The highest-revenue provider was the least profitable
A dermatology group came to us last year (anonymized Sorso client, Southeast, five providers, ~$4.2M revenue) with a straightforward question: "We are doing $4.2M in revenue but only keeping $280K. Where is all the money going?"
They had five providers. The owner assumed the answer was overhead, maybe staffing costs, maybe rent. The usual suspects.
When we built provider-level P&Ls, the answer was more specific than anyone expected.
Dr. M was the highest-revenue provider in the practice. $380K in annual revenue. The owner loved pointing to that number in meetings. "Dr. M is our top producer."
Dr. M was also generating $12K in profit. Not $12K per month. $12K per year. That is a 3.2% margin on $380K in revenue.
Meanwhile, Dr. K, who produced $295K in revenue (the second-lowest in the group), was generating significantly higher profit with a healthy margin.
Revenue is not profit. And if you are not tracking profitability at the provider level, you are guessing which members of your team actually make you money.
Why Dr. M's revenue did not turn into profit
We dug into the data. The problem was not one thing. It was four.
Heavy Medicaid payer mix
Dr. M saw the most patients. That is why revenue was high. But 42% of Dr. M's patients were Medicaid. The practice average was 18%.
Medicaid reimbursement for dermatology procedures in their state averaged $48-$62 per visit. Commercial insurance averaged $125-$180 for the same procedures. Dr. M was doing high volume at low reimbursement.
The owner knew Dr. M saw a lot of Medicaid patients. What he did not know was the financial impact. When we calculated revenue per visit by provider, Dr. M averaged $78. Dr. K averaged $142. Same office, same procedures, dramatically different reimbursement because of payer mix.
Under-coded visits
Dr. M consistently coded at lower E/M levels than the documentation supported. We reviewed 60 of Dr. M's charts and found that 35% could have been coded at a higher level based on the clinical documentation.
This was not fraud risk in the other direction. Dr. M was leaving money on the table. A 99213 billed instead of a 99214 is a $30-$50 difference per visit depending on the payer. Multiply that by the visits where coding was lower than documentation supported, and the practice was missing thousands per month from Dr. M's panel alone.
Dr. M was not trying to under-code. The habit had formed early in residency: code conservatively to stay safe. Nobody had ever audited it, so it continued for years.
Outdated fee schedule
The practice had not updated their fee schedule in three years. They were billing commercial payers at rates that were 8-15% below current market for their region.
This affected all providers, but it hit Dr. M's patients harder because the Medicaid reimbursement was fixed regardless of the fee schedule. The only place fee schedule updates make a difference is commercial payers. With only 38% commercial in Dr. M's panel (versus 65% for Dr. K), the outdated fee schedule was leaving even more money on the table for the patients where it mattered most.
Unprofitable procedures
Dr. M performed a high volume of cryotherapy treatments. Quick procedures, low reimbursement. The overhead per procedure (room time, supplies, staff involvement, documentation) ate most of the margin.
When we calculated the cost per procedure including allocated room time, MA support, and supplies, cryotherapy was generating $8-$12 in profit per treatment. Dr. M was doing 35-40 of these per week. Compare that to excisions and biopsies, which generated $60-$90 in profit per procedure, and the problem was clear.
Dr. M's schedule was packed with high-volume, low-margin work. Dr. K's schedule had fewer total patients but a higher concentration of profitable procedures.
What provider-level profitability tracking looks like
A provider-level P&L takes each provider and calculates their true profitability. Here is the structure we use:
Revenue line:
- Total charges billed by the provider
- Contractual adjustments (the difference between billed charges and allowed amounts)
- Net collections (what actually got paid)
- Revenue broken down by payer category (commercial, Medicare, Medicaid, self-pay)
Direct cost line:
- Provider compensation (salary, benefits, payroll taxes)
- Medical assistant or support staff allocated to that provider
- Supplies consumed during that provider's procedures
- Malpractice insurance for that provider
Allocated overhead:
- Proportional share of rent (based on rooms used or time in clinic)
- Proportional share of front desk, billing, and admin staff
- Proportional share of EHR, equipment, and other fixed costs
Bottom line:
- Profit per provider
- Margin per provider
- Revenue per visit
- Profit per visit
- Visits per day
When you lay this out side by side for every provider, the differences are stark. And the conversations change.
How it changes compensation conversations
Most multi-provider practices compensate providers based on some combination of base salary and production bonuses. Production is usually measured by collections or RVUs.
The problem is that collections-based compensation rewards revenue, not profit. A provider who generates $380K in collections and $12K in profit gets paid more than a provider who generates $295K in collections and significantly higher profit.
That is a bad incentive structure. You are paying more for the provider who contributes less to the business.
Once you have provider-level P&Ls, compensation conversations shift from "how much did you collect" to "how much profit did your practice generate." That does not mean you cut provider pay. It means you have data to support changes that make both the provider and the practice more profitable.
For Dr. M, the conversation was not punitive. It was: "Your volume is strong, your patients like you, and your clinical work is good. Let us fix the things that are eating your margin so that your production actually translates to profitability for the practice and for your bonus."
What they did to fix it: profitability aligned with production in six months
Here are the specific changes that moved Dr. M from $12K to profitability in line with the provider's revenue contribution over six months.
Coding audit and training. We hired a certified coder to review Dr. M's documentation and provide one-on-one training. Two sessions, about three hours total. Dr. M's average E/M level went from 3.1 to 3.6 within two months. That was an additional $3,800 per month in collections with no change in patient volume or clinical work.
Payer mix adjustment. The practice set a Medicaid cap at 25% of any single provider's panel. They did not drop Medicaid patients. They redistributed new Medicaid patients more evenly across all providers and directed new commercial patients toward Dr. M. Within four months, Dr. M's Medicaid mix dropped from 42% to 28%.
Fee schedule update. The practice updated their fee schedule to current market rates for their region. This was a practice-wide change, but it had a measurable impact on each provider proportional to their commercial payer volume. For Dr. M, the fee schedule update added approximately $1,800 per month once the new rates took effect.
Schedule restructuring. Instead of packing Dr. M's schedule with quick cryotherapy visits, they blocked time for higher-margin procedures. Dr. M still did cryotherapy, but the weekly volume dropped from 38 to about 20, and two additional biopsy or excision slots were added per day. This increased revenue per hour without increasing total hours worked.
Total impact over six months: Revenue dipped slightly from $380K annualized because of the procedure mix change and Medicaid redistribution. But profit increased dramatically — from $12K to a level that matched the provider's actual revenue contribution. The practice made significantly more from Dr. M while Dr. M worked the same hours and saw roughly the same number of patients.
Revenue went down. Profit went up. That is the whole point.
Most practices do not track this
In my experience, fewer than 1 in 10 multi-provider practices track profitability at the provider level. They track production (collections or RVUs). They track patient volume. They do not calculate profit.
The reason is that it requires combining data from multiple sources: billing data for revenue by provider, payroll data for compensation, and accounting data for allocated overhead. Most accountants do not have access to billing data, and most billing companies do not calculate profitability. The analysis falls between two systems and gets done by nobody.
This is exactly the kind of thing we build for our clients. If you have multiple providers and have never seen a provider-level P&L, schedule a free assessment. We will show you who is actually making you money and where the opportunities are.
