How Much Does it Cost You to See a Patient?


Are you paying to see patients without knowing it? A medical practice is a business which is supposed to make money, not lose money. Do you know how much it costs you to see a patient?

Before the incursion of managed care, this figure was irrelevant. However, it is of prime importance now. The managed care organizations and insurance carriers know their profit per patient. That is how they determine capitation rates. You will be a more savvy businessperson if you know where your profit begins. It will help you to determine which contracts to sign, which to add and which to drop. Knowing your cost per patient may cause you to disenroll from all the contracts in which you participate.

How You Determine Your Cost Per Patient

To determine the cost of seeing a patient in your office, you need your true overhead. Therefore, do not include depreciation, contributions to your pension plan, or your bonus at the end of the year. Once you determine your monthly overhead, divide that total by the number of days your office is open each month. That is your overhead per day. Divide that by the number of hours in a day you or your staff sees patients. That is your cost of seeing 1 patient per hour in your office.

Because you generate income, sometimes the largest amount, in other facilities; hospitals,surgery centers, nursing homes, etc. Your cost of seeing those patients is minor. It is mostly staff time, i.e. scheduling, billing, collecting. So factor in 1 hour which is attributable to services you render outside the office. Divide that by the number of patients you actually see in one hour. Now you know what it costs you to see a patient.

For example, if your overhead is $14,000 per month, your daily overhead is $700.00 ($14,000 divided by 20). Your overhead per hour is $87.50 ($700 divided by 8 hours per day). Now divide by the number of patients you see in an hour, let's say 4, your cost per patient is $21.88. You can round this up to $22.00 for easy figuring. If you want to perform a retroactive reality check without going through these alculations,divide your total monthly expenses by the total number of patient visits that month to determine your cost per patient. Because expenses fluctuate, you will need to do this for several consecutive months to obtain a true number.

How to Use This Number

If a managed care contract pays you $5.00 per member per month, calculate how many of your patients come from that contract, how often you see a typical patient from that plan in a month, and how long the visit takes of your s and your staff's hands-on time. This should be quite a revelation!

Third Party Payors Will Still Pay You

Remember third party payors, except capitated contracts, will pay you even if you are not a participating provider. They pay you less than their participating providers, but your fee is not limited by a contract. Your patient will pay the difference between your fee and the amount of the insurance payment. Medicare and some other insurers will send the payment directly to the patient and the patient will pay you.

If you disenroll from a plan, you can protect your physician-patient relationship by notifying your patients of the reason for of your decision. Some will remain with you and pay your full fee. Others cannot afford to go out of plan and will seek another physician. At first you are going to lose patients, but you might lose more money by seeing them! You can replace contracted patients with paying patients by promoting your practice to other groups. Then you will make more money by seeing fewer patients. I have numerous clients all over the country who are doing just that. Their overhead is lower. Their patients are happier. And their profit is considerable.

Lesson: My most successful clients do not participate in managed care contracts and are non participating providers. This is the time for physicians to take back the lead in health care payment before any legislative changes can take effect.

A Word of Caution:  Although your primary goal is to take care of your patients, you must have an office in which to do so. You have to be sure each patient is not costing you money, but is generating a profit so you can keep your doors open.