Primary care practices are generally hospital-owned or physician-owned, but more big corporations like Amazon, Walgreens, and CVS are looking to get a piece of primary care. How profitable are these services?
Hospital-Owned vs. Physician-Owned Practice Net Income 2017
Primary care specialties are typically less lucrative than nonsurgical single specialties such as neurology, dermatology, endocrinology, etc. With less procedures to bill for, primary care services have fewer codes they are able to bill.
Privately owned practices by physicians look to be more cost-effective than those owned by larger entities. Larger hospital-owned practices usually accept a wide variety of insurances and take most patients, whereas physician-owned practices may be more selective about which insurances they accept. Concierge and direct primary care practices are also more common among physician-owned practices.
Sample Cost Breakdown from 2019
Business Insurance: $1,400
Office Supplies: $800
EMR & Billing Software: $450
Wages + Benefits for Employees (2 employees + Doctor): $17,000
This physician’s total practice expenses were $25,870. Income leftover after expenses: $16,796. This physician was only paying himself $10k/month at this time.
In Arizona, total compensation for a primary care nurse practitioner in 2023 would be closer to $200k/year, or $16,667/month including retirement match, healthcare benefits, student loan repayment assistance, and more.
Medical Assistants are now averaging $20/hour, so the primary care provider and medical assistant and biller/coder labor would run closer to $23-24k/month. This would leave income after expenses close to $9-10k/month.
This does not include an office manager or anyone to help take extra work off the primary care provider’s plate. The first employee must be multi-skilled to be able to help the primary care practice run as smoothly as possible. Additionally, some medical assistants aren’t trained to draw blood for labs or give injections (Arizona has no restrictions for injections for MAs).
With the 2021 updates, annual income for the year is not released, but his wages include those to himself, one other physician, and 15 employees including PAs, medical assistants, billers, and more.
Hiring Practice Managers vs. Not
This physician hired a practice manager after approximately three years of running it alone. Managing employees, grievances, stocking inventory, creating protocols, talking to drug and medical device representatives, talking to unhappy patients, and initial screenings of new hires were things this physician wanted to off-load.
For a single provider, a practice manager does not make financial sense due to the minimal staff needed to support one primary care provider. When two or more primary care providers are involved, all the support staff added on start to necessitate the need for a clinic manager.
Hiring internally and promoting an employee with a good work ethic and solid problem-solving skills can make a great practice manager. Showing there is growth available within a primary care practice makes it attractive to current and future employees.
The Unexpected Costs of a Bad Hire
Hiring a new primary care provider includes more overhead than almost any other position. A rock solid employee contract and proper vetting can take time, but are worth the investment.
The estimated overhead to taking on a new physician includes:
-$800/month malpractice insurance
-$3,000/month medical assistant
-$330/month billing platform
-$50/month HIPAA email/secure texting
-$100/month dictation software
-$800/month health insurance
-$3,0000 their share of rent
Finding new providers is difficult. Most candidates can be filtered into three types:
1- New graduates. Graduation timing just doesn’t line up clinic needs.
2- Doctor with problems. Multiple lawsuits, gaps in career, switches jobs often for the past 10-20 years
3- Doctors who can’t take a pay cut. Hospitalist locum pays much more than outpatient.
Nurse practitioners and physician assistants are good candidates to fill in any gaps you might have with patient scheduling and physician availability.
Best Way to Run a Lean Primary Care
Automating patient check-in, getting patient insurance, and keeping employees off of the phone as much as possible helps to get patients roomed quickly. If you can keep patients circulating in and out and prevent bottle necking in the clinic and on the phone, more time can be spent on patient care than administrative work.
Medical equipment is also an expense to think about when starting. Exam tables are at least a thousand dollars a piece, computers, and EKG machines are all costs associated with opening a new primary care clinic. Finding this equipment at auctions, or buying used are great ways to save costs.
Why Single Physician-Owned Clinics are Dying
Reimbursement rates for single providers are not good. Insurance companies do not negotiate with solo practitioners, and most private insurance companies pay less than medicare. Low reimbursement rates prevent growth and limit service offerings.
Many ERs, urgent cares, and more are using online booking systems. Decreasing the amount of barriers to book appointments, such as online booking systems helps bring patients into the clinic.
Non-stop availability. Patients want doctors that can be reached 24/7. This is near impossible for a solo doctor to provide on their own. Many new health tech start-ups are providing 24/7 doctors on-call for patients to consult via subscription service.
Starting a primary care clinic is best for the entrepreneurial minded nurse practitioner or physician assistant. With low to no student loans due to the amount of education needed and ability to work elsewhere during the opening of the clinic, nurse practitioners are able to open primary care clinics with lower risk than physicians.
Physicians have a wide variety of specialties that pay far more than primary care, and exit medical school with hundreds of thousands of dollars. Starting a brand new primary care is risky and expensive.
For corporations and other large entities, a standard primary care does not appear to be highly profitable unless a highly innovative approach is taken.
Amazon & One Medical – proud provider of telehealth appointments 24/7 and same-day or next day appointments with their annual membership, it is unclear what Amazon has in store for One Medical.
Walgreens & Village Medical – patients can fill prescriptions in the same place as their doctor’s office. Prescription drugs had a 21% gross margin on average in 2018.
CVS & Signify Health – an in-home service provider, in 2019, 40% of adults over 65 reported trouble with mobility.