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Nearly one-fourth of California’s medical groups don’t meet the state’s financial solvency requirements, finds a recent report by the state’s Department of Managed Health Care.
"This demonstrates the grave instability in the for-profit HMO system that threatens to affect patients," said Daniel Zingale, director of the California Department of Managed Health Care. "Those in the hole are deep in the hole."
Some 25% of California’s groups have assets worth less than 70% of what they owe others, according to the agency. Also, 20% of groups have a negative net worth and little to no tangible assets.
In response, the state is considering actions ranging from publishing the names of troubled groups in the newspaper to forcing HMOs to drop contracts or stop enrolling members in practices with severe financial problems.
Just how financially sound is your practice? Here are some key questions to help you size up your practice:
The right physician compensation package will depend on the dynamics of your group. However, one rule of thumb is that after revenues from capitation exceed 30% to 40% of your practice, it no longer makes sense to reward physicians purely on a fee-for-service-based productivity formula. At this point, it is better to start looking at pay packages that reward increased utilization or other measurable factors like productivity as a percent of billings, quality, or patient satisfaction.
Generally, a thriving family practice generates over $300,000 in billings per full-time physician. A collection ratio of 80% or more from both fee for service and capitation is considered good.
Typical total overhead as a percent of revenues for an average family practice office is about 60%. Anything lower either means you are running a very efficient office or don’t have enough support staff, which may cost you in the long run in the form of overworked doctors and lost ancillary income.