DETERMINING ARNP WORTH OF SERVICE- Cost To Practice

DETERMINING ARNP WORTH OF SERVICE
The data in this example was provided by a nurse practitioner employed in an internal medicine practice in a small city in Kentucky. The income projected is based on the amount actually received by the practice for the nurse practitioner visits. Twenty five percent of the patients have Medicare; 65% have a HMO or PPO; and 10% have commercial insurance.

The nurse practitioner saw 18 patients per day. Two were new patients; sixteen were established patients. Of the established patients, two were Level 2 visits, seven were Level 3, three were Level 4, and four were annual physicals (Level 5). There were also charges for two EKGs and three microscopic urinalyses.

The nurse practitioner generated income of $1075 per day - $5375 per week – and $258,000 per year (assuming 48 weeks worked).

The following chart illustrates the costs incurred by the internal medicine practice to employ the ARNP.

Overhead costs include additional supplies and equipment needed, plus two full-time employees at $10 per hour to support the nurse practitioner (a nursing assistant and clerical help).

COST TO PRACTICE TO EMPLOY ARNP

Salary $80,000
FICA 6,120
Health Insurance 4,000
Malpractice Insurance 504
Continuing Education 2,000
401K 3,200
Professional org/license 150
95,974
Overhead 54,446
Expense to Practice 150,420
Income Generated by ARNP 258,000
Profit to Practice $107,580

Patient Care/Practice Expectations
a. Determine the number of patients the nurse practitioner is expected to see, remembering that a new graduate will need more time in the first six months of practice. It will also help to find out what the most frequently billed CPT codes are for the practice and the amount received for those codes.
b. If you are expected to take call or make hospital rounds, determine what percent of the other practice provider’s salaries are attributed to this activity. You would expect to receive a like percentage if you take rotation with other providers.
c. If you are to be salaried and your clinical and administrative schedule requires longer days or evening hours, you may wish to negotiate a half-day off/week to compensate for this time.

Bonus/Productivity Payment
a. Negotiating a bonus payment system may be important, particularly as the nurse practitioner develops a large patient base. Bonus formulas can be based on productivity, quality, profit or patient satisfaction. if a patient satisfaction based formula is agreed upon, using a satisfaction tool is helpful in determining the bonus formula.
b. A productivity-based bonus may be appropriate if the nurse practitioner is on at least a 50% fee-for service system. Formulas are usually based on number of patient visits per year. Quality based bonus payments may be more practical under a capitated system where profit is measured by maintaining high quality care in as few visits as possible. In this case bonuses should be awarded for meeting or exceeding quality standards.

Profit Sharing
When negotiating profit sharing, it is important that the language regarding the determination of the profit share is clear. It is important to negotiate the right to access the company audit and a method for handling disputes.

Authored by American Academy of Nurse Practitioners Committee on Practice: Chair, Margaret Friel, Staff Liaison, JanTowers, Lenore Resick, Mary Jo Goolsby, Evelyn Jackson, Norann Planchock, Sue Tanner, Barbara Weis

For the full document go to Melnic Consulting Group including Contract Negotiations for Pediatric Nurse Practitioners

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