“So. What are you going to do when you complete your medical training?”

It’s a question you’re probably hearing a lot from your family, your friends and your colleagues. Answering that question will involve a lot of research and hard work on your part.
However, developing the knowledge and skills to answer it successfully for you was likely not part of your medical training.You are in the Medical Physician in Transition phase.

Like many new physicians, you may decide to join an existing practice to take advantage of the established infrastructure while you gain experience and acquire your own patients. Practices vary widely, however, in the way they are organized and managed. Just like any other business, a medical practice can be an efficient, profitable, rewarding place to work, or it can be a frustrating, disorganized and difficult experience.

Making a decision to join a particular practice is complex. It’s important to take the time, up front, to learn how to make a complete operational assessment of a practice, so that you can make an educated and informed decision about whether to join it.

In order to evaluate a practice effectively, you need to understand how the practice is structured and how it operates on a day-to-day basis. There are five major areas in which your should concentrate your investigation:

  • practice revenue;
  • business services;
  • medical practice management;
  • personnel / staffing; and
  • the facility itself

In this article we offer suggested approaches and questions to ask within each of these five operational areas as you research and assess a practice to find the best career fit and opportunity for you.

1. Revenue

Simply put, a practice brings in money, or revenue, by providing medical care and services to patients. Typically, revenue consists of a combination of professional fees and technical fees.

Professional fees – Professional fees are charged by the physician for his or her direct services to a patient, such as an office or hospital visit. The actual charge is generated by the use of Evaluation and Management codes (E&M). An example of an E&M code is a 99204, a complex office visit with a new patient.

Technical fees Technical fees are charged for related services provided to the patient through the practice, such as laboratory services, x-rays, procedures, chemotherapy, etc. Actual charges for these services are generated from Current Procedural Terminology or CPT Codes. An example of a CPT code is a 90656, an influenza virus vaccine injection.

Physicians are compensated differently from each revenue source, so it’s important to understand the ratio of professional revenues to technical revenues in a practice that you’re considering joining. The actual credit you can expect to receive for each source varies widely among practices, depending on the volume of technical revenue generated by the practice. Generally speaking, technical revenues generated by a practice will greatly exceed professional revenue, so you need to understand exactly how a particular practice credits individual physicians for revenues generated by these technical services.

In addition, if the practice is run by an outside medical practice management company, that company will share in the technical services revenue stream. Practices may also have relationships with hospitals, out-patient facilities or other organizations that could affect the net income of the practice and, in turn, your compensation as an individual physician.

Can I generate revenue in my first year as a new physician?

The answer is yes, as long as you understand the factors involved.

Your ability to generate revenues in your first year of affiliation with a practice is directly related to how quickly you acquire new patients, whether you need to become a credentialed provider under a managed care plan, and how well the practice markets your services.

Here are some tips to help you accurately assess these critical factors:

Practice growth ? Ask to review the practice’s data for the last two years to see if the number of new patients is growing, decreasing or remaining flat. Find out if any new specialists have moved into the area over the same period of time who could be competing for business from the same patient base. Patient assignments ? How are new patients assigned among the physicians in the practice? Some practices assign all new patients to the new physician, unless the referring source requests a specific physician. Other practices may rotate new patient assignments among all physicians.

Referrals ? How are the the majority of patient referrals generated? Who are the top five referring physicians? Ask whether the total number of referrals has increased, decreased or remained flat over the past two years.

Managed care plans ? What percentage of patients belong to managed care plans that require you to become a contracted member? It can take from nine months to a year for you to become a credentialed provider under many managed care plans and you will not be able to accept new patient referrals until that process is complete.

Marketing your skills ? Ask how the practice plans to introduce you to the medical community. You should expect the practice to make some effort to let the community know that you are joining their team by means of announcements, an open house, yellow page ads, dinner with key physician leaders, or a marketing piece profiling you, your specialty, your education and training, family, etc.

2. Business Services

Understanding how a medical practice functions as a business is essential to making an informed decision on whether to join it. There are a number of business concepts that you must become familiar with in order to understand how a practice functions as a business. These include accounts receivable, charges, billings, patient statements, and collections.

Here’s a brief overview of each:
Accounts receivable ? Accounts Receivable (AR) is the money owed to the practice by patients, insurance companies, and others on accounts that the practice is currently carrying on its books. The total Accounts Receivable equals the total number of dollars that remain outstanding as a result of charges billed.

Charges ? Charges are the dollar amounts that will be billed-out for particular services rendered to patients. Poor management of the charge process can result in significant loss of revenue to a practice over the course of time. Find out who in the organization is responsible ? and accountable – for the ongoing monitoring and updating of the charge process and then ask the following questions:

1. How long does it take to enter and process charges for billing from the date of service?

Charges should be processed with 24-48 hours of the service being rendered. The exception to this rule involves hospitalized patients for whom physicians often submit weekly rosters. However, if you find that a practice routinely enters charges more than 24 hours after the service is rendered, this could indicate poor management of the charge process or a lack of adequate personnel.

2. Is there an audit process to ensure that all charges are captured?

In a busy practice, it’s relatively easy for legitimate charges to be lost in the process. Ask whether the practice conducts a quick daily audit comparing the patient schedule to the charge ticket to reduce the likelihood of missed charges.

3. Are fee schedules updated on a scheduled or routine basis?

Find out whether the practice’s fee schedules are reviewed and updated regularly. Medicare adjusts fees annually, and so should the practice. In addition, drug and supply costs change frequently and the practice should have a system in place to track these changes and reflect them in the fee schedules.

4. Is coding monitored closely for accuracy?

Erroneous coding carries serious legal implications and can also result in lost revenue. Ask about the practice’s standard procedures for assuring the absolute accuracy of the coding of charges. Regardless of who is doing the actual coding, you, as the physician, are ultimately responsible for it’s accuracy. Be certain that all steps are being taken to assure coding accuracy. Submission of erroneous charges, regardless of whether it results from innocent oversight or actual intent is considered fraudulent and can result in sanctions, fines, and even criminal prosecution.

5. Is the billing performed in-house or is it outsourced?

Does the practice do its own billing and collections or is this function outsourced to another agency? Either way, it’s important to determine the effectiveness of the effort to collect charges billed in a timely manner. Keep in mind that a practice typically pays 4-8% of net collections to a fully outsourced service.

Practice Billing Reports

There are three standard billing reports to which you should pay close attention:

  • the AR Aging Report;
  • the Charges, Payments, Adjustments Report; and
  • the CPT Code Frequency Report.

Here are some helpful tips for reading, understanding and interpreting these typical practice billing reports:

AR Aging Report ? Ask to review the AR Aging Reports for the past six months, by month, for 0-30 days, 31-60 days, 61-90 days, 91-120 days and 120+days. These reports detail the amount of money billed out, but not yet collected by the practice, for each of the day-range categories. In particular take note of outstanding AR in the 90+ days categories and the trends over the past six months. It’s a given that the older the AR, especially greater than 90 days, the less likely that money will ever be collected. If you note that a practice is not collecting well, or that the trend is going in that direction, you should be cautious about joining the practice.

Charges, Payments, Adjustments ? Ask to review these reports, by physician, for the last six months, by month. These reports provide specific information on adjustment to payments due to contractual allowances taken by insurance companies, reasons for denials of claims, and other adjustments made by the practice. Payors may pay less than the contracted amount, deny claims for poor diagnosis or missed filing deadlines, or for other reasons.

If the practice monitors these reports closely, it can uncover reimbursement trends that will allow it to change its internal processes, as well as hold payors more accountable. Taking note of the importance the practice attaches to monitoring these reports will give you an insight into the way the practice is managed.

CPT Code Frequency ? Ask to see the CPT Code Frequency reports, by physician, for the last six months, by month. Review of the CPT code report will give you an overview of the specific services provided by the practice, as well as an indication of which services drive the revenue of the practice. It will also demonstrate how your own specialty is likely to augment or complement the services already offered by the practice.

More Questions

The following questions concern additional, critical areas of a practice’s internal business operations and financial management. Be sure your investigation and research into a prospective practice includes requesting and reviewing detailed answers to each.

How frequently are patient statements sent?

Patient statements should be sent out on a regular and consistent schedule ? at least monthly. This will not only help collection efforts, but will also minimize patient frustration and confusion caused by late invoices and bills. It’s important to know that, by law, the practice must demonstrate consistent efforts to collect patient balances and not automatically write off the patient portion.

What is the practice’s net collections percentage?

The amount of money a practice actually expects to receive from an insurance company or government programs like Medicare is often considerably less than the gross charges billed. The difference is called a contractual adjustment.

For example, if a practice bills out $100 for a service and expects a contractual adjustment of $20, the net collection is $80. This means that the practice has a net collection percentage of 80%.

It’s also important to identify the payor mix of the practice, i.e., what percent is Medicare, Medicaid, HMO, managed care, etc. Understanding the payor mix is the key to determining the number of dollars that can actually be collected from the actual gross dollars billed and in deciding whether the net collection percentage of the practice is reasonable.

What about bad debt?

Bad debt is the nonpayment of an expected reimbursement. Find out the conditions under which a practice will cease attempting to collect money owned to it. Ask how the practice differentiates bad debt from contractual adjustments so that you can understand how the percentage of bad debt affects the practice’s profitability.

3. Practice Management

Does the practice employ a Practice Manager or Administrator who is responsible for the entire practice operation? If so, arrange to spend time with this individual and ask for an organizational chart to help you understand the reporting structure of the practice and to facilitate your discussion. Here are some questions to ask:

1. Who employs the Practice Manager?

The Practice Manager may be employed by the practice itself, by the hospital, or by a practice management company. This individual’s salary may even be shared by two parties, for example, by the practice and the hospital. In another situation, the practice management company may employ the manager but that person’s salary is subsidized by the physicians. It’s important to understand, up front, how this will affect your personal financial situation within the practice.

2. What authority and autonomy does the Practice Manager have in the decision making process?

What involvement would you, as a physician, have in the decisions that affect how the practice is run? In some instances the Practice Manager may enjoy considerable autonomy. Find out whether the Practice Manager attends physician meetings regularly to keep physicians informed on material issues. Ask how information is communicated to practice personnel. Does the Practice Manager conduct regular meetings with office personnel?

3. What is the experience and competency level of the Practice Manager?

Managing a medical practice requires a unique blend of business and clinical skills. Ask if the Practice Manager’s background and experience is purely clinical or does it also include formal training in the business aspects of managing a practice. What is the individual’s management style ? is it hands-on close management or more arm’s length? Does the manager spend equal time overseeing both the clinical and business aspects of the practice?

In your conversations with the Business Manager, take note of whether he or she can readily answer your basic business questions about the status of AR, expenses, etc. Does this person receive income statements and can he or she easily walk you through information on the day-to-day running of the office, such as trends in payroll, general and administrative expenses, etc. You should feel comfortable that the Business Manager understands the broad scope, as well as the day-to-day details of how the practice is run.

4. Personnel and Staffing

In addition to the investigation and research into the actual business management as described above, you’ll also need to seek answers to the personnel and staffing questions outlined below, including who are the clinical personnel, what are their qualifications, and is the support staff adequate and well trained.

Clinical Personnel

How many clinical personnel does the practice employ and what are their qualifications? Does the practice employ PAs, Nurse Practitioners, RNs, LVNs, Medical Assistants?

How are these clinical personnel insured. Are they covered under the practice’s malpractice policy or do they have individual policies? In many cases, you’ll find that clinical personnel may be covered under an umbrella policy attached to a specific physician’s license.

Ask whether a specific nurse will be assigned to you as a new physician. Does this nurse make rounds? It is preferable to have a designated nurse assigned to each physician in order to ensure patient continuity and equal nursing attention to a new physician.

On-call policies

Ask if any nurses are on-call after hours and on the weekends for emergencies. If no nurses are on-call, will you be expected to triage your own phone calls?

Support personnel

Is the practice adequately staffed with support personnel? It’s an important question because striking the right balance can be a tricky. Salaries and benefits are the second greatest expense to a practice after pharmaceuticals. If the practice is overstaffed, it can adversely affect practice income and subsequently your income as a physician. If the practice is understaffed, it can create havoc, undermine patient care, and adversely affect your quality of life.

Find out about the turnover rate of personnel in the practice. A high rate could indicate problems with the work environment, office dynamics, or office politics that could dramatically impact your job satisfaction.

Ask about how hiring decisions are made and whether physicians are involved. While you may not be interested in the hiring of support personnel, you may want to have some level of involvement in the hiring of clinical personnel.

5. Facility

The fifth area of your research and investigation should focus on the practice’s facility itself. Practices acquire and utilize office space in a number of ways and it’s important to understand the details of the business arrangements for the facility before you commit to joining a practice.

Is the office space leased or owned by the practice? If the facility is owned, find out exactly who owns it and how the costs are allocated and amortized. If it is leased, determine the terms of the lease, e.g. length, build-out, and break clauses, as well as your personal liability if you decide to join the practice.

Are there are an adequate number of exam rooms to support you as an additional physician? As a rule of thumb, you should have three exam rooms available for your use when seeing patients.

What about access to the facility after hours, on weekends, and holidays? It’s important to assure that you have access to the office space at all times.

Outreach/satellite locations

Does the practice have other locations? What are the practice’s expectations for you to cover outreach or satellite locations? How are those office’s staffed? Will your nursing staff travel with you to these locations? Be sure to take into account the commute time involved, the time taken away from your main practice location, and call coverage.

Computers and medical equipment

Information systems and medical equipment can be very costly to install, maintain, and upgrade. Find out whether the practice is planning any large capital outlays in the near future to upgrade its computer systems or medical equipment. Large capital expenses can affect your near term earnings on one hand, but a practice dependent on outdated computer systems or medical equipment may not be a good fit in the long run. It’s also important to know whether a particular computer system or application or piece of equipment meets the needs of the practice and the physicians.

Contracts, Agreements and Leases

Are there any binding contracts, agreements or leases for which you will incur personal liability? Be sure that you thoroughly examine and understand the details before you commit to joining the practice.

Ancillary facilities and services

Finally, determine if the practice owns and operates additional facilities and services beside besides direct medical care? These could include, some or all of the following:

  • radiation
  • imaging (MRI, x-ray)
  • research
  • pharmacy
  • lab
  • other

Make sure to determine the commercial structure for these facilities and services and the degree of revenue-generating opportunity as well as potential liability they represent to you in your assessing the practice’s potential as the right career choice for you.


As you can see, there’s a lot of information you’ll need to collect and assess during your investigation of a practice’s operations. If you model your investigation around the five areas suggested above Medical Practice Revenue, Business Services, Medical Practice Management, Personnel/Staffing and Facilities, you should be able to support a clear and well-informed opinion about the health of the practice.

Remember, too, that you have every right to receive and review this information. Your potential practice partners will understand and respect your professionalism and astute business sense for being diligent and methodical in your research and analysis of their operations. You should certainly offer to sign a confidentiality agreement, if requested.

If you get the right answers to your questions and decide to join, your new partners will be eager to take on someone who can add not only clinical value to the practice, but good business value as well.

About the Author:

Wesley D. Millican, MBA, CEO and Physician Talent Officer of CareerPhysician Advisors, LP, and CareerPhysician, LLC, provides comprehensive talent solutions for academic children’s hospitals, colleges of medicine and academic medical centers across the nation. He possesses a longstanding passion for career development of all young physicians and serves as a go to career resource for training program directors and their residents and fellows. In continuing his commitment to the “future of medicine”, Mr. Millican speaks nationally at residency and fellowship programs. His Launch Your Career® Series is a proven resource for today’s residents and fellows and has served as a go to resource for program directors over the last 15 years.