I am concluding this miniseries on the economics of medicine by examining the cost of doing business as a solo practitioner. Earlier, we saw that living a decent lifestyle requires an annual salary of $170,000. Now let’s see what happens if you’re a solo practitioner and you want to generate that kind of income.
The first thing you’ll have to do when setting up your offices to hire an attorney to help in incorporating your business. You should never practiced under your name alone. Instead of being Half M.D., I should set up a company called Half M.D., PA, to distance myself from any liabilities.
You can get your business to pay the cost of malpractice insurance, health insurance, life insurance, and disability insurance—four things that all physicians will need. The cost of malpractice insurance is highly variable based upon specialty and location. In California, you might pay as little as $10,000. Or you can practice in the absurdly expensive region of Southern Florida where malpractice insurance for ob/gyns runs over $100,000. For my calculations, I decided to use $40,000 for malpractice.
Next, you’ll need to hire an office staff. You will need a nurse or medical assistant, a secretary, and someone who can take care of billing. The total annual cost for salary and benefits for these three employees can run as high as $150,000 depending on the level of talent and experience. You’ll also need to rent a building with enough examination rooms, a private office, and a break room. You can easily spend $5,000 a month on such a setup. You will then have to cover other overhead such as equipment. You can be as bare bones as having just syringes and patient gowns, or you can purchase an ekg machine ($2,000), an ultrasound machine ($100,000), or any number of other office-based equipment depending on your level of practice. I used the calculations below as a bare minimum. You should play around with the numbers for your own situation.
You will see that before taxes, you’ll need to earn over $700,000 a year. As you can imagine, being the only person in the office to pull in that kind of money is going to be very difficult. You may occasionally hear your family practice doctor say that he has not taken a vacation in over six years. He is not being facetious. Every day that you don’t work—whether it be due to an illness or vacation—is a day that you don’t get paid. I will be very generous with my calculations in saying that you are working 250 days a year in this example. If you can get an average of $100 off of each patient thanks to laboratory fees and “bill aboves,” you will have to see thirty patients a day to come out ahead. That gives you 16 minutes dedicated to each patient. I say “dedicated” because you really aren’t going to spend that much time with anyone. Half of your day will be dedicated to paperwork, calling back pharmacists, calling back consultants, writing letters for patients, and other miscellaneous tasks which do not generate money. In reality, you will more likely spend 8 minutes with each patient.
That’s 8 minutes to solve the patient’s new problem, work on health maintenance such as pap smears and cholesterol screening, council about smoking and drinking, consolidate medications, and fulfill any other tasks that the patient needs done. If you’re a pre-med reading this, you may have noticed when you’re shadowing a primary care physician, he runs into the room, looks at the patient’s chart, and quickly blurts out, “I see that you’re here for a headache. Have you had any nausea, vomiting, dizziness, lightheadedness, ringing in the ears, facial pain, difficulty swallowing or talking, tingling of the hands or feet, heart palpitations, urinary incontinence, or erectile dysfunction?”
The patient at this point is staring off into space and manages to say, “Uh, no.”
The physician will then reply, “Good, take this ibuprofen.” And as he is walking out of the room, he glances that the chart and says, “I see that you’re due for a colonoscopy soon. We’ll get that worked out the next time you’re here.”
You now know why primary care is a dying field. Who wants to see 30 patients in a day, only to be the lowest paid doctor?
P.S.: I should add that these calculations were done with the hopes that every patient ends in a full payment. Many insurance companies will not pay you on time, in full, or at all. There is a very real chance that you might have to work extra days to make up for lost income from deadbeat billings.