Why is family medicine overhead in the US significantly higher than in Canada?

[-JAG-]

TL:DR: Why do primary care clinics in the US have overheads in the 50-60% range while Canadian ones pay less that half that. Do malpractice insurance premiums and billing agents really make up the difference? Some back of the napkin math below:
 

Let’s start by citing some commonly thrown around percentages. The CMA states that family physicians in Canada pay, on average, 27% overhead. The large GMF’s here in Montreal all charge around that rate, usually between 23 and 31% from what I’ve personally seen. While I can’t confirm it, I’ve also heard from a few family physicians that even at nicer clinics in more expensive cities like the GTA and Vancouver, overhead is closer to 35%. Fair enough. While I couldn’t find any hard data for the states, 50-60% seems to be used as a general estimate. Why? Let’s crush the numbers. I’ll ignore currency value differences for this comparison. I’ll also use a solo practice for the American example, despite its inefficiencies .

A clinic has to pay rent for the space it occupies. I couldn’t find a specific breakdown for medical office space. So let’s use general numbers for simplicity’s sake.

Office space in Midtown Toronto rents for an average of $24.49 CAD/sq ft per Statista. Class B office space in Downtown Dallas rents for an almost identical $25.00 USD/ sq ft. I found similar numbers for other major cities such as Boston and Atlanta. Let’s call this one a dead heat. Assuming a single physician can operate in  a generous 1500 sq ft space, they would pay a yearly rent of 38k.

Now, onto staff. A physician’s office needs a secretary. They make on average, 39k USD per year in the States according to the Bureau of Labor Statistics (Medical secretaries make less, but let’s ignore that) and around 40k CAD per year in Canada according to the trend analysis on the governments job bank. You would probably need to higher a medical assistant as well. These run 30k a year in the US according to the American Association of Medical Assistants for certified personnel. I’m Canada the average medical assistant makes more usually, but for the sake of this comparison let’s call it even.

Next up are supplies. Vaccines, EKG machine, computers, EMR, etc. There’s too many costs here to breakdown, but I don’t think that these items cost significantly  more in the US that in Canada.

Up until now, we’ve established that costs in the US and Canada are practically identical. Now come the two game changers : malpractice insurance and billing expenses, or are they?

CMPA charges a family physician roughly 5k a year in Ontario for a general practice without any ER or OB work. In other provinces this is lower, and sometimes partially reimbursed. Malpractice insurance prices vary in the US but seem to be very dependent on state. In a less lawsuit happy part of the country like Texas or Minnesota it seems like many doctors are paying 5-10k a year but this can easily rise to three times that number in more litigious states like Illinois and Florida. That being said, who wants to live in Illinois or Florida...          Let’s put malpractice insurance premiums at a generous 15k/yr.

Last up is the question of billing, which is much more complex in the US than in Canada. Let’s assume that the Canadian physician has no expenses related to billing and that their American counterpart has to hire a full time billing agent at 50k USD/yr. as well as pay for a license to use billing software at 100$/mo. 

Related to billing are collections. Unlike in Canada, where if you bill OHIP for example you are guaranteed payment if you actually provided the service, American insurers aren’t as easy to work with. That being said, I routinely see collection rates of over 90% being thrown around, and certain programs, such as the rural health clinic program, reimburse physicians for a portion of bad debts (65%). Lastly, I would assume that, as a family physician, you’re probably going to be more successful getting an uninsured patient to pay 100$ for a visit than a hospital would getting that same patient to cover a six figure bill for emergency surgery. Lastly, over 91% of Americans have health insurance so you won’t be seeing hordes of uninsured people unable to pay for your services anyways.

So all in all, the American physician has an extra 60kish worth of recurring yearly costs  over the Canadian, yet they seem to able to bill substantially more for their services (American codes are much more complex than Canadian ones but it seems like even Medicare pays 80$ per patient gross billings, but average salaries for EMPLOYED family physicians are about the same as for Canadian self employed doctors after currency conversion) Why is American overhead so high? Am I missing anything huge? Are billings that go unpaid included in overhead and driving numbers up? Do American doctors see fewer patients. Since your patients are lying to see you, either out of pocket, through their insurance or usually both, do they feel more entitled to your time and therefore drag down the number of patients you can see per day? Even so, ignoring the huge potential for hiring mid levels to work and bill under you, I have a had time believing American family doctors can’t personally see 3-4 patients per hour.

 

[MDinCanada]

Why are you awake at 4h30!?

[JohnGrisham]

US clinics have billing agents and coding agents, and the bloat that comes with  various insurance agencies. Not to mention, clinics in the US are more corporate than smaller business like in Canada. You'll get much more admin bloat in the US than here. While it is more likely that a doctor is running their own small business here in Canada, that is not as much the case in the US when its more likely a corporate entity/company/HMO/etc etc. 

Someone else other than the physician is taking the money, either for their own coffers, or to pay out all the extra employees in a clinic setting there. Mostly both.

[bearded frog]

In the US you have to advertise

Also malpractice insurance costs more.