Making sense of the economics of part-time physician practice

March 1, 2015

Physicians who would like to work part-time should understand the economic issues involved and learn how to manage staff, patient volume, and costs effectively.

 

Take-home message: Physicians who would like to work part-time should understand the economic issues involved and learn how to manage staff, patient volume, and costs effectively.

 

By Nancy Groves; Reviewed by Robert E. Wiggins, MD, MHA

Asheville, NC-Consideration of the economics of part-time practice can produce a win-win situation for practices and employees, said Robert E. Wiggins, MD, MHA.

“It lets us fill in the gaps in our schedule and cover the overhead better,” said Dr. Wiggins, an Asheville, NC-based ophthalmologist who is in a group that includes part-time practitioners.

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One of the benefits of a part-time arrangement is that it may allow for better utilization of capacity and staffing. However, if these are not managed well, they may be underutilized, he said.

“The key here is managing your staff and facilities with part-time positions,” Dr. Wiggins said.

The second advantage is a greater pool of physicians from which to recruit. The downside of this is that two physicians require more effort to manage than one.

To achieve an economically viable part-time practice, physicians have to understand the economics: patient volume, revenue, fixed and variable costs, the breakeven point, and profit.

Fixed costs include rent and some staff salaries. These will not necessarily be lower for someone working part-time. In a two-physician practice with one physician working full time and another part-time, a receptionist will still be needed in the office every day.

A switch to part-time work may yield some saving in variable costs, though, such as lower use of supplies.

Staffing costs could be reduced if certain employees, such as technicians, only work the same days as the part-time physician.

Hypothetical case

 

Dr. Wiggins illustrated the economics starting with a hypothetical 50-something-physician working full time, seeing about 8,000 patients a year, and generating $1.3 million in revenues and a profit of $600,000.

If the same physician slows down a decade later and sees just 4,000 patients a year, the profit is not one-half of what it was before, but one-sixth due to the larger proportion of fixed costs in the total cost.

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In order to generate a profit, physicians who have cut back to half-time hours may be forced to see more than half of their former number of patients. However, physicians who prefer to work part-time can learn to be more efficient, consolidating more patients into a shorter amount of time, Dr. Wiggins said.

Once the profit dips below the breakeven point, a part-time physician may actually be losing money for the practice, a reason some practices cite for a policy of forcing senior physicians to retire rather than reduce their hours, he said.

On the other hand, a practice may accept an arrangement in which a physician continues to see patients part-time and pay staff members despite generating little or no profit simply because the physician enjoys the work.

One solution to making part-time work financially viable is to address the issue of fixed costs by having two part-time physicians occupy the slot formerly held by one, suggested Dr. Wiggins. A physician could make a comfortable living seeing about 3,000 to 3,500 patients a year, with a break-even point of about 1,500 patients.

Physicians who want to work fewer hours or have more flexibility may be interested in working as independent contractors rather than employees. This arrangement is based primarily on the employer’s degree over control versus independence of the individual rather than time worked. To learn more about the distinctions between independent contractors and employees, Dr. Wiggins recommends consulting an attorney, tax advisor, or visiting IRS.gov.

 

NEXT: Conclusion

 

A part-time physician can be paid in several ways, including percentage of collections, percentage of full-time equivalent salary and bonus, per diem rate, or net income. Payment of benefits also varies from practice to practice. As a rule, however, benefits are provided to employees but not to independent contractors.

Practices may set a threshold of hours worked before employees may apply for benefits, such as health insurance or retirement plans. Professional liability insurance may also be negotiable.

Salary and benefits are key issues for physicians who want to work part time, but call coverage is also high on the list of potentially contentious items, Dr. Wiggins said.

A part-time physician may be expected to be on full call, proportionate call, or no call. Physicians who prefer no call may have to accept a reduction in pay in return. Restrictive covenant and non-solicitation clauses for part-time physicians are advisable from the practice standpoint.

 

Robert E. Wiggins, MD, MHA

E: rw@aea1961.com

This article was adapted from Dr. Wiggins’ presentation at the 2014 meeting of the American Academy of Ophthalmology. Dr. Wiggins did not report any financial disclosures.