Medical Transcription: There’s Just No Money In It
Yesterday’s discussion about the salaries for medical transcriptionists was an interesting one. I was as surprised at the data as many of you were when I actually went in search of it and put it together. I hope you’ll stick with me this week because we have some learning to do and some discussions to have!
One of the things I continue to hear is that hospitals are losing money, the companies who employ medical transcriptionists are constantly being asked to lower their rates, nobody is really making any money and so that explains why things are so depressed. Add to that what we also know about our economy today and it can seem a pretty dismal picture. And in those discussions, I think part of what happens to MTs is that we listen, and we say, okay, I get that, and since I love what I do, I’ll work for less. And so, as I researched this, I decided to really try to find out if that’s all true. Let’s take a look.
Let me start by saying this is NOT a post to bash employers. It’s not one to say one is better, or worse, than others. There are some awesome service owners out there. There are some not so awesome ones as well. So, that’s not our point today. Our point is to learn what we can about what’s happening in our world.
Hospitals are Losing Money
Let’s start with hospitals. It’s a well-accepted statement to say that our healthcare industry is in trouble these days. We hear about it every time we turn on the TV. And while it’s true that many US hospitals are struggling, it’s also true that some are turning some pretty hefty profits. In a study done by Forbes in August 2009, they looked at that data. They published the top 25 hospitals in terms of profitability. All of their information was taken from information that hospitals have to provide to the Federal Government when they do their reporting for Medicare. They found that 24 hospitals in the country have a profit margin of 25% or greater. That easily beats Pfizer’s profit margin of 9.2%. It even beats General Electric’s 7% profit margin. And yet, how many times do we hear the drug companies berated for making too much from the medications they produce? Don’t misunderstand my point here. I’m not saying one is good or bad, just that it’s pretty amazing to note that any hospital can have a profit margin that’s more than double that of any major drug company today.
The most profitable hospital listed was in Alabama, and reported a whopping 53% operating margin. Think about that. For every dollar that is spent for services at that hospital, that says 53 cents is pure profit. This particular hospital is a part of a big for-profit chain. Second place was taken by a hospital in Texas, at an operating margin of 45%. This hospital is a part of the HCA chain, based in Nashville. While neither hospital commented in this study, the Alabama hospital did reply to Forbes saying they had overstated their profit in its report to Medicare (I wonder if that creates yet another problem?) and it was really only 12% (still higher than either Pfizer or GE).
Of the 25 hospitals, 15 were a part of for-profit organizations. HCA had a total of 11 hospitals in the top 25. It’s not just for-profits, though. Some big nonprofits were also on the Forbes list including Mayo Clinic’s two main hospitals and Ohio State University’s hospital. Yes, some hospitals are struggling to keep their head above water. Still, it doesn’t appear that this is the case for the entire industry.
Medical Transcription Employers have Fewer Dollars
If you happen to work for a medical transcription service, there’s no doubt you’ve heard this, time and time again. Clients don’t pay as much and we don’t have the same amount of revenue we used to have. Am I right? Okay, so let’s take a look. Here’s what I did. I found the year end financial information for two medical transcription companies that are publicly held. Because they are publicly held companies, their financial information is available to anyone who wants to see it and it’s posted online. I won’t name names here. Let’s just see what the data shows us. For this study, we’ll use Company A and Company B. I’ve also used the data from the same years we compared with MT salaries, 1998 and 2009.
Before we go into detail here, I want you to think about revenue in a medical transcription business. What is it that generates revenue? You got it, it’s all of those millions of characters, words, lines, and pages that MTs transcribe.
In 1998, this company reported their revenue ($271.7 million) was up 41.3% from the previous year. Their net income (final profit) was $17.7 million, up 83.6% from 1997. Fast forward to 2009, and here’s what we see: Revenue was $307.2 million, which was 6% lower than 2008. For net profit, they reported $23.4 million. I think it’s also interesting to note their EBITDA rate. In case you’re not into accounting terminology, that stands for earnings before interest, taxes, depreciation, and amortization. Those last two are really numbers on paper. Yes, things depreciate, but it doesn’t mean you pay out hard dollars at the time. Their EBITDA for 2009 was $57.9 million, up 74.8% from 2008!
What this gives us in comparing dollar amounts is that Company A’s net profit increased approximately 32% in actual dollars (I’m using dollars here because that’s what we compared with salaries.)
This company was a lot smaller in 1998 than it is today and that shows in their numbers. In 1998, they had a net profit of $282,000, on revenue of $53,314,000. Comparing the two, that shows they were only about 1/5 the size in revenue of Company A. In 2009, things have greatly changed here. Their total revenue was $71,764,000, which was reported to be up 47% from 2008. Their net income for 2009 was reported at $6,759,000.
Now if you compare the changes in actual dollars with this company, you can see a huge difference because of their growth. Their actual dollar profit increased 2,397% (no, that is not a typo).
So Where Is All of that Going?
I’ll be the first person to say that businesses have a right to make money. In fact, they should be making a profit or they don’t keep their doors open. In the case of publicly held companies, they also have stockholders to keep happy. I also think that we need to redefine what the word “stockholder” means and it can and should include employees.
What I can tell you is that in the management jobs I’ve held through the years, I can only recall one time (in 20+ years) where we were told there was nothing available for annual increases. And when those increases were calculated, they generally ranged 3 to 5%. Some companies have bonus programs as well for their mid or senior level managers, where the bonus is based on the percent of profit. I’m not opposed to rewarding leaders for doing a good job in a company either, I was one of those leaders for quite some time. When I had my own medical transcription business, 70-80% of what I billed went to the MTs who did the work. Those in business today would also tell you that’s why I would never get rich doing this. But you know what? I loved it and the folks who worked with me were happy and well compensated.
Have We Done This To Ourselves?
Okay, it’s time for your reaction. Did we create this situation for ourselves? Have we said “yes” too many times to lower wages and changes in our pay rates? Have we for too long accepted that “people paid on production don’t get annual increases”? Have we been too accepting of, as someone said yesterday, “Well, we pay less for that technology because you make it up in volume”? What say you? Let’s hear your reaction. And please stick with me this week. We’re not done, but we do have to look at these things to lay a foundation.
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Filed under: Challenges in Medical Transcription
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