Beginning Medical Practice

1. Beginning Medical Practice A Primer for Family Medicine Trainees John S. Butler, MD, B.Comm, M.Sc., CCFP

2. Key Considerations • Practice Scope • Practice Location • Practice & Payment Structure • Practice Size and Intensity • Incorporation

3. Practice Scope • Choice of medical practice impacts: • Professional satisfaction • Income • Lifestyle • Early career choices propagate later into career • Difficult to “shrink” a practice if too ambitious

4. Practice Scope - Continued • Locums • Family Medicine, office practice only • Emergency Medicine/Urgent Care only • Office Practice + value added services • Emergency or Urgent Care • Nursing Homes & Home Visits • Hospital inpatients, chronic care, OR assist, OB-Gyne • Palliative Care

5. Locum • Advantages: • No commitment, flexibility in life • Try out different practice styles and communities • Disadvantages • Unpredictable and unstable income • Unfamiliar Patients, Variable charting/EMR*** • Changing Charting procedures & Local consultants • Less income than other options • No vested income potential

6. Office Practice OnlyAdvantages • Simplifies life, less obligations, more flexible • Vested value of practice (esp with PEMs) • Set your hours, more time for self • Relatively easy work

7. Office Practice OnlyDisadvantages • Professionally less rewarding (boring?) • Lower income relative to comprehensive • Income stream narrow • complete dependency on one payment model • More easily capped

8. Value Added Services(Nursing Homes, Hospital, ER, etc) • Increase Revenue Streams • Highest income earners in this group • Reduce probability of being capped • Maintain skills and interesting work • Increase doctors’ value to the community • Improve visibility with specialists

9. Emergency & Urgent CareAdvantages • Few responsibilities after shift, more free time • Income tends to be reasonable • Fun work, managing acute cases • Working in the hospital can enhance physician-physician relationships and access to CME

10. ER - disadvantages • Shift work & high stress can take its toll • Depend 100% on hospital system • Hospital politics • Income Stream extremely narrow • Time-off negotiated with group,

11. ER Disadvantages - Continued • May have too little or too much work, little control • ERs can close or change practice requirements • No vested income for long term • Opportunities can be limited, choice of communities narrows • True for ER and for Urgent Care

12. Location

13. Choice of Location Depends On… • Practice that meets preferred work scope • Rural or urban medicine? • ER/Hospital/Nursing home work available? • Spouse and family issues • Personal needs.. • Do you “need” to have sushi in the neighborhood? • Community educational institutions • Is it safe? Is it remote? Near Fishing? Near golf?

14. Other Location Considerations • Availability of nice homes, cost • Distance to hospital of office and home • Accessibility to shopping/cultural activities • General economic climate

15. So your ready… Key Remaining Considerations are: • Practice Structure & Infrastructure • Payment Structure • Practice Size and Intensity

16. Practice Structure • Virtually everyone will join group • Most are cost-sharing associations • Some professionally managed • Can reduce overhead, especially if you are a low earning doctor

17. Overhead Flat Rates • Most costs are either: • Fixed – eg RENT • Fixed Variable – Labour, Software Support, phones • There is very little variation in cost with changes in patient volume • Fixed rates favor lower earning doctors • As income goes up non-flat rate preferred

18. Overhead ExamplePractice-Specific Costs 2002 – 2 docs, no EMR, RN 4days $5250 per month • $63,000/yr - 27% of office revenue, 16% of total revenue 2005 – 2 docs, no EMR, RN 5 days $6050 per month • $72,600/yr, 23% of office revenue, 15% of total revenue 2009 – 4 docs, new building, EMR lease & support fees, 2 RN’s, 5 support staff, $18,000 copier/scanner, new integrated phone system $8300 per month • $99,600/yr, 20% of office revenue, ~15% total

19. Fixed Overhead is not all overhead • You still have other overhead items: • CME • Car Expenses • CMPA fees • Accounting costs • Personal computers at home, PDAs • These do not change regardless of practice type, volume, income, etc

20. Practice Structure Incorporation

21. Incorporation Key Benefits: • Tax reduction (16.5% >> 15.5% July 2010) • Income Splitting • Tax deferral (and investment growth) • Sets up “two offices” – improves write-offs • Flexibility in income stream • Eg. Maternity, time off

22. Incorporation AdvantageExample – kid’s Education Assume $24,000 per year cost/child in university Non-incorporated - $44,444 in earnings to fund the cost of education. Incorporated - $28,743 in earnings to fund education by paying dividends. Savings: $15,701 per year per child!

23. Incorporation Potential Drawbacks: • More Complicated • Bank accounts, legal documents, “minute book” • Annual renewal requirements, letterhead, etc • Separate personal and corporate tax returns • Higher legal and accounting fees BUT… • Increased net income far outweighs cost • If incorporate UP FRONT, less hassle

24. Recommendations • Incorporate your medical practice • Start process before finishing residency • Avoids: • switching accounts • accounting for transfer of assets, revenues and expenses (very time-consuming) • multitude of legal and business notifications

25. Payment Structure How will you be paid?

26. Payment Structure Acronym Primer: FFS = Fee for Service PEM = Patient Enrolment Model CCM = Comprehensive Care Model FHG = Family Health Group FHN = Family Health Network FHT = Family Health Team FHO = Family Health Organization

27. FFS vs PEM • FFS – straight pay per service rendered • No capitation fees, bonuses, EMR funding • Works best in walk-in/urgent care • Main Codes: A003, A007, A001, K005, etc

28. PEM - general • Steady income less fluctuation • Focus more on patient issues than volume • Reward comprehensive, quality care

29. PEM - general • Support for IT • Encourages group formation • Compensates for cost and complexity of having a medical practice

30. PEM – Key Issues • Rostering – paid per patient rostered • Becomes lucrative over 1400 patients • IT funding • Bonuses for Comprehensive Care

31. PEM’s - Subtypes CCM – Comprehensive Care model • solo with similar pay scheme • Roster patients • FFS + 10% + $2.16 per month/per patient

32. Impact of New Models Payments to Family Docs in Ontario almost doubled from 1992 to 2009 ($1.5 billion+ to $3 billion+) Average pmts to primary care physicians increased from$200,000 to almost $400,000 FHO physicians highest, closely followed by the other primary care model physicians Solo practice physicians make less than half of the primary care model group

33. FHGFamily Health Group • Roster Patients • FFS + 10% premium + Capitation ($2.16) • Bonuses for preventative care

34. FHGFamily Health Group For 1400 patients: • Adds $36,000 capitation income • plus 10% of FFS billings plus bonuses • About 25% increase in income over FFS alone Ontario FHG Providers 3170; Enrolled – 3.8 million pts

35. Family Health Network • Pay is mostly roster-based • Covers 57 core services • Eg. A007, A003, K005, G420 • Other Services – extra billing • Eg. Skin cancer, biopsies, Joint Injection • About 356 doctors with about 357,000 pts are in this model

36. FHN and FHO • Any ER/APP Funding is in addition • FHO is fastest growing group 119 fee codes • FHN and FHGs are shrinking – more FHO • Over 4.5 million patients now in FHO

37. FHN/FHO Payment Base Rate – varies depending on age/gender Average is $112/pt/yr FHN; $124/pt/yr FHO + Access Bonus (less claw-back) + Capitation + Bonuses + Preventative Bonuses + up to $48,000 for codes for non-enrolled

38. Bonuses > $24,000/yr • Hospital $12,500 ($2000 in C-codes) • Palliative $2000 (4 x K023/yr) • Mental Hlth $2000 (10 pts schizo/bipolar) • Home Visits $2000 (100 visits per year) • Pre-natal $2000 (5 pts/yr to 28 wks) • Procedures $2000 ($1200/yr of work) • CME $100 per hour up to 24 hours/yr

39. Other Bonuses & Premiums • Diabetic Management Fee • $75 per patient (about 8 – 10k most practices) • Prevention Bonuses • Paps, Mammos, Colorectal, Immunization • Up to $11,000 in bonuses

40. FHN Income Stabilization • Provides bridge funding until roster grows • $155,000, paid monthly; $170,000 North/Rural • Maximum of one year • No OHIP billing at all • YOU CAN make extra money in AFA/ER

41. 2004, FFS, excluding ER $295,000 Plus ER billings Plus on-call bonuses 2007-2008, Roster Model $505,000 ( up 71% ) Plus ER billings Plus on-call bonuses Seeing less patients Taking more time off Comparison of BillingsFFS vs PEM/Roster

42. FAMILY HEALTH TEAMS • Collaborative Practice • NOT a payment model • Physicians in FHT are paid via FHN or FHO • Professional manager, office administration along with help from NPs, RNs, social workers, etc, to improve office workflow and quality of patient care

43. Maximizing Value • Maximize codes not in basket • Joint injections, biopsies, warts • Nursing Home visits • Home Visits • Hospital Visits

44. Disadvantages of PEM • Patients not always served as well • Less motivated to add-in • Less motivated to see higher volume • Wait times are higher • Less ability to go after variable income unless in APP such as an ER.

45. Critical Considerations • Apply for your OHIP before exams!! • Apply for your CPSO before exams!! • Bulge of Applicants • Hospital privileges depend on your CPSO • Need OHIP number to contract with FHN/FHT

46. Take Home Messages • Choose a practice that suits your lifestyle • Incorporate at the very beginning • Go with FHN/FHO if possible • Be organized, arrange OHIP, CPSO, CMPA