Dermatologists Use Production Pay, Expand Cosmetic, Cancer Care Services

Physician Compensation Report, Sept 27, 2000

Production physician pay formulas typify dermatology practices, whether in single or multispecialty groups, say managers in both types of groups.

Single specialty groups that PCR interviewed are on collections formulas, except for one that combines aspects of time worked, production and equal shams (see box p. 3).

The multispecialty groups interviewed by PCR measure production by collections or "adjusted charges," which are gross charges minus contractual discounts. Some allocate costs against physicians to arrive at a pay figure, while others simply pay a percentage of production.

Apart from traditional dermatological concerns like acne, dermatology today focuses on two main types of care: skin cancer surgery, which is growing fast, and cosmetic care, which is growing even fasten Many practices tend to emphasize one or the other of these two areas.

Nancy Carson, administrator of cancer-oriented seven-physician Las Vegas Skin & Cancer Clinics, says that not only the exposure to the sun in southwestern regions, but also the many elderly patients, are factors explaining the sharp rise in treated skin cancers.

Carla Grijalvi, administrator of cosmetic-centered two-physician Skin Spectrum in Tucson, says her group is so busy that it turns away 30 patients per day And that is even though a lot of cosmetic care is self-pay

Laser technology -- and the skin's often benign reaction to bursts of laser energy -- has made possible many of the developments on both the cancer and cosmetic sides. Carson notes that lasers are used in the removal of hair, scars, varicose veins and tattoos. MOHS surgery is a layered removal of melanoma on the skin, using lasers. During MOHS surgery, dermatologists often do their own pathology studies.

MD Encounters Can Top 1,000 Per Month

At Carson's practice, the seven physicians and two salaried physician's assistants see more than 7,000 patients a month. The top producer sees 1,200 to 1,600 patients every month. Driving that caseload, in addition to the sun and the elderly community, is Las Vegas's extraordinary growth, now at about a net 6,000 to 7,000 per month (about 12,000 moving in and 5,000 moving out). There are many dermatologists in Las Vegas, but still not enough, Carson says.

The pay for all the physicians, from the one owner down to the relatively new person still on a salary guaranty is 45% of individual collections, with the other 55% going to meet overhead. The practice is so busy that even the new person exceeds the guaranty

The pay ranges from $12,000 per month for a halftime physician to $150,000 per month for the top producer, Carson says.

Benita Duncan, CMPE, business manager of Tulsa Dermatology Clinic, says her group begins its pay formula with each physician's adjusted charges. It classifies costs into two categories: fixed, which are divided equally, and variable, which are divided in proportion to adjusted billings. It allocates all its costs that way to individual physicians, and comes out with pay figures.

The practice has 4.75 full-time equivalent physicians. Most of them think this pay plan, which they have had for two years, is fair, Duncan says.

Multis Go for Production Too

Springfield (Ill.) Clinic pays all of its 145 physicians, including two dermatologists, based on individual net collections, says CEO Mike Maynard.

Then expenses specifically identifiable to particular physicians are subtracted. Finally, expenses not identifiable are allocated by production, and subtracted. The result is pre-tax pay for each physician.

Maynard says the formula is effective as an incentive for hard work and holding down expenses that the physician can control, such as clinical staff.

A 35-physician multispecialty group in Ohio, which asked not to be identified, measures production by adjusted charges. After subtracting expenses from revenues, the group sets a pool from which physicians can be paid, says its COO. Ninety percent of the pool is divided in proportion of each physician's adjusted billings.

The other 10% of the pool is distributed according to each physician's RVUs. Ten percent is the approximate amount of group profit that comes from lab and X-ray services. The group thought that this part of the pay plan was necessitated by the Stark anti-self-referral law, on the ground that pay from ancillaries should not be distributed according to billings, the COO explains.

The McFarland Clinic in Ames, Iowa, with 190 physicians and five dermatologists, figures out its pay pool and distributes 30% of it according to equal shares among physician-owners, and the other 70% according to each owner's share of adjusted charges, says CEO Dale Anderson, M.D.

Anderson says no plan will meet the needs of all specialties by keeping pay competitive. As a result, certain hard-to-recruit specialties receive extra production and supervision credits. Specialties now receiving such pay are oncology, GI and radiology, but not dermatology.

Contact Carson at (702) 436-1001; Duncan at (918) 749-2261; Grijalvi at (520) 797-8885; Maynard at (217) 525-5157; and Anderson at (515) 239-4734.