How Many Patient Should My Practice See?

I get this question from time to time. Especially from people that are thinking about opening their own practice.

As with most things, it is hard to say unless one understands the situation. For example, some doctors go for profitability regardless of lifestyle, while others are going for lifestyle and don’t mind forgoing some profitability.

Deciding which one you want will go a long way in understanding how to tackle this question.

So where do we begin? Glad you asked. First, you need to determine a few practice numbers. Let’s start with Cost.

– Practice cost

Practice cost is everything that cost you money. This is all the expenditures that go out. Some people exclude doc salaries and doc benefits, but for the purpose of this exercise, I include everything except bonuses. Quick example, le’t say a practice will spend $450,000 in operational cost and a solo doc wants to make $200,000 in an anual salary. Then your total cost is $650,000. If the doc is comfortable with $100,000 then the cost is 550K.

Naturally, you need to bring in at least that much to pay off the bills and for the doc to get paid.  But how many patients does that translate to?

Well, for that, we need to know the average payment for each encounter (net, not gross).

– Average payment per visit or encounter

This is the net dollar amount your practice gets per encounter. An easy way to figure this out is add all the encounter in a year and divide that by your net receivables.

Let’s say a solo doc brought in $650,000 in receivables and the practice saw a total of 5950 encounters in a year. Simple math tells you that your average payment is $109.

Example: $650,000 / 5950 (encounters) = $109 avg payment

I know, I know, we aren’t looking at well visits vs sick versus RN visits. You’ll want to do that later. But I want to keep it simple. So stay with me.

Next, you’ll need to know how many days your practice is open.

– Number of days worked (or will work in a year)

If a practice is open 5 days week and is open all year around, the practice will be open for roughly 260 days. If the doc takes vacation then you’ll need to subtract the number of days off.

Let’s put these concept into practical terms.

How much do I need to break even?

Let’s say a solo practice will spend $650,000 (including the doc’s salary). We know that the average payment per visit is $109 (don’t get bent out of shape if the $109 is not your number. Focus on the process, not the numbers).

Now we can answer how many patients the solo doc will have to see in order to break-even.

Cost / Average payment = Number of patients.

$650,000 / $109 = 5963 patients

If your practice works 260 days a year you can do the math this way.

Number of patients / days open = number of daily patients.

5963/260 = 23 patients a day.

Twenty three patients isn’t all that much. Most doctors are in the 30 patients a day range. But here is the kicker, you have to see at a minimum of 23 patients a day for every single day the doc works. If the doc sees 25 one day and the next day sees 15 the doc is averaging 20 patients; which isn’t enough to make the $650,000 that we discussed earlier.

Please, keep in mind that this is a very simplistic view. Of course a good accountant can help you figure this out better.

But the idea is put some of these numbers in perspective. Once you have them, you can start going crazy with more complicating reporting. For example, you can look to increase your per encounter average or look to reduce expenses all of which will change the “patient a day” figure.

Well visits revenue is different than sick child revenue, so you can manage these two visits and make a big difference in how your practice does financially.

But again, the point is to start to give you an idea what the expectation ought to be. Once you have this perspective, then you can move in to refine your numbers.


#smm

16 thoughts on “How Many Patient Should My Practice See?”

  1. Hi Chip,
    I like your method of calculations. Very easy to follow. Any idea how new reimbursement rate( same as Medicare) gonna affect the money flow?
    Thanks

    1. Well, in any of the states where Medicaid rates suddenly get boosted to Medicaid, it will have a PROFOUND effect. I have clients who see 40% Medicaid paying them 60% of what private pays. If that 60% gets increased to, say, 90%, that’s a ~15% increase to a practice’s bottom line overnight. Given that it’s all margin, that’s a lot of money to the docs (which is a great thing!).

      For those practices who don’t take Medicaid – 20-30% – it may entice them to do so. For those in the 10-15% Medicaid range, it won’t have a big effect. But many practices stand to have a revolutionary change.

      Of course, very few of the states even have an operating plan to make this happen yet.

  2. Hey guys, I have a question regarding practice profitability. My wife is a gen. ped working for another doctor who wants out (reason are burn out and time to move on) i have the books on the practice which generates about 900k in income per year. main docs compensation is 160 plus benefits for 3 days a week and my wife works 3 days (1.25 doctor practice) Her revenue is on a steady decline from 1.05 to 950 to 880. With the flu season in the northeast our of control she feels there is now more value in the practice. She wants 700k for the practice. There is essentially zero profit left at the end of the year as she pays herself pretty well. I feel with the economy and a reduction in insurance payouts that a practice with that revenue , maybe 400k would be worth it, but not 700K, any advice out there? the primary doc really wants out.

    office is open 5.5 days per week, sees on average 28 patients per day with a good mix of sick and well.

    1. What, exactly, does that $400-700k buy?

      I’d have many more questions, but start there. Even $400k seems way out of whack. How about “$150k and I assume your rent, pay yr malpractice for 5y, and don’t open shop next door for free?”

    2. I have a tons of questions too.

      As much as I understand where the owner is coming from (heck, if were up to me, my practice would be worth at least $2million), the 700K tag is way too much.

      The question for you is, not how much is the practice worth, but how much would it cost your wife to start her own practice?

      There is some advantages to buying a practice. For example, patients coming in the door on day one, staff is hired, equipment is in place, and you have infrastructure. So adding some of those cost that are already baked into the price is reasonable.

      Another thing to consider is, the practice may be bringing in 900K, but you said there isn’t anything left over. Businesses are bought for the revenue, not for what it brings in.

      If you spend all of it, what difference does it make if the practice brings in 50K to $100,000,000.

      Lastly I would add that if the owner leaves, her revenue also walks out the door because your wife won’t be able to manage the workload of two docs working 3 days a week. It is not like a factory where one can crank production whether one is there or not.

      I would find a consultant that does practice valuations. I’m sure it will be expensive, but I think worth it. The consultant will give you a much better idea of what the practice is really worth. Then, once you know that, then you can either make an offer or start your own gig.

      On Tue, Mar 5, 2013 at 8:24 PM, Pediatric Inc

  3. Quick question. What is a generally accepted ratio of an actual patient base vs visits? Using the conceptual number above of 5963, I am interested in knowing the average number of existing patients and the number of visits/revisits they experience in order to get to that 5963 total. Simple formula would be: (# of pts x visits/appts per year= 5963). I understand the new vs. exisitng patient tracking, but I am interested in seeing if there is a rule of thumb for a core patient base

    Thanks for the information on “well vs. sick” child encounters; helpful information.

    1. Thanks for the question Jim.

      I think this is a great question and one that I would like to address in a blog post.

      Give me a few days to write a more thoughtful response. I think the discourse merits a front page (as opposed to a comment) discussion.

      Brandon

      On Thu, Feb 28, 2013 at 9:49 AM, Pediatric Inc

      1. Brandon:

        Thanks very much for addressing my question re: the average/core number of patients in a pediatric practice. Looking forward to reviewing your response in the blog post.

        Have a great weekend.

        Jim Powers

  4. Let me clarify… I’m not suggesting me dismiss the RVU concept. I think it is important to understand how they work, because as you said, this is how insurance companies decide how we get paid.

    What I disagree with, is using it as a measure of productivity for one’s practice.

    In our practice, we don’t use RVUs, at all, yet we are do well in terms of profitability. At the end of the day, my docs have to produce enough to cover expenses, pay for their salary and generate profits for the practice.

    My point is that at the end of day, you have to have enough money, regardless of RVUs.

    We choose to measure doctor productivity by how much money they produce. Not by how many RVUs.

    I also like to point out that even if you do decide to go with an RVU model, you still have to base it on a dollar figure. RVUs have to translate into dollars. So why not just stick with dollars?

    Here is the bottom line for me. In my experience, I see docs lean on their RVUs without regard to “profits or cost.” Not in all instances of course, but in many cases, it can give doctors a false sense of productivity. A false assurance they are doing well in their practice.

    I also think this mentality removes doctors from thinking in terms of cost and revenue. Since most doctors are uncomfortable talking about the money side of the business, the RVU is a perfect compromise for them. But it can be deadly.

    Funny that doctors are the worst business people, and they are the only ones that embrace a point system, as opposed to dollars to measure productivity. Coincidence?

    By the way, I do like the online engagement and welcome it anytime.

    B

  5. It’s not how many pts u see, but how many RVUs you generate which matters. Real question is: how can a practice maximize RVUs per encounter? Ancillaries? Anything that be done by support staff which genrates EVId?

    1. John, patients don’t care about RVUs, and a vital element to the managed growth and development of a new practice is the number of “touches” a pediatrician can have with her patients as well as the panel size she can manage. If a pediatrician can only manage to see 10-15 kids in a day, the budgetary impact is significant.

      In pediatrics, there is only so much you can do to maximize RVUs legally. Yes, you can improve your coding and charting, but an otitis media is still an otitis media. A 12yo well visit still generates the same CPT codes 9 out of 10 times. The most RVU-heavy visits a pediatrician does are the well visits and although the overwhelming majority of practices have 30-40% of their kids overdue, that’s a limited pool of patients from which to fish AND getting those visits in moves out other visits…hence your need to measure the number of patients you see. I’ve done a lot of research on this subject and I’d estimate, very non-scientifically, that most pediatric offices could improve their RVUs by 5-15%. A lot…but a swing of 2 visits a day in most offices eclipses that figure.

      RVUs are important and largely overlooked by pediatricians. But many of them fail to even understand and manage the first step in the process, which is to gauge their potential volume.

      1. I guess I am ASSuming that those practices managed by Chip and Brandon have moved beyond maximizing number of patient visits and are now into ultimately maximizing sustainable revenue, hence my comment about RVUs. If the pts are already there, make sure nothing is left on the table.

        I agree with you that if given the choice, bring in the max RVU (=revenue) visits, followed by the lesser RVU visits.

        If well visits are better, and that pool is limited, how can a practice increase that pool? Is that something that can be pursued by pediatricians to maximize revenue? Do you recommend that pediatricians going out to meet potential referring docs to increase that potential pool?

        I know you guys are right-on when it comes to practice management. I have even called Brandon and spoke with him about how much I agree with his philosophy. I’ve been reading about Chip’s rants for a while and recommend all of my peds friends to join your specialty practice management society. Thought I would engage you online and stimulate discussion. Fodder for future blog posts?

        1. “I guess I am ASSuming that those practices managed by Chip and Brandon have moved beyond maximizing number of patient visits”

          Every practice I work with still needs to pay attention to their patient volume – whether it’s simply to manage the ebb/flow of demand (summertime, swine flu, etc.) or to deal with new or retiring doctors. An empty room == 0 RVUs 🙂

          To play Devil’s Advocate, I wonder how the value of RVUs will play out in our predicted future of outcome/episodic/ACO payments?

          Your point about maximizing what you do during the visit is, of course, always important!

    2. I totally disagree John.

      I think RVU are completely flawed system and should not be used in a pediatric private practice setting because it doesn’t measure a pediatrician’s productivity.

      For starters, the RVU system is decided by a secret society composed of specialist. Nobody seems to have a problem that a secret society decides how much work and how much cost should be allocated to a medical service.

      Medical procedures are very dangerous and have a lot of risk, but so is trying to provide healthcare to a complicated 2 year old that can’t tell you how she is feeling, where it hurts or if the medication is helping. Yet, RVUs don’t take into consideration that dealing with infants and children have a huge risk as well.

      Second, the RVU system is “RELATIVE.” As in happiness is “relative,” or usually followed by or comparative speaking. Yet we somehow have bought into the notion that we are being fair with this made up “point” system.

      RVU are meaningless unless they are attached to a dollar amount. In other words, you can’t take RVUs to the bank. At the end of the day, a private, independent practice, in order to survive has to have more money coming in than going out regardless of how well or how little RVUs they genenate.

      RVUs don’t reflect profitability. You can accumulate thousands of RVUs but it doesn’t mean you are making money.

      RVUs change from year to year. Up until last year, vaccine admins didn’t have RVUs attach to them, yet vaccine admin are very costly and can easily eat up a practice’s margins.

      The only thing that makes a private doctor money, is seeing patients. Not accumulating RVUs. If you don’t treat patients, you are not accumulating RVUs, thus which one do you think is more important?

      Let’s say you are opening a private practice, how many RVUs do you need to accumulate in order to pay for the expenses and have money left over to live on?

      5000 or 12,000 or 9,000 RVUs?

      Who cares? The bank that is loaning you the money doesn’t care about the RVU. They wan’t to know how you will pay back the money. And like I said, what pays the bills are the patients you see. Not the RVUs you accumulate.

      1. Brandon,

        Irrespective of how we feel about RVUs and how it is flawed, it IS the way with which we are valued and paid. It IS the measue by which insurance companies base your payments. Recall conversion of RVU x Conversion Factor = $ PAYMENT to the doc. So, it’s BOTH number of patients seen AND RVUs that matter, and not simply # of patients. If you have a ped doc see 100 pts but is a poor coder (sorry, flawed system, but that’s how we get paid. Gotta learn coding or else practice UNhappily), and records only 80 RVUs (not realizing that an Established Pt with new problem of OM for whom abx are prescribed is a Level 4 when appropriate documentation and work is done), vs. a ped doc who sees 100 pts and records 100 RVUs, who is going to practice happier and be able to continue to practice?

        If you have a bunch of ped docs working in the same practice, wRVUs (work RVUs) is probably the closest you are going to get to the actual measure of personal productivity (not including ancillaries such as vaccines, etc.). Although flawed, it has its place in what we do and how we measure productivity.

        Maximize office efficiencies, provider productivity in seeing patients, and provider coding / billing for a sustainable and happy practice.

  6. I do this math for clients a couple times a day and suggest that getting your head around it helps a lot. One thing I do to keep it simple in my head is to make the numbers easy to multiply:
    25 kids a day, 4 days a week = 100 kids
    100 kids a week, 50 weeks a year = 5000 visits
    5000 visits at $100 a visit = $500K in revenue
    To generate the $600-$700K that so many pediatricians need to generate these days, you have to change the numbers above…more kids a day, more days a week, more weeks a year, or more $$ per visit.
    What’s interesting is how a LITTLE change can have such a big effect. Going from 25 -> 30 kids gets you to $600K. Working another 1/2 day a week gets you to $560K. Going from $100/vis to $115 gets you to $575K
    If you tweak each of them just a LITTLE – say, 27.5 kids, 4.25 days, and $110 – and you’re almost $650K.

Comments are closed.