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    Saturday, April 28, 2007

    Equation Equity: How to calculate a doctor's fee:

    Specifically, the method sets practice expense RVUS so that they are the same proportion of total RVUS as practice expenses are of total practice revenues: (4) [RVU.sub.pe,i] [ITRVU.sub.i] = [PEP.sub.i], where [TRVU.sub.i] = total relative value units for

    service i = [RVU.sub.w,i] + [RVU.sub.pe,i]
    with [RVU.sub.w,i] denoting the physician
    work RVU, and [RVU.sub.pe,i]
    the practice expense RVU (including
    malpractice) for service

    Equation (4) can be solved for [RVU.sub.pe,i]- (5) [RVU.sub.pe,i] = [[PEP.sub.i]I (1 - [PEP.sub.i]) [RVU.sub.w,i-

    Equation (5) states that if, for example, practice expenses account for one-half of physician revenues on average for the specialties performing a service (that is [PEP.sub.i] = 0.5), then the practice expense RVUs for that service equal the work RVUs.

    Substituting equation (5) into the expression for total RVUs, we have:

    (6) [TRVU.sub.i] = [1/(1 - [PEP.sub.i])][RVU.sub.w,i-

    [PEP.sub.i] = service i's practice expense percentage,
    that is, the percentage
    of practice expenses in total revenues
    for each specialty providing
    service i, weighted by the
    specialty's frequency of performing
    service i.

    Multiplied by an appropriate conversion factor and geographic adjustment factor, equation (6) gives the Medicare fee for service i under the proposed method. We call equation (6) a specialty resource-based relative value scale because it is calculated from only [RVU.sub.w,i] and [PEP.sub.i], which are both derived from actual physician resource costs by specialty. The percentage markup over physician work for service i implied by equation (6) is: ([TRVU.sub.i] - [RVU.sub.w,i])[IRVU.sub.w,i] = (7)

    [PEP.sub.i]I](1 - [PEP.subi]).

    If the practice expense percentage PEP were the same for all services, equation (6) shows that the method would allocate practice expenses in proportion to physician work. Also, the markup over work would be the same for all services (equation 7). However, [PEP.sub.i] does vary by service, though only according to the mix of specialties performing a service. For example, fees for services performed by psychiatrists are marked up less over physician work than fees for services performed by general practitioners, because psychiatrists have lower practice expenses relative to revenues than do general practitioners.

    How to calculate every other profession's fee:

    x amount of money multiplied by y amount of hours = payment

    How did we ever let it get to that? Oh, that's right. We're the only profession that relies on someone other than our customers to pay us.

    posted by Sydney on 4/28/2007 04:30:00 PM 3 comments


    How to calculate every other profession's fee:
    x amount of money multiplied by y amount of hours = payment

    Are you comparing doctors to auto mechanics? This formula only applies to people who are paid by the hour - i.e. mostly blue collar workers and independent consultants. Maybe also lawyers.

    Show me a researcher or an engineer working for a corporation who is paid by the hour.

    If you are at a high skill job on a fixed yearly salary, you are considered "non-exempt" which means you are not getting overtime pay, not even 1 to 1. You are getting a fixed yearly salary and if your (usually insane) schedules require you to work evenings and weekends to meet deadlines you do it for no pay and no comp time. You don't want your project to be cancelled because then your group may be the prime candidate for layoffs should your company fail to meet Wall Street's expectations.

    Sometimes I take vacations only to work from home because I need to finish a paper by a conference' deadline or simply finish a project. In addition, since I work for an international company, now we have teleconferences with India and China in strange hours, and no, I am not getting paid for it.

    Don't like it - too bad, feel free to leave or get bad evaluation. In my company two bad evaluations and you are out the door.

    Oh, and if you think we are getting inflation-based increases, think again. Very few companies adjust for inflation. Mostly they compare how much they pay compared to their competitors and pay just enough to keep good people. Provided the company is doing OK. If the year is bad - no raises, be lucky you have a job.

    Maybe patients have no clue how much or little the doctors are paid. But you have no clue how other professions are paid.

    By Anonymous Diora, at 6:00 PM  


    Indeed, salaried positions are different. Some doctors are also paid on a salaried basis, but their employers are ultimately reimbursed by third party payers based on the above formula. The dilemma for them is that their employer never thinks they work hard enough for their salary.

    I was, in fact, thinking of other professions in which a person pays a professional for advice - lawyers, accountants, and yes, car mechanics.

    There are all kinds of ways to calculate payment, but I'd wager the medical profession is the only one that gets reimbursed based on some Harvard economist's complex equation.

    By Blogger sydney, at 10:13 PM  

    Sydney, yes if you are comparing only to service professions, you have a point. I don't know much about those having being salaried for the past 20+ years, not to mention in the field where salaries dropped significantly since late 1990s.

    Salaried positions often include pretty complex formulas too. For example, many companies do yearly surways of how much their competitors are paying for similar jobs. Then they determine 1) amount of money available for raises based on company's profits and the stock market and 2) person's salary compared to market average. Top performers (which is often the function of project's visibility as much as how good someone is) also get performance-based raise. So, somebody who didn't end up among "top performers" in a particular year and whose salary happens to be at or above some vague unknown "reference point" gets no raise.

    BTW - I mixed up "exempt" and "non-exempt" in my post. It is the other way around. 'non-exampt' get overtime pay while "exempt" are exempt from it.

    By Anonymous Diora, at 12:54 PM  

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