Wednesday, April 15, 2009

Lawyers Say the Darnedest Things

Last night, I overheard a senior lawyer speaking with my wife, a psychologist:
"The first thing a lawyer does is discuss how much their services will cost their client. You know, in all my years of going to the doctor, I never once felt I needed to ask how much he cost."
I couldn't resist joining in and said, "Well, that's because most know what to tell you, since for any given person, the doctor does not negotiate his own fee, it is negotiated for him by third parties." He nodded acknowledgement.

But this got me thinking. What would we ask as salary for our services priced by the hour? Could we have this conversation with our patients after the dust had settled after an acute illness? If we factor in office expenses, the price of malpractice, account for our level of training and experience, and consider the price point of our attorney colleagues, what hourly wage would we accept? Would we be able to have this conversation, or have our policies and expectations made such a discussion too politically incorrect to broach with our patients?

I have heard others in private practice discuss this topic before while working in Cincinnati. One doctor mentioned to me that he had to bill at least $200 per hour just to cover their office expenses (receptionist, billing staff, office manager, benefits, vacation, utilities, rent, taxes, etc).

Certainly there are many geographic differences in the cost of living and practicing medicine in America. Also, different price-points might be acceptable for an primary care doctor or a specialist and worse, the amount we bill no longer pairs with the amount we can collect. But if each of us had to pick and hourly wage like lawyers, what would we charge if we take all of our expenses and vagaries of our current system into account? Given all of the overhead to health care today, would we have the ability to justify our hourly wage to our patients?

Given that it's likely to far exceed $200 per hour, I suspect none of us could have that conversation any more.



Anonymous said...

Doc, I'm just a lowly web developer and I bill $150/hr. You guys should be making multiples of that.

Anonymous said...

But lawyers bill in increments of 6 minutes. That means $20/6 minutes. That would put the cost of a brief follow-up visit at $20-40. On the other hand, most docs would not take $400 for 2 hour in the OR. Lawyers don't have the variation in settings that you get with physicians (and you seldom need to get a lawyer urgently on nights and weekends except for some criminal matters).

#1 Dinosaur said...

Billing by the hour is exactly the solution I propose (or plan to, in my next book.) Here's my formulation:

$100/hour/year of training after medical school.

That means my charge should be $300/hour, or $30 for 6 minutes. That may actually be a little rich for my geographic area, so I'd probably settle for $200. That would mean $50 for a 15 minute follow-up visit, corresponding to a Level 3; about right.

Look at it this way, though:

$200/hour, 40 hours/week (obviously many docs would hit more than that), 50 weeks a year (assuming only 2 weeks vacation) yields $400,000 per year. My overhead is about $160K; I'd be thrilled to take home $240K per year.

Multiply that by just 2 (ie, four-year residency yielding $400/hour); same number of hours annually comes to $800,000. Any doc unhappy with that has more problems than can be solved with money.

DrWes said...

#1 Dinosaur-

Interesting that you denigrate your income from $300/hr to $200/hr -> taxes would eat up about 35% of your $240K, leaving you with $156K (admittedly, in the ballpark of current wages for many internists). As noted above, a "lowly" web developer makes $150/hr and junior law partner makes $395/hr here in Chicago while a senior law partner makes a whopping $595/hr.

Given that, still think $200/hr is Okay? Or might you appear want to take the lower salary because that's where your guilt about requiring more is minimized...

Mind you, I do not necessarily disagree with you about the benefits of looking at things on the basis of hourly wage, but I'm just not sure doctors are very good at justifying their salaries comparible to other professions when we talk in these terms.

Anonymous said...

Could you explain something to me, an ordinary patient who's neither an MD nor a JD? I have a medical condition and get treated by several physicians (all specialists in various fields) at your institution. Some belong to the medical group, some are independent practioners. The IPers do not accept my insurance (but will file it so I eventually get something remitted although I have to pay up front) so I pay 'full freight' - and it's often a hefty amount for a simple in-office follow up visit. (And this practice is THRIVING).It's my assumption that when structuring their practices, medical practioners made a business decision one way or the other - join the medical group (which seeme to negotiate everything) or stay independent. So why not become an independent practioner?

DrWes said...


There are pros and cons to private practice vs employed models. With private practice there is generally more risk but, as you mention, potentially more financial reward. But these days with declining reimbursements to physicians in general, the decline in revenue must be offset by increased number of patients seen. Established practices in affluent areas still due well, but increasingly the declining reimbursements, coupled with ever-increasing expenses of salary, malpractice, health insurance, adoption of EMR, e-prescribing, etc., has made more and more practices abandon an independent model in favor of employed status or partnership arrangements with larger hospital groups. The vagaries of Medicare billing also matter. Since medicare bills a "technical" as well as a separate "professional" component - those with technical machines make much more income (reportedly helps pay for the equipment/techs to run it, etc).

Guys like me do highly technical procedures in fancy lab facilities housed in hospitals. As such, we do not generate significant technical revenue for an independent group model like regular cardiologists (they own their own echo machine or nuclear camera that garners the prized "technical" AND "professional" components). Certainly, there are sharing agreements in larger groups in return for taking call, for instance, but academic interests and lifestyle decisions also contribute to one's decision where to practice.