Q.: What percent of the overhead should I as a new physician in a practice accept?
A.: To answer the question, and it is a multi-faceted one, since there are many different types of overhead.
There is only one formula however, that works every time, and saves a lot of grief down the road. The formula is that the physician pay only his direct expenses and not indirect expenses. For instance, if you are sharing space with Orthopedic Surgeons – you only want to pay for your direct overhead – not their accounting, marketing, employees, etc. for which the physician has no benefit. The physician sharing space should account for the exact sq footage he/she is utilizing, have his/her own dedicated staff for which he/she pays for, and pay the percentage of billing for only what he/she collects.
What is generally done, and is a huge mistake, is to share equally the expenses of the overall practice with all of the physicians in the practice. An Ortho practice has huge expenses, most of which are not related to anything the PM&R physician generates. This later ends up in huge disputes, and almost always ends with the PM&R doc leaving and not on so good terms.
The percentage of overhead cannot be calculated by percentage unless he is in his own practice, and then that is driven by the market values, i.e., cost of lease space, employees, marketing, etc. Most of our practices have an overhead of around $6,000 per month before PRS fees and physician salaries. Most physicians take a set salary, and then take bonuses with the surpluses.
Answer contributed by Liz Lee, President, PRS, Inc. a practice management and billing company that works mostly with physiatrists, 817-284-9850,1-800-324-4777, 817-284-3425 FAX, Website: PRSinc.com