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You don’t need an elaborate cost-accounting method to determine how much it costs you to treat your patients, Peter Lucash asserts. "Most practices use 20 to 40 CPT codes. It’s not worth it to spend a lot of money on cost accounting. It will probably cost you more than you could possibly gain," says Lucash, president and chief executive officer of Lucash & Co., a Charleston, SC, consulting firm.
Here are two ways to determine your costs:
1. To find your average cost per patient per year, calculate the total expenses for the practice, not including owner-physician compensation. Calculate the total number of unique patients your practice sees in a 12-month period. (This is a compilation of individual patients regardless of the number of times they are seen. If a patient comes in 12 times in a year, she still is counted as one unique patient.) Divide the total expenses by the number of unique patients to determine the average cost per patient per year. Divide by 12 to find out the per-patient, per-month cost of treatment.
If a health plan offers you compensation on a per-member per-month basis, you can compare what it costs you per patient per month to what is offered. "The assumption is that all patients are fundamentally the same. The managed care patient may be healthier but you should assume they are sick," he says.
2. To calculate your costs based on RVUs, calculate the utilization for each CPT code you delivered in a 12-month period. Multiply the utilization of each CPT code by the RVUs for each and you get the number of RVUs per CPT code. Add these up and you have the total number of RVUs that you delivered for the year. Divide the total expenses by the total number of RVUs to see your cost per RVU, also known as the Practice Expense Conversion Factor (PECF). To determine your cost for providing a service, multiple the RVU for each CPT code by the PECF.
"This is what you do to calculate your revenue per CPT code under Medicare. You’re doing the same thing for expenses. Your revenue should exceed this revenue calculation," Lucash says.