How Much Can You Afford To Pay A Provider?
Every week PMI receives several phone calls and emails asking for help to determine how much to pay a provider. We suspect there are many others out there with similar questions and we want to help!
PMI now offers an online calculator that allows you to adjust the relevant variables to determine what your practice can afford to pay a provider. To effectively use the calculator, follow the four steps explained below.
With this calculator, you can enter these practice-specific variables to determine how much a practice can afford to pay:
Number of Days Worked
Revenue Per Encounter
Practice Overhead Rate
Desired Profit Margin
Provider's Benefit Cost
Before you begin, there are a couple of important things you will need to figure out in advance to complete the calculation:
Provider's Revenue per Encounter. If you want to determine what you can afford for a new provider joining your practice, simply use the practice's overall revenue per encounter. (Total Revenue Generated divided by Total Patients Seen). If you are looking to analyze a provider who has been with you at least a year, simply divide the revenue they generated in the past twelve months by the number of patients they saw during the same period. Be sure to use an entire twelve month period to address seasonality issues normally seen in Pediatrics.
Practice Overhead Rate. For more accurate results, you will need to determine all the practice expenses prior to provider compensation and benefits. [(Total Practice Expenses minus Provider Costs) divided by Total Practice Revenue].
Need some help figuring this out? Check out our video on determining how much to pay a provider.