the best possible medical care. They often find a doctor by asking around, and since there are very few doctors who have the reputation of being the very best, these are the doctors whom many patients seek out.
Because there are so many patients who all want to see a relatively small number of top “name brand” doctors, patients need to wait for hours on end. The question then arises: What can other expert doctors—either those undergoing a transition or finishing a residency—do in order to create busy waiting rooms, too?
Establish yourself as an expert
If you are in this position, it’s important to show potential patients that you are an expert, too. This can be a challenging goal, because there’s so much at stake for these patients. A patient’s decision about his or her doctor can literally be a life or death choice.
One excellent way to market your practice and demonstrate your clinical expertise is to set up a Web site where you can inform and educate patients—in addition to their relatives and friends who could also become your patients. Of course just putting up a Web site is not enough.
You could encourage patients or potential patients to submit general health questions that you can answer to show your expertise and your caring. If you do this, be careful not to offer specific medical advice and include the standard legal disclosures. However, you can offer general medical advice that will be useful not only to the person asking the question, but to others who view your Web site.
Another way to establish yourself as an expert in the community is to offer free health talks to educate them about high-interest medical topics. The talks should not be a commercial for your practice but instead should focus on popular information such as managing type 2 diabetes, nutrition and wellness, childhood vaccinations, or other subjects related to your specialty area.
Offer a question and answer session at the end of each talk and encourage attendees to sign on to your Web site to ask questions too. You can offer informational literature about the services your practice offers at the talks, and when the community members who attend your talk need a doctor, it’s likely that they will think of you.
Stand out in the crowd
Doctors who are helpful and are willing to answer questions will stand out and will be able to build trust and confidence in patients. This actually makes a lot of sense for doctors who don’t have a full patient load and who are trying to build their practices. They are not as busy with patient appointments as established doctors are, so they have more time available to perform this type of outreach.
As you begin to build your practice, patients will be happy, too. They will be able to see an expert physician who can help them and manage their medical issues, and they also won’t be waiting hours on end for their appointments.
(Available from: http://mdcurrent.in/business-of-medicine/how-you-can-build-your-practice-even-if-youre-not-a-famous-doctor/ )