The Business Case for Hiring a Nurse Practitioner

Carolyn Buppert, MSN, JD

March 24, 2020

Why hire a nurse practitioner (NP)?

Carolyn Buppert, MSN, JD, Healthcare attorney

Depending on level of experience and type of certification, the NP can bring expertise, increase profits, and provide respite for a sole practitioner or small practice. Having an NP on staff can increase the choice of caregivers that some patients desire. Studies have shown that patient outcomes of care provided by NPs are comparable to those found with physician care, NP care is cost-effective, and patient satisfaction with NP care is high.

If you are thinking about hiring an NP, you may also wonder how the NP will affect the practice's bottom line. For example, how much is an NP typically paid? How much money can an NP bring in? What, exactly, can the NP do in the state where the practice is located, and will the practice be reimbursed for these services?

The basics on expenses, revenue generation, and potential profits when adding an NP to a practice are outlined below.

Calculating the Business Value of an NP

Revenue generation. A full-time NP typically will work 5 days a week, 47 weeks per year (assuming 1 week off per year for continuing education, 2 weeks of vacation, and 2 weeks of holidays). Although it depends on patient acuity, a reasonable patient load for a full-time NP might be 20 patient visits per day. An NP would be performing and billing new patient visits and established patient visits at five levels.

But let's simplify by calculating the reimbursement for an average patient visit to an NP. The math goes like this: Under the Medicare Physician Fee Schedule for 2020, Medicare reimburses a middle-level office visit with an established patient (Current Procedural Terminology code 99213) at $75.32. (Reimbursement rates vary among geographic areas.) If an NP performs the service and it is billed under the NP's name, reimbursement from Medicare and the patient copay is 85% of the Physician Fee Schedule rate. The total reimbursement to the practice would be $64.01. Multiplying 20 patients per day, 5 days a week, 47 weeks a year by $64.01 means the revenue generated by a full-time NP would be $300,847. This number is conservative and includes only the reimbursement for the evaluation and management visits. There would probably be other charges connected to the visit, for testing and earned enhancement for the performance of quality measures.

Note that reimbursement from other insurers may be higher than Medicare's. Medicare's reimbursement would be higher if the practice could comply with the rules on incident-to billing.

Employee expense. NP salaries vary by geographic region. The national average is approximately $110,000. If full benefits are offered, usually costing 25% of salary, the personnel expense would increase the salary to approximately $137,500. If the additional overhead expenses to a practice who employs an NP are $65,000 (additional space, furniture, assistants, supplies, telephone, continuing education, and so on), the full expense of employing an NP would be approximately $202,500 annually.

Potential profit. In the example above, the practice's profit would be $98,347 yearly. Profits could surpass that amount for the NP whose average reimbursement per visit is greater than $64.01, or who bills more than 20 patient visits per day.

Who Reimburses NP Services? 

To ensure that the NP will actually be able to generate revenue for the practice, the NP will have to fulfill the requirements and conditions for each of the practice's payers. The categories of third-party payers who reimburse physician services provided by NPs are:

  • Medicare;

  • Medicaid;

  • Commercial indemnity insurers;

  • Commercial managed care organizations; and

  • Businesses wanting health services for employees or students.

Each payer has different rules on reimbursing NP services.

Medicare NP Reimbursement

Qualification requirements. To qualify as an NP eligible to become a Medicare provider, an individual must hold a state license as an NP and be certified as an NP by one of the following recognized national certifying bodies:

Medicare requires that individuals applying for provider numbers as NPs possess a master's degree from an NP program, as well as national certification and state licensure.

Qualifying NPs can apply for Medicare provider status by filling out and submitting an application form.

Scope of practice. Medicare requires reimbursed services to be within the NP's scope of practice as defined in state law. Medicare defers to state law authorizing the types of services an NP may perform in each state, and each state defines the scope of practice for NPs in its nurse practice act. For scope of practice in any state, contact that state's board of nursing.

Physician collaboration. Federal law on Medicare requires that an NP collaborate with a physician. Collaboration is "a process in which an NP works with a physician to deliver healthcare services within the scope of the practitioner's professional expertise, with medical direction and appropriate supervision as provided for in jointly developed guidelines or other mechanism as defined by the law of the State in which the services are performed."

States vary in their requirements for collaboration between physician and NP. In 22 states plus the District of Columbia, there is no requirement that an NP have a formal agreement with a physician or other healthcare provider promising collaboration or supervision. For example, Oregon law states, "The NP is responsible for recognizing limits of knowledge and experience, and for resolving situations beyond his/her nurse practitioner expertise by consulting with or referring clients to other health care providers."

However, 28 states still require NPs to have a collaborative agreement with a physician. Even in such states as Oregon, where collaboration is not required, an NP wishing to bill Medicare must establish a collaborative connection with a physician. For the law of each state on collaboration requirements, query the state board of nursing.

Commercial Indemnity Insurer NP Reimbursement

Indemnity insurers reimburse healthcare providers on a fee-for-service basis. Each company has its own policy regarding reimbursement of NP-provided services. The policies vary, and include:

  • Payment at the same rate as physicians without requirement for admission to a provider panel;

  • Payment at a reduced rate;

  • Payment for NP-provided services when billed under a physician employer's name; and

  • Denial of payment for services provided by NPs.

Some states' laws require commercial indemnity insurers to reimburse NPs for physician services. Other states' laws are silent on the matter. Commercial insurers may adopt Medicare's rules and guidelines on billing NP services, or may adopt completely different policies. Each practice must query each insurer about the insurer's policies. Practice managers may find it useful to prepare grids that track the various insurers' policies in their state.

Commercial Managed Care Plans

In general, managed care plans reimburse only those providers admitted to the plans' provider panels. Managed care plans do not admit every physician to provider panels and may or may not admit NPs to provider panels. Commercial managed care plan policies on empanelment of NPs vary and include:

  • Admitting NPs to provider panels;

  • Declining to admit NPs to panels, but allowing NPs to provide services for patients on a physician's panel; and

  • Declining to admit NPs to provider panels and permitting only those listed on provider panels to see patients.

Some managed care contracts allow a designated primary care provider (PCP)—a provider admitted to a plan's panel of providers—to delegate to his or her employees the authority to provide services. Other contracts are silent on delegation. Some contracts may require that a designated PCP provide the patient services.

If a plan will not credential a group's NPs, and if the contract between plan and the practice is silent on the issue of PCP delegating the care of patients to an NP, and if the practice intends to offer care by NPs to a plan's patients, then the practice should ask the plan for written authorization, as part of the contract, for NPs to provide services and receive reimbursement.

Businesses Contracting With NPs or Practices Directly

A business wanting an NP to provide health services to employees may contract with a practice or NP under whatever financial terms satisfy both parties. State law requirements (eg, for physician collaboration) for NP practice would need to be fulfilled.