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[Editor's note: This is a Web complement to the November 2009 cover story, "What's Your Status?" For additional IC-employee questions, read "Relationship Issues" on the "ADVANCE Perspective: HIM" blog.]
When Karen Fox, CMT, AHDI-F, moved to a new part of California, she decided to throw in a career shift. The hospital-based MT was given an opportunity to continue working for her facility as an independent contractor (IC). The pay was good, and she already knew the accounts and dictators she would be transcribing. She liked the idea of working from home and having more freedom in her schedule.
Then Fox purchased her first piece of equipment. "It was just shy of $2,000 . . . and this was 10-plus years ago," she recalled.
Fox was able to write off much of the cost as a business expense, but it was the first of many lessons she learned about running your own business.
"Once upon a time there was a huge opportunity to make a lot of money as an IC," Fox said. "Those days have changed."
Don't get her wrong--MTs can make a comfortable living through contract work, but they need the tools, training and business sense to be successful. And those aren't cheap investments.
 One of the biggest adjustments in switching from employee to IC status--and the first thing potential ICs should consider--is paying the self-employment tax. As an employee, taxes are withheld by the employer, but that responsibility falls on the individual when they become ICs. According to Fox, MTs should set aside about 20-25 percent of their income to pay for income and self-employment taxes. Business write-offs can reduce some of the cost, but those investments still need to be paid upfront.
Business expenses range from buying and maintaining equipment to paying the phone bill. And whatever tool you expect to purchase, double it. "One of the things every IC must have is two of everything," Fox said, "because if something breaks, you need to be functional."
For her transcription and QA business, Fox had two foot pedals, two headsets, a desktop and laptop and two Internet browsers.
Once ICs have the tools to operate a business, they need the means to manage it. That's where MTs may flounder. "You can't just say you want to run a business ... At least you have to know what a profit and loss statement is, what it looks like and how to make one," Fox said.
ICs need financial skills to track expenses and make practical business decisions to cut losses. Fox, for example, decided to conduct electronic-only business; the decision may have turned away paper-based clients, but she knew it would save time, gas and money in the long run. "It could have taken me 4 hours a day to go around the county and drop off [tapes]," she said. "I didn't see the benefit when you could set things up electronically and be more automatic about it."
Fox has a bookkeeping background so she managed her own finances. However, she advised all MTs, especially those with limited business knowledge, to consult with an accountant or financial advisor, especially around tax time. And those services come with a bill.
Then there's the matter of securing work. Contract negotiations can get tricky, and if aspiring ICs don't set specific demands, they may end up with a bum deal. MTs have to decide, for example, if they want to charge by the hour or by production. If it's a line rate, will count follow the standard 65-character line or virtual black characters? Will output be delivered at the end of the week or month, or will the client expect 24-hour turnaround time--and is that from the time of dictation or when the MT opens the file? "All those are the 'intricacies,' if you will, of doing business," Fox said.
ICs often seek legal counsel to review contracts and ensure they're binding, but that means more out-of-pocket costs.
And the money coming in? Depending on how you look at it, the outlook could go either way. New technologies may increase opportunities for contract work, as long as ICs have the right vision; Fox could foresee MTs serving as EHR consultants with specific attention to accuracy and documentation practices. At the same time, ICs may see a decline in private clients; as more providers outsource transcription, MTs may be forced to subcontract with medical transcription service organizations (MTSOs), which offer less leverage on line rate.
In general, production-based salaries have been on the decline, with clients appearing to value cost more often than quality (ideally, they'd like to have both--and a quick turnaround). But that's a problem ICs brought upon themselves, Fox noted. "People blame a lot of things for the commoditization of transcription, but really one of the contributing factors has been the ICs being able to come in and compete for contracts that started to affect how much people paid for transcription," she explained.
Until clients pay more attention to quality, ICs will need to decide how to balance accuracy and efficiency while still offering a competitive price. There's more than one way to run a business, Fox noted, but MTs eyeing IC status should know the basics--like generating profit-loss statements and filing taxes--before they hit the ground. And that's an area Fox hopes education starts to address. "It's not good enough to develop only medical language for an incoming transcriptionist," she said. "You have to prepare them for what the business options are and the opportunities out there."
Cheryl McEvoy is an assistant editor with ADVANCE.
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