Therein lies a classic trap for doctors, says Robert J. Solomon, Ph.D., a professor of business administration at the Graduate School of Business Administration at the College of William and Mary in Williamsburg, Va. "A lot of doctors equate working harder with making more money.
The solution to falling income is to take on more patients."
But that only works if you are receiving enough payment for your services to cover your costs plus putting some money in your own pocket at the end of the day, says Dr. Solomon
, who has written two books on medical practice management and works with medical groups and health systems across the country as a consultant for VHA Inc.
"There are some contracts that it is better to just walk away from than to accept the financial consequences."
Telling the good from the bad and ugly contracts
The problem is distinguishing money-losing managed care contracts from those with reasonable discounts that will build your practice.
Finding the answer is more complex than simply projecting how much money a given contract may bring in, Dr. Solomon
Always know where your risks lie and try to offset them in negotiations, Dr. Solomon
With a capitated contract, volume is often the least predictable element.
Stop-loss coverage and options to reopen negotiations are important hedges against volume risk.
But Dr. Solomon
emphasizes that knowing your costs is the key.
"If you don't know your costs, you have no basis for analyzing a contract or negotiating changes."
Of course, managed care firms often will not negotiate contracts.
In that case, it's still important to know your costs so you can judge whether to simply walk away.
"There are a few exceptions, of course, but in most markets you don't need to take every contract that's offered to keep your practice going," Dr. Solomon