Beginning Medical Practice A Primer for Family Medicine

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

Key Considerations Practice Scope n Practice Location n Practice & Payment Structure n Practice Size and Intensity n Incorporation n

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

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

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

Office Practice Only Advantages n Simplifies life, less obligations, more flexible n Vested value of practice (esp with PEMs) n Set your hours, more time for self n Relatively easy work

Office Practice Only Disadvantages n Professionally less rewarding (boring? ) n Lower income relative to comprehensive n Income stream narrow n n complete dependency on one payment model More easily capped

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

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

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

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

Location

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

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

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

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

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

Overhead Example Practice-Specific Costs 2002 – 2 docs, no EMR, RN 4 days month n $63, 000/yr - 27% of office revenue, 16% of total revenue 2005 – 2 docs, no EMR, RN 5 days month n $5250 per $6050 per $72, 600/yr, 23% of office revenue, 15% of total revenue 2009 – 4 docs, new building, EMR lease & support fees,

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

Practice Structure Incorporation

Incorporation Key Benefits: n Tax reduction (16. 5% >> 15. 5% July 2010) n Income Splitting n Tax deferral (and investment growth) n Sets up “two offices” – improves write-offs n Flexibility in income stream n Eg. Maternity, time off

Incorporation Advantage Example – 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!

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

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

Payment Structure How will you be paid?

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

FFS vs PEM n FFS – straight pay per service rendered No capitation fees, bonuses, EMR funding n Works best in walk-in/urgent care n Main Codes: A 003, A 007, A 001, K 005, etc n

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

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

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

PEM’s - Subtypes CCM – Comprehensive Care model solo with similar pay scheme n Roster patients n FFS + 10% + $2. 16 per month/per patient n

Impact of New Models n n 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

FHG Family Health Group n Roster Patients n FFS + 10% premium + Capitation ($2. 16) n Bonuses for preventative care

FHG Family Health Group For 1400 patients: n Adds $36, 000 capitation income n plus 10% of FFS billings plus bonuses n About 25% increase in income over FFS alone Ontario FHG Providers 3170; Enrolled – 3. 8 million pts

Family Health Network Pay is mostly roster-based n Covers 57 core services n n Eg. n Other Services – extra billing n n A 007, A 003, K 005, G 420 Eg. Skin cancer, biopsies, Joint Injection About 356 doctors with about 357, 000 pts are in this model

FHN and FHO Any ER/APP Funding is in addition n FHO is fastest growing group 119 fee codes n FHN and FHGs are shrinking – more FHO n Over 4. 5 million patients now in FHO n

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

Bonuses > $24, 000/yr Hospital $12, 500 ($2000 in C-codes) n Palliative $2000 (4 x K 023/yr) n Mental Hlth $2000 (10 pts schizo/bipolar) n Home Visits $2000 (100 visits per year) n Pre-natal $2000 (5 pts/yr to 28 wks) n Procedures $2000 ($1200/yr of work) n CME $100 per hour up to 24 hours/yr n

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

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

Comparison of Billings FFS vs PEM/Roster 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

FAMILY HEALTH TEAMS Collaborative Practice n NOT a payment model n n n 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

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

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

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

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