How to Determine If Your Private Practice Is Ready to Hire Another Physician
Sometimes, it’s easy to get caught up with just keeping up with the day to day operations of a private practice. When you’re overwhelmed, it’s easy to jump to the conclusion that you need more help and need to hire another physician. However, one mistake private physicians in our online physician communities often say that they make is making the decision to hire based on gut instinct, rather than math. Before starting to look for another physician for your practice, it’s important to run metrics to determine if that physician will be successful. Below, we’ll cover the logistics of ensuring that the physician that you add to your private practice will be successful, and that you can support their growth in a way that’s mutually beneficial.
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What are reasons that you may be thinking about adding another physician to your private practice?
Prove that you actually have excess demand to support another physician
Ensure that you have the infrastructure to absorb and support another physician
Consider if the next hire needs to be a physician, and if you need a full-time physician
Set metrics for your practice that determine when it’s time to start looking for your next physician
What are reasons that you may be thinking about adding another physician to your private practice?
Private practices have many reasons for thinking about adding physicians to their practice, including:
Retiring physicians
Anticipated departure of a physician for other reasons
Planned practice expansion in a new location
Long waitlists for patients to be seen secondary to too much volume
Needed expertise in a particular field
A great candidate presents themselves
While these are definitely all indicators that you need to start thinking about the 30,000 foot view and hiring another physician, it’s important to take a pause before going full steam ahead with the interview and hiring process. You’ll want to ensure not just that you can afford to hire that person, but that you’ll be setting them (and your practice) up for success.
PSG Resource: Find your next physician via our Physician Job Board.
Prove that you actually have excess demand to support another physician
You’ll want to start by running numbers, as well as getting the thoughts of your partners. Just because you all feel busy in the moment doesn’t mean that you could obviously find the volume to support the salary of another physician. You’ll want to think about not just the volume of the past 6 weeks, but really of the last year or two and assess the trends.
Metrics you’ll want to look at include:
New patient requests per month
Wait times for new patients
Wait times for established patients
Number of new patients that are inquiring about appointments but then choosing not to schedule because the next available appointment is too far out
Trends in referral volumes
Trends in numbers of referring physicians/practices (and how big they are)
Average appointment utilization percentage by each physician per day
After hours or weekend demand if you’re considering expanding hours
Backlogs for procedures or services that are in demand
It’s very important to distinguish between temporary demand and steady demand, because a delay caused by a group of physicians taking vacation simultaneously is very different than a referral source that is sending more and more patients.
Determine whether you actually are at capacity for taking on new patients, procedures, or appointments
This is both a numbers question and a group temperature question. You’ll want to look at objective metrics on how many appointment, procedure, and if applicable, surgery spots are going unfilled first. Is this a processes problem? Are there too many no shows, are scheduling templates not efficient, are you facing staffing shortages amongst the support staff that limit scheduling, or are you not utilizing your office space appropriately? Look at what could be changed to accommodate backlogs prior to deciding that the existing physicians couldn’t handle any backlogs or unmet demands.
This second part is important though: find out how much more capacity the existing physicians are willing to take on. Do you have a group of physicians that’s looking to see more patients but just need to find a way to do it, or is everybody happy with their current workload, schedule templates, and vacation schedules? If the doctors don’t want to increase their current workload, and you’ve got real unmet demand, it’s probably time to start thinking about hiring someone else.
Build an actual financial model with a physician specific proforma, and make sure the projected revenue growth justifies the additional expenses (and that you can afford the new hire)
Most private practices will tell you that it’s rare that a new hire is immediately profitable. Not only does it take a while for them to scale their practice, but hiring a new physician isn’t just about salary. To start, it also includes paying their benefits, for their support staff, and for their office space and any required supplies/equipment. Add in additional things you might not think of like marketing costs, recruitment costs, sign on and relocation bonuses, etc to see if it feels like the right time to make an upfront expense.
You’ll want to model out the timeframe until the physician becomes profitable with a monthly cash flow model for the first few years, including things like ramp up by month, number of patients they can see per day and how many clinical days per month, new vs. established visits, procedures, RVUs or collections, and more.
Be very conservative with these projections - it’s better to be pleasantly surprised than realize you agreed to pay a physician $400,000 a year (plus the additional costs above) for the next three years while they are generating a significant loss every year. You’ll want a nice cushion to account for things like declining reimbursements, ramp up period with marketing and efficiency, etc.
These numbers are always easier to figure out when an incoming physician is replacing a physician that has left. Utilize a practice consultant or reference benchmarks like MGMA data that can compare apples to apples with similar practices to make more informed decisions when needed.
After taking all these things into consideration, calculate the breakeven point. Many practices are surprised to see how long it’ll take for a physician to be profitable even when the demand is seemingly there.
Ensure that you have the infrastructure to absorb and support another physician
This is very important to think through. This is not a, “when there’s a will, there’s a way” situation. There may be critical issues / catastrophic deviations from your assumptions if you bring on a physician before they can actually be useful. You’ll have to think about things like:
Exam rooms
MAs, front desk, and nursing staff support
Billing and prior authorization capacity
Procedure rooms or OR capacity
Available equipment
Physician office workspace
Parking
Other administrative support
Consider if the next hire needs to be a physician, and if you need a full-time physician
While we are huge advocates of hiring physicians, in today’s healthcare landscape, every private practice is going to need to determine whether a physician actually is the hire that the practice needs. As you look at the unmet needs of the practice, think about whether it may just be that you need a PA or NP to free up some more physician time, whether the needed work could be done by a PA or NP, or if you could do with a part time, per diem, or locums physician to meet the needs of the practice instead of hiring a full FTE.
Set metrics for your practice that determine when it’s time to start looking for your next physician
The fact is, most practices start the process of looking for a new physician once they’re overwhelmed or because they have a sudden departure or retirement from the existing physician pool. This is almost always suboptimal - you’ll be pressured to hire quickly, have less choice to find your ideal candidate from, and you will be negotiating from a position of less leverage.
What you really want is to have a system in place for your practice that’s routinely assessed for by your management team. Once the indicators start flashing green, it may be time to start running the numbers on whether a new hire makes sense. A sample may look like this:
Demand
≥ X months of persistent access pressure
≥ X qualified new-patient requests/month
> X days to next available appointment (steady)
Anticipated practice expansion to a new location
Current physicians
≥ X% sustainable schedule utilization
Stable collections/wRVUs for 12+ months and no desire for further ramp up
No obvious coding/operational inefficiency remaining
Anticipated physician departure or retirement
Conclusion
While most private practices dream of scaling, it’s important to do so responsibly. Hiring a new physician is both a large expense as well as a substantial commitment to making the physician that you add successful. It shouldn’t be approached with a gut instinct, but with a careful look at the numbers as well as the sentiments of the whole group in mind.
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