hysician Care Services, Inc. (PCS), was founded as a for-profit corporation on January
l, 2000. Three physicians each own 20 percent of the stock, and one physician owns 40
percent. PCS currently offers non emergent care services in two locations-at the Alpha
Center just outside the city limits of Middleboro in Mifflenville and at the Beta Center in Jasper,
close whe Jasper industrial park and suburban neighborhoods. At these locations ambulatory
medical care is provided on a walk-in basis. PCS centers do not offer emergency services. If a
patient arrives needing emergency services, an ambulance is called to transport the patient to
the nearest hospital emergency department.
The Alpha Center opened in January 2000. Originally, it only treated occupational
health clients. This policy was changed in 2004 when private patients were accepted. The Beta
Center opened in January 2006 and has always treated private as well as occupational health
PCS specializes in providing services that are deemed convenient by the general public.
Patient satisfaction remains its highest operational goal. At present, staff physicians employed by
PCS do not provide continuing medical care. PCS physicians refer patients to area physicians
as warranted for continuing and/or specialized medical care. Although patients often return to
a PCS center, chronic illness management is not provided.
78 The Middleboro Casebook
OCCUPATIONAL HEALTH CLIENTS
Occupational health clients are sent to a PCS center by their employer for treatment of
a work-related injury (which is usually covered by workers’ compensation insurance), for
mployment or annual ph
ysicals, and for health testing, which are paid for directly by
the employer. Because of special work conditions, usually involving hazardous chemicals or
materials, some local corporations contract with PCS to provide comprehensive physicals
in accordance with Department of Transportation and ocher federal and state laws and
regulations. Local corporations consider PCS a cost
-effective and convenienr alternative to
a hospital emergency department. These corporations use PCS in lieu of employing a phy
sician. Corporate clients expect PCS to assist with all phases of case management involving
worker injury. They hold PCS accountable that their workers receive timely, appropriate,
and cost-effective services.
Physicals for Occupational Safety and are cur
rently priced between $300 and $500 each. Ph
ysicals for local police and fire include
pulmonary function tests (PFn, laboratory tescs, and electrocardiograms (EKGs). 1hey
are currently priced between $250 and $350 per physical, depending on contractual volume. Pre-employment physicals are typically priced becween $60 and $95 and include a
urine dip test. Services provided for occupational health clients are billed directly to the
PRIVATE (RETAIL) CLIENTS
Private clients also seek medical care from PCS centers. AU aspects of general medical care
are provided except 08/GYN. Private patients are attracted to PCS because they do not
need an appointment. PCS accepts cash, checks, and credit cards at time of service. As of
2008, PCS directly bills the larger health insurance plans covering ics market area: + Statewide Blue Shield + American Health Plan + Cumberland River Health Plan + Central Scace Good Health Plan
At time of service, retail clients covered by these plans are screened to verify eligibility and to determine whether they have satisfied any required deductibles. If deductibles
have been met, patients will be required to pay just the copay amount, and a bilJ is sent
electronically co the insurance plan for the account’s balance. If deductibles have not been
met, thenthe insur.patient dro claim rA recent iapproximAivice is refsive credi Pa stirute 80 ORGAN Each ceff
in a smal building
Case 3: Physician Care Services, Inc. 79
met, then the patient will pay the bill at time of service, and PCS will enter the bill into
the insurance company’s system as partial fulfillment of any outstanding deductible. If the
patient does not have coverage from one of these insurance companies, she receives a bill
to claim reimbursement directly from her insurance plan. PCS also directly bills Medicare.
A recent study suggested chat these four private insurance companies and Medicare cover
approximately 85 percent of PCS’s private clients.
Any client who has a history of bad debt at PCS or is unable to pay at time of service is referred ro a hospital emergency department for service. PCS maintains an aggressive credit and bad debt collection policy and does not serve Medicaid patients.
Patients living within a 30-minute crave! distance from a PCS center typically constitute 80 percent of PCS’s private pay patients.
ORGANIZATION AND MANAGEMENT
Each center is located in approximately 6,000 square feet of rental space devoted to patient
services. The Alpha Center is located on main roads between Middleboro and Miffienville
in a small shopping center. The Beta Center is located on the first floor of a new office
building adjacent to a large shopping mall in Jasper. Ample parking is provided in both
locations. Each center maintains attractive signs.
Each center is open 60 hours per week, 8:00 a.m. to 7:00 p.m. on weekdays and
a.m. to 2:00 p.m. on Saturdays. Both centers are closed on Sundays and Memorial
Day, July 4, Thanksgiving, Christmas, and New Year’s Day. Each center has four fully
furnished patient examination rooms and one extra room. Currently each center has some
For patient care the minimum staffing at each center is one receptionist/billing
clerk, ohe medical assistant, and one physician or nurse practitioner. Additional staff (e.g.,
advanced registered nurse practitioner, physician assistant, medical assistant) is scheduled
based on anticipated high-volwne days. Typically the nurse practitioner works on Saturdays and assists with physicals and other services on high-volume days. Physician assistants
also assist on high-volume days.
The central administrative and billing office is an additional 2,500 square feet and
is located adjacent to Alpha Cenrer. The central office staff includes the president, medical
director, director of nursing and patient care, business office manager, and the billing and
Each center uses the same price schedule. The basic visit charge (CPT 99202) has changed
So The Middleboro Casebook
January-December Private Pay ($)
Current detailed prices include:
99201 Office visit, brief, new
99202 Office visit, limited, new
99203 Office visit, inter, new
99204 Office visit, comp, new
99211 Office visit, min, est
99212 Office visit, brief, est
99213 Office visit, limited, est
99214 Office visit, inter, est
99215 Office visit, comp, est
Additional charges are levied for ancillary testing and specialized physician services,
such as suturing. A patient rerurning for a medically ordered follow-up is charged $96
for the return visit. Based on Current Procedural Terminology (CPT) comparison, PCS
fee levels are competitive within the area. No similar medical service is offered within a
45-minute radius from each center. In the past-as part of an advertising campaign to
attract private pay patients–each May and June PCS has offered discounted physicals,
such as camp physicals for children at $48 and for all children in a family for $69.
Steve J. Tobias, MD, board chair and president of PCS, says national studies suggest that urgenc care visits are at least $10 less than a visit to primary care physician in
Case 3: Physician Care Services, Inc. 81
private practice. Other studies indicate that urgent care visits cost $250 to $600 less than
emergency department visits for the same CPT code.
Some occupational health clients are charged based on a negotiated volume-based
price, especially for physicals. PCS’s medical director negotiates specific fees for physicals and specific medical tests ordered by an employer. Typically, an employer approaches
PCS in need of a specific type of physical, such as the annual physical required by the
Department ofTransportacion for all operators of school buses, or specific medical test for
employees. PCS submits a bid to perform a specific number of physicals based on a flat
rate per physical.
As of 2007, PCS does its own payroll. Employees must have direct deposit with a
local bank. Each employee receives an electronic pay stub biweekly (with accrued balance
of vacation and sick time) and a W-2 at the end of the year.
BOARD OF DIRECTORS
The board of directors is composed of the four physician owners and meets quarterly co
review operations. The annual board meeting occurs in December, at which time officers
are elected for the coming year. As majority stockholder, Dr. Tobias is chairman of the
board and president of PCS. JayT. Smooth, MD, is the board secretary. Other board members are Rita Hottle, MD, and Laura Cytesmath, MD. Current owners have che option
,uying any available stock at its current book value. An outsider can purchase stock in
This company only if all the current owners refuse to exercise this option and he receives
the approval of the existing owners. It should be noted chat PCS has paid a stock dividend
in three of the last five years.
PRESIDENT AND MEDICAL DIRECTOR
Dr. Tobias is also the medical director of PCS. He is a graduate of the medical school at
Private University and has completed postgraduate medical education at Walter Reed Army
Hospital in . He is in general internal medicine,
, and occupational health. He also holds a master’s in public health
from State University. As medical director, Dr. Tobias is responsible for medical quality
assurance programs and the recruitment and retention of qualified physician employees.
He is also responsible for securing the services of consulting radiologists to read all X-rays.
He receives a separate salary as medical director and as president. Compeosation for the
medical director position began in 2008. Before Dr. Tobias founded PCS, he as a full-time
emergency physician at Middleboro Community Hospital.’He originally worked to establish joint venture urgent care centers with Middleboro Community Hospital. When this
approach failed, he recruited th other stockholders and moved ahead with PCS. As president, Dr. Tobias is responsible for the management of all resources and strategic planning.
:: The Middleboro Casebook
Dr. Tobias schedules the other physicians and the nurse practitioners. He also works
in the centers and provides oncall services as needed. He has consulting medical staff
privileges in th Department of Medicine at Middleboro Community Hospital.
In total, the clinical staff is composed of eight physicians, three nurse practitioners, and
two physician assistants. All physicians hold medical staff privileges at an area hospital.
Bennet Casey, MD
Mark Welby, MD
Steve Tobias, MD, MPH**
Jay Smooth, MD *
Rita Hottle, MD*
Laura Cytesmath, MD*
Micah Foxx, DO, MPH
Melisa Majors, MD
Carl Withers, ARNP
Jane Jones, ARNP
Gerri Mattox, ARNP
Rutherford Hayes, PA
Mary Fishborne, PA
** Owner and president
Family and adult health
Family and adult health
Family and adult health
Until 2007, staff physicians were retained as independent contractors and received
no benefits above their hourly wage. Beginning in 2007 when nurse practitioners were
added, physicians (and all ocher employees) who worked more than 1,000 hours were
provided comprehensive benefits, including family medical coverage. Also as of 2007, PCS
reimburses all physicians and nurse practitioners for their medical malpractice insurance.
Full coverage is provided when a member of the medical staff works 1,400 hours at PCS.
Others receive a partial reimbursement.
Case 3: Physician Care Services, Inc. 83
Physicians are paid $100 per hour. Nurse practitioners receive $50 per hour. These
payment levels have been fixed for two years and are considered within the appropriate
market range. Ors. Smooth, Hottle, and Cycesmath also work as emergency physicians at
Middleboro Community Hospital. Dr. Casey serves as medical director one day per week
at an area corporation, where he specializes in occupational health. Dr. Welby also works
at Convenient Med Care, Inc., in Capital City. Dr. Foxx, who recently relocated to Jasper
with her family, is available to work no more than six shifts per month, a condition she
has established until her children reach school age. Dr. Majors also works as an emergency
physician in Capital City. Physician assistants are paid $40 per hour and assist physicians
on anticipated high-volume days.
Dr. Tobias schedules all members of che medical staff for work on a monthly basis
with the understanding that if a physician is unable to work, it is her responsibility to
secure a replacement from the qualified medical staff of PCS. Physicians and nurse practitioners work an entire shift (e.g., 11 hours on a weekday). Fridays and Saturdays are
typically assigned co the nurse practitioners. Physician assistants are on call for busy days
to assist physicians.
The clinical staff of PCS meets quarterly to review areas of concern. Dr. Tobias
does random reviews of medical records to ensure compliance with standards of clinical
practice. He is also responsible for all issues involving credentialing.
Medical assistants at each center are trained to cake limited X-rays, draw specimens for
laboratory testing, do EKGs, and conduct simple vision and audiometric examinations.
Each center is equipped to do:
1. On-site X-ray
4. Audiometric and visual testing
5. Some laboratory testing (e.g., strep screen, dip urine)
6. Drug and breath alcohol testing
A regional laboratory processes more advanced labotory work.
Two medical assistants are assigned to each weekday shift. One is assigned for 7
hours per day (i.e., 35 hou;rs per week) and the other is assigned for 4 hours per weekday and Saturdays (i.e., 25 hours per week). Responsibilities include examination room
84 The Middleboro Casebook
preparation, assisting the physician or nurse practitioner, patient testing, case management, scheduling visit follow-up care, and addressing patient questions. Each center maintains a pool of qualified medical assistants who are trained, evaluated, and scheduled by
the director of nursing and clinical care.
CENTRAL OFFICE STAFF
Dr. Tobias devotes his time co being both the president and medical director at PCS and
filling in at a center when needed. As president he is responsible for the ove1:aU management of PCS. Joan Carlton, LPN, is director of nursing and clinical care. She trains,
supervises, and schedules the medical assistants. She is also responsible for ordering medical supplies, meeting with occupational health employers as needed, and general administrative duties as assigned by Dr. Tobias. If needed, she substitutes for a medical assistant
at a center.
Martha Coin directs the business office and has three full-time staff. She schedules the receptionist staff at each center. She and her staff assist the receptionists and
billing clerks at each center, manage all insurance billing, and manage the general ledger, including accounts payable and accounts receivable. If needed, she or a member o
her staff substitutes for the receptionist at a center. The central office billing staff also
maintains a list of available (and trained) fill-in receptionists to cover absences and other
One full-time (35 hours per week) front desk receptionist is hired for each center. Aside
from greeting and registering all patients, the receptionist is also responsible for appointments, billing, records for occupational clients, and managing cash receipts. One or more
additional receptionists are hired for the remaining 25 hours per week.
In 2008 PCS began using URGENT CARE MIS, an electronic medical information, general ledger, and billing system. Computer terminals were installed in the reception area in
each center, at the central office, and in each examination room. PCS uses this system for
all phases of financial and medical record keeping and billing, appointment services, case
management, staff scheduling, and data management. This system captures, stores, and
reports all CPT codes and links medical procedures with revenue and expense information. The health insurance billing system has a direct Internet link with the participating
insurance companies and Medicare. PCS purchased the hardware and leaed the required
soft\ assist PCS
Case 3: Physician Care Services, Inc. ;
software for ten years. It receives hardware maintenance, software updates, and technical
assistance from the vendor.
A 2013 study of medical records indicated chat the mosr common CPT codes ac
+ 99212/3 and 99202 Office/Outpatient Visit,
+ GOOO I Drawing Blood,
+ 85029 Auromated Hemogram, and
+ 71010/2 CbesrX-Ray.
Injuries and rechecks generally account for 20 percent of all visits.
Paper medical records char existed prior to 2008 arc retained in active file for seven
years, and chen transferred to closed files.
When interviewed, Dr. Tobias indicated that discharging Nancy Scone, RN, as
director of nursing and clinical services in 2012 was a hard decision. Some employees
still regret this situation. Scone was well liked bur just could not ge
t along wich some of
the physicians and had a great deal of difficulty coping with multiple job responsibilities.
Ac the end of her tenure she refused co provide patient care as needed at the Beta Center.
er she was discharged, Stone complained chat she had “too many duties co do well, and
PCS was more interested in getting patients in and out than in providing patients quality medical care.” She has retained an anorney and informed Dr. Tobias that she is suing
him and PCS for “wrongful discharge.” As she scared ac the initial hearing for the lawsuit,
“Meeting job expectations was hard when the job lacked any formal job description.” Dr.
Tobias shared in the interview that he felt compelled co act even though Scone is che sister
of the vice president for human resources at Carlstcad Rayon, a growing occupational
health client of che Alpha Center, and thar additional details are not available given chat
chis case is currently being handled by legal counsel.
Dr. Tobias seated chat the owners should look forward to achieving even greater
corporate profitability. Dr. Tobias indicated that no one foresaw che terrible first three years
of financial losses. He also said chat within the past few years, PCS has earned its place in
the regional medical care system and ics future appears solid. le should be noted that, at
che end of 2007, one of the original physician parmers, who is no longer affiliated with
PCS, exercised his option co be bought out by anocher stockholder. Dr. Tobias was the
only partner willing at that time to increase bis ownership in PCS.
Dr. Tobias also indicated chat che owners might now be in che position to open a
third and even fourtb location. He also discussed purchasing buildings co house che existing
centers and adding s<?me services to better serve cheir occupadonal and private pay clients.
86 The Middleboro Casebo ok
“We are a debc-free corporacion char is beginning to earn serious profits,” he
said. “Along the way we have distinguished ourselves by the high quality of care we have
provided–ou patients and occupational health clients are delighted with our highestlevel commitment co patient care, convenience, and affordable prices. While it has been
a Jong road, I have every reason to believe we wiU continue co prosper and expand.”
The original real estate leases on che Alpha and Beta Centers expire at the end of
2015. Dr. Tobias said chat he timed the expiration of these leases co coincide with when
PCS would be ready to make a major strategic move. Each current lease has a renewal
clause for up to 36 months, with an escalation clause so chat rents do not increase more
than 15 percent per year. Tobias estimates that appropriate facilities could be acquired for
$150 per square foot (including land, site improvements, and facilities) and thac it would
cake approximately six months from the time the concracc was executed to when the center
could be fully operational. 1
When asked co identify future challenges, Tobias noted that he felt char volume had
just about hit the level at which coral service time averages about 20 minutes. He did indicate, however, that there might be a need for larger waiting rooms and that those patients
waiting for more than 90 minutes might be a problem. Tobias was, however, pleased that
patients generally reported “complete satisfaction” with the quality of care provide
PCS. Dr. Tobias repeatedly cited the competent clinical and administrative staff. Overall,
he indicated that he was concerned about continued rapid growth. “Our early success with
occupational health may be slowing. If we lose a significant amount of manufacturing in
our area, we potentially lose occupational health clients. Our future in occupational health
will follow the local economy.”
Dr. Tobias noted that regional unemployment has already affected occupation
health. Fewer people are being hired and working. Fees paid by the workers’ compensation program have been fixed for 24 months. People who are unemployed lack health
insurance. Dr. Tobias expressed a greac deal of optimism that the full implementation of
the new federal health insurance plan (the Patient Protection and Affordable Care Act)
would significantly expand PCS’s pool of private clients.
Two years ago, PCS instituted an appointment plan for occupational health clients,
which Dr. Tobias reported has been very successful. Under this plan, occupational health
clients are scheduled for physicals or medical testing. Under the “call before you come” system, patients (or employers) can call ahead to determine the approximate wait time, make
a decision, and-if they want service-register for service at an approximate rime that
day, thereby ensuring themselves a specific place in the queue for service even before they
arrive at a center. Every patient who arrives at a center is given an approximate wait rime by
the receptionist and told they need not wait in the waiting area to preserve the scheduled
time for their appointment. While “first in, first out” is generally used, urgent care cases
(especially injuries) are bumped ahead of nonemergency patients. Signs in the waiting area
Case 3: Physician Care Services, Inc. 87
explain co patients chat some occupational health clients are served by appointment and
that appointments override arrival order.
PCS advertises its services in the regional market. It uses billboards on main roads
and newspaper advertising. It also uses an extensive website and social media. The director
of nursing and patient care visits current and prospective occupational health clicnrs and
typically answers approximately 15 to 25 telephone inquiries per monch regarding quotes
for specific services, such as employee physicals.
When interviewed, other PCS physicians offered differenr perspectives. Three physicians expressed concern about the manner in which Dr. Tobias schedules the physicians.
lbey were never sure exactly how many shifts per month they would work and at which
center. All prefer to work ac only one center and indicated that this type of stability leads
co a better medical care team.
Records suggest that certain physicians may have productivity profiles significantly
different from those of ocher physicians. It appears that on busy days, revenue per visit
drops, a trend that suggests that physicians do less ancillary resting when they are busy. The
target for physicians and nurse practitioners is 3 to 4 patients per hour. Three physicians
have also requested extra compensation for busy days. They concend that they cend ro be
scheduled on “very busy days” and receive the same hourly compensation as physicians
who work on slower days. Dr. Tobias indicated that he does not feel that their claim is
In 2010, two (nonowner) physicians said that because they are paid by the hour,
they should be paid for the time they spend treating chose patients who arrive right before
closing time. Up until chis change, all staff were only paid for the hours in their shift (e.g.,
11 hours), which was sometimes less than the number of actual hours worked. Employees
are expected co treat all patients that arrive during working hours even if chis extends their
work tifue beyond closing time. All physicians reported chat they felt that their pay level
was reasonable given their responsibilities.
Six occupational health nurses at area corporations were interviewed. Each indicated chat she and her corporation were satisfied with PCS. A number of these nurses
indicated chat they appreciated PCS-specifically the medical assistants-keeping them
informed about specific patients and that PCS was creative in explaining restriction and
suggesting “light duty,” medically appropriate work an injured worker could perform for
the employer as an alternative co her regular duties until she was ready co resume her
Dr. Tobias recently returned from a professional meeting with statistics that he felt
could help PCS better estimate irs future market. These statistics apply to this state:
The Middleboro Casebook
Average Number of Physician Visits-Ambulatory Care per Person,
per Year, by Age and Sex (National Statistics)
Age Males Females
0-14 3.37 3.09
15-44 1.99 3.92
45-64 2.98 4.34
65+ 4.51 5.19
NOTE: Visits unrelated to workers’ compensation and occupational health
Ac chis meeting, Dr. Tobias also learned chat ocher urgent care corporations use the
following parameters in their fiscal and market planning.
+ For every 15 percent increase in a basic visit fee, there will be a 25 percent
reduction in utilization of retail patients without health insurance (i.e., who
pay by cash, check, or credit card).
+ Patients covered by insurance, including Medicare and commercial insurance,
are generally not price-sensitive as long as the annual increase in the basic visit
fee does not exceed 20 percent.
+ Annual increases up to 15 percent in ancillary charges do not affect the
number of new visits by retail clients. It appears that ancillary charge increases
above 15 percent may reduce return visits by as much as 45 percent regardless
of payment source.
At the next board meeting, Dr. Tobias plans to discuss a series of new ideas and
opportunities chat deserve the board’s attention. Currently his ideas and opportunities
include the following:
PRESCRIPTION DRUGS FOR RETAIL PATIENTS
This service is currently available to patients covered by workers’ compensation. State law
allows physicians (and nurse practitioners) co dispense prescription drugs as long as adequate
records are maintained. National firms specializing in drug repackaging let PCS buy prepackaged prescription drugs ready for sale to a patient. PCS has already established its formulary
Case 3: Physician Care Services, Inc. 89
for workers’ compensation patents. PCS has determined that by maintaining 12 specific
drugs in pill form it can meet approximately 60 percent of the retail demand that PCS
physicians create for prescription drugs. The charge for prescription drugs for workers’ compensation patienrs is directly billed co the employer as part of the overall charge for service.
Dr. Tobias indicated that PCS should consider extending this service co all patients.
By only providing “high-volume” drugs, PCS can guarantee high inventory turnover. An
appropriately sized initial inventory for retail patients can be capitalized for a center for
$1,000. All suppliers promise a next-day replenishment of inventory items. The shelf life
of all drugs is more than one year. Even with a markup of 800 percent, PCS prescription
prices will be competitively priced in the area. The question is whether this service should
be expanded to retail patients. By reviewing medical records of current retail patients (nonphysicals), PCS has determined the number of prescriptions received per visit by patients.
Age of Patients
Average Number of Prescriptions
Received per Visit
The average supplier cost per PCS prescription is estimated to be $5. To maintain
posed inventory, additional software costing $12,500 per year is required to verify
insurance coverage and copays and process insurance payments. Dr. Tobias would like co
potentially begin this service within six months. Questions remain, however, whether any
prescriptions issued by PCS should be refilled without another medical visit. Questions
also remain as to billing procedures when patients do not have a current prescription plan
card at cime of service. An urgent care center in Capital Cicy recently ended its pharmaceutical sales to retail patientS because of the high number of refused claims by drug plans.
DRUG TESTING FOR HEALTHY EMPLOYEES
The director of human resources at a local company, a current PCS occupational health
client, has stated that itS new labor concract includes a clause stating that “all workers and
job applicanrs are subject to mandatory random drug testing and any worker who fails or
refuses the test will be iediately discharged or not hired.” The client has asked PCS co
perform drug tests on referred-workers or job applicants.
90 The Middleboro Casebook
Note that under the new state law and workers’ compensation regulations, drug
resting is also required for all workers who are injured at work. Employers are also able to
institute rand9m drug testing. Some other clients have even requested that PCS select some
of cheir workers for testing using a random selection process. A process using employee
Social Security numbers has been discussed. Other occupational health clienrs have previously suggested that PCS begin this cype of service.
Currently a test is available from a reference laboratory for a processing cost of $8
per test. Results screen for the presence of all common illegal drugs. The list price for this
test is $42 and $63 if a certified medical review officer (MRO) reads the test. Dr. Tobias is a
certified MRO. The test requires about IO minutes of a medical assistant’s time, specifically
to maintain compliance with the chain of custody protocol during collection.
PHYSICALS BY APPOINTMENT FOR EMPLOYEES
Increasingly, employers are issuing formal requests for proposal (RFPs) for occupational
health physicals that require appointments. For example, a current RFP from a local
employer is for 350 annual physicals during 2015 that must be done between 3: 15 p.qi.
and 4:30 p.m. Monday through Friday at che Beta Center. (The company’s empls
work 7:00 a.m. to 3:00 p.m.) The physical must include the following components:
PCS List Price
Medical history and $70
X-ray chest $101
Urine (dip) test $20
Complete blood count $40
Vision screen $27
Audiometric test $3
Each physical will take approximately 80 minutes to complete. The PCS list price
for this package of services and tests is $331. PCS vendor coStS for the physical (e.g., X-ray
reading fees, laboratory charges) are estimated to be $70.00. The PCS bid for this contract
will be evaluated on the basis of total price and fulfilling expectations related to schedule
92 The Middleboro Casebook
Staffing could include one full-time physical therapist (PT
) at $80 per hour (or $75,000
plus benefits) and pare-rime physical therapy assistants (PTAs) at approximately $25 per
hour. PTs can simultaneously manage between two and five patients and supervise a PTA,
who provides the direct therapy, given specific creatmenr plans. Dr. Tobias also says chat
PCS may be able to contract for the needed PT and PTAs from local nursing homes. The
PT must do the initial patient evaluation and establish rhe treatment plan but need not be
on site to supervise che PTAs.
Equipment for each center could be purchased and installed for approximately
$30,000 (five year depreciation, no salvage value). Operational coses, such as laundry and
medical supplies, are estimated to add approximately $15 per visit. The one-rime information system upgrade for ambulatory physical therapy would cost $6,500. Other coses
may need to be estimated. A consultant has recommended chat PCS only service workers’
compensation patients co start, but Dr. Tobias indicates chat full coverage needs to be
The board members know chat one member of the board will come co the next b
meeting in hopes of discussing whether PCS is for sale and how best to position PCS
for sale. He believes chat PCS cannot be a long-term successful player in the increasingly
competitive medical marketplace. He stated, “I am very concerned chat the big box stores
will add walk-in services to go along with their pharmacies. I just do not see how we can
compete. Our market area is just too volatile!” It is known that Dr. Tobias has always said
he would be willing to sell PCS for “the right price.” He has also stated when the regional
economy and manufacturing pick up, PCS’s occupational health business should rebound
along with its overall profits.
PCS is liable for a 31 percenc federal tax and 9 percent state tax on its profits.
Carry-forward losses experienced in the initial years of operation have expired. Local real
estate taxes on owned land and buildings are 4 percent of assessed valuation. Current
assessed valuation of land in the county is approximately 40 percent of market value or
total development cost.
Originally three-year renewable leases were used to secure the needed medical
equipment (e.g., X-ray machines, computers) and most furniture. In 2005 PCS’s accountant recommended that because PCS was now earning a profit and had used all of its
carry-forward tax credits, it should consider borrowing funds to purchase needed equipment and should cancel all outstanding equipment leases. Between 2005 and 2007, it
did. Each center required between $150,000 and $200,000 worth of new equipment. The
only equipment leases that remain are for color copiers and general office equipment. PCS
maintains a line of credit with a commercial bank in Capital City. Its cost of capital is 2.5
percent above the Wall Street journal prime rate.
Case 3: Physician Care Services, Inc. 93
Based on its annual credit review, PCS has been informed chat its cost of capital
could increase by 1 or 1.5 percentage points over the next 18 months. The bank seated
that the management and organization of PCS are seriously flawed: “PCS has become too
dependent on Dr. Tobias in his many roles. His duties need to be divided between two
or more qualified professionals.” If PCS does not address this situation, its credit worthiness will be significantly downgraded. This situation was also noted in the 2013 audit and
Officials in the City of Jasper have requested a meeting with PCS to discuss emergency planning and expanded services. Their specific questions will include whether PCS
would expand hours on Saturday and offer services on Sunday afternoon. Their letter
indicated that the majority of urgent care centers nationally offer services on Saturdays
(8:00 a.m. to 8:00 p.m.) and Sundays (9:00 a.m. co 7:00 p.m.). A formal response to this
inquiry is due within the week.
Additional information regarding PCS utilization, patient demographics, and
finances may be found in the following tables.
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