Carolyn Buppert, NP, JD


September 11, 2001


A physician has asked me to see his patients for follow-up visits and hospital rounds. He wants me to be an independent contractor and he wants 45% of my billings. How would this work? In other words, do I bill Medicare, Medicaid, or commercial plans and then pay him?

Response from Carolyn Buppert, NP, JD

You need to answer 3 questions:

  1. What is the physician providing for his percentage of billings? Are you working out of his office, using his space, utilities, assistants, and billing services?

    If so, the 45% he wants probably is within range of the fair market value of the "overhead" expenses for a nurse practitioner (NP) practice. As a rule of thumb, you should expect that half of what an MD or NP bills is spent on the costs of doing business -- overhead. If he wants you to pay rent, supply your own staff, and do your own billing and is asking for 45% for referring patients to you, then you run the risk that the government would see his percentage as a kickback from you to him for referrals. Kickbacks are illegal.

  2. Are you a skilled coder?

    If not, your income will suffer. Under the proposed arrangement, you have a vested interest in coding accurately and legally, and coding every procedure that brings reimbursement. For example, suppose a patient comes for a well-child visit. The child's mother states that she is worried about the child's hearing. When, as part of the well-child evaluation, you check the child's ears, you note that cerumen is occluding his ear canals. You irrigate and remove the cerumen. A practitioner skilled in coding will bill the well-child visit and the cerumen removal. A less knowledgeable or less motivated NP will bill the well-child visit and forget about the cerumen removal.

  3. Do the numbers suggest that you can make sufficient income, given your work style and the physician's practice systems?

    For example, if you plan to work 5 days a week, 48 weeks a year, and see 10 patients a day, and if your average charge per visit is $40, you will bill $96,000 a year. If you collect on every one of your bills, the physician will take $43,200, leaving you with $52,800, from which you must subtract Social Security, Medicare, unemployment insurance, malpractice insurance, professional license fees, continuing education, transportation, and other expenses usually covered by the independent contractor. If, however, you see 20 patients a day, keeping the other elements of the scenario the same, you will bill $192,000. The physician will take $86,400 and you will have $105,600 from which to fund your daily life, Social Security, Medicare, unemployment insurance, and so on. Whether you see 10 or 20 patients a day will depend on how efficient you are, how many hours you are willing to work every day, how good you are at marketing your practice in the community, how much overflow the physician has to give you, and the efficiency of the support staff at getting patients processed. Your rate of collections on your billings will depend on your knowledge of insurers' billing and payment policies and the skill of the office staff at tracking denials and failure to pay.

You and the physician should agree on the details of your business arrangement, and should put those terms in writing. Among the issues to be addressed in the agreement are:

  1. Compensation: Is he paying you an hourly rate or a percentage of your billings, or are you doing the billing and paying him a share of your billings?

  2. Work site: Are you working in his space or your own? Are you paying him rent for the space you use or is that included in the 45%?

  3. Utilities and equipment: For example, are you using his telephones and copying machine or your own?

  4. Billing: Is his office billing for you? Will they bill under your number? How often will they supply you an accounting? How often will they pay you your share?

  5. Assistants: Does his office staff assist you? Is this covered in his 45% of your billings?

  6. What else will he provide you?

  7. What will you provide him? Specific hours of coverage? Administrative duties? On-call services?


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