Nurse practitioners and other clinicians who are starting a practice often ask this question. Indeed, all of us want to know when and how much we can expect in any new job. Those of us starting a practice are even more concerned about it. And here’s the difference.
When you are offered a job, you are told what to expect in salary and benefits. You will know how much money you will receive per month, per week, per day, per patient. Perhaps you’ll be paid a base salary with a bonus based on productivity. But you KNOW, for the most part what to expect.
What the employed clinician does not have to worry about is all the variables that the business owner (or your employer) has to consider. Revenue that is generated in any outpatient practice (for the most part) is still a fee per service model. In other words, when you see a patient, you (hopefully) get paid based on work done and billed to the payer.
But this is where it gets interesting. First of all, it’s highly unlikely that the billed amount is the amount the practice will be reimbursed. The allowed reimbursement varies from payer to payer based on what you might have been able to negotiate, as well as provider designation (i.e., NP, PA, MD/DO).
For example, for an average office visit of 99213 (return patient) in primary care, you might see allowed rates from $25.00 to $97.00. If you are doing any add-on services such as a UA, immunization, punch biopsy – you may (or may not) get reimbursed additionally. You’ll need to include the correct modifiers and diagnostic codes for that second service. However, be aware, that more often these days, payers are bundling services together and only paying for one service.
So to get back to the original question…”how much money will I make?”, you need to understand the actual reimbursed amounts and cost variables.
Know your Numbers
Gross receipts depend on:
- Contracted allowable rates per payer
- Payer mix
- Number of patients seen
- The office’s ability to collect co-pays, co-insurance and deductibles
- Ability to verify insurance
- Denial of claims now and in the future (where money is “taken back”)
- The effectiveness of the billing team to follow up on accounts receivable and to collect on outstanding claims.
Cost variables/Practice Overhead
- Cost of bill insurance companies
- Payment failures (ie no payment, bounced payments
- Salaries and benefits (including yours)
- Building and utilities cost
- Insurances, licenses
- IT costs
- Subscriptions including journals, software, EMRs, medical references (ie UpToDate or other references)
- Taxes – federal, state and local
- Other (including any fees the NP and PA must pay to a collaborating physician)
As you can see, it’s critical that you are able to generate enough revenue to cover cost and more on an ongoing basis in order to keep the practice open and growing. This is one reason why it’s essential that practices establish budgets and monitor their cash flow and profit and loss statements on an ongoing basis.
And for those of you employed, knowing what it takes to run a practice and keep it profitable will only make you a more valued employee. I don’t know about your employer, but every practice owner I know would find the employee with this type of understanding highly valuable and compensate accordingly.
After all, it creates a win-win situation for both of you.
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