Chart out costs, revenues before hiring new doctor

Practice Pointers. By Karen S. Schechter, AMNews contributor. Jan. 23, 2006.

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Question: My partner and I are considering hiring a new physician to join our ob-gyn practice. This physician would be an employee of the practice initially, with the intention of inviting the doctor to become a shareholder later. From a workload aspect, the decision is clear. But cash is tight, and we are concerned about what it will cost during the "startup" period for this doctor. How can we determine if the decision to hire is financially feasible? When can we expect this physician to start generating a profit?

Answer: Though every hiring and cost situation is unique, there is a way for you to project the cost and eventual benefits of hiring this new doctor.

There are several potential additional expenses associated with hiring a new physician, not the least of which is salary and payroll taxes. Then there are startup costs, and expenses relating to staffing, operations, supplies and other items.

Startup costs include the direct costs associated with recruiting a new physician, such as hiring a physician recruitment firm if necessary, as well as preparing the necessary legal documents and marketing the newly hired physician to the community, along with some indirect costs.

Indirect costs associated with hiring a new physician should not be overlooked. These costs are typically the time that your partner and you will spend interviewing, conducting reference checks, participating in negotiations and meeting with your attorney, accountant and other advisers. This might impact the number of patients you see during that time period and cut into your personal life. Your staff, family and you should be aware of this time investment.