Fam Pract Manag. 2001 Jan;8(1):62.

Accounting for capitation payments


Often we aren’t sure until we receive the Explanation of Benefits (EOB) report whether all procedure charges are covered under capitation or whether some are fee for service. For that reason, it’s unwise to write off the entire visit until the EOB arrives. How should we account for capitation payments within our practice’s system?


Not knowing exactly what is covered under capitation and what is fee for service is a recipe for disaster. Each managed care contract spells out what the capitation covers, so when covered services are rendered, the practice should immediately write off the charge (less the patient’s co-pay) as a managed care adjustment. Remaining charges should be treated the same as any other patient balance or, if the contract provides for it, billed as fee for service.

Waiting for responses from managed care companies puts the practice at the mercy of the companies’ billing departments, which is not a position practices should be in.

Employment contracts


I’m about to hire a medical assistant for the first time. What terms should the employment contract cover?


I don’t recommend having employment contracts for employees other than providers and management staff.

Employees are hired “at will” in most states for specific duties to be performed at specific times for a specific hourly rate. You should have a definitive job description prepared for each position so employees know their duties; and all employees should receive a copy of the practice’s personnel policy manual. This should be the extent of the “written contract.”

Providers and management staff traditionally do have employment contracts since a number of things —such as incentives, terms of future ownership arrangements and restrictive covenant provisions — may need to be spelled out in advance.

Payment for hospital committee work


Is it permissible for physicians to be paid for serving on hospital committees, or would such payment violate fraud and abuse laws?


If the services provided by the physicians on the committee are to the economic benefit of the hospital, a fair market value payment to the physicians for their service would not create legal problems. The payment would need to be made only for leadership positions that require more than minor amounts of time and would need to be based on a written contract that quantifies the services the physicians will render in terms of time and scope. Even if the payments are coming purely from medical staff dues, as is the case in some institutions, these principles should pertain.

The key to any such arrangement, however, is that payment cannot be made to reward physicians for their referrals or ordering of services, and the compensation must meet fair market value standards under the Stark and anti-kickback statutes.

Starting a practice


I’m a family physician starting a private practice that will have two providers — myself and a nurse. How can we expect to progress financially? What can we do to ensure that the practice gets off to a good start?


It’s hard to say without knowing the details of your situation. Typically primary care providers are at full patient capacity in 18 to 24 months. If you plan to take a low salary for the first 18 months and are able to negotiate good deals for your office lease and equipment purchases, you can expect to begin breaking even by at least the 18th month.

Here are some of the most important steps you’ll need to take:

  • Get credentialed by the insurance companies in your area. Waiting to find out if you’re accepted into the plan may take nine to 12 months in some areas.

  • Hire the right number of employees, and make sure at least one employee is knowledgeable about insurance companies, billing and collections.

  • Set up a computer system for billing, appointment scheduling and other practice management functions.

  • Ensure that your practice operations are consistent with state and federal regulations such as Health Care Financing Administration (HCFA) guidelines, Clinical Laboratory Improvement Amendments (CLIA) and Occupational Safety and Health Administration (OSHA) regulations.

* Denotes member of FP Assist, the AAFP’s online clearinghouse for consultants and attorneys.


Copyright © 2001 by the American Academy of Family Physicians.
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