When Physician Compensation Models Are Questioned

May 20, 2015

Younger docs tend to favor a productivity model, while older physicians may prefer a set compensation model. How do you reconcile the two views?

There are many different ways in which medical practices operate. From scheduling to hospital rounds to compensation, there is no single approach. But how often do practices examine the compensation models they use? Has your practice been using the same approach since the practice was founded, even if the founding physicians are long-since retired? Is this the case because the practice functions well, or because it's just the way things have always been done?

Recently I have worked with a few groups that have needed assistance in handling discord among their physicians. In each case, the group has been run the same way for over 20 years and, not surprisingly, the more senior physicians seemed to find it quite acceptable to maintain the status quo, while the younger physicians questioned many aspects of the practice's operations. With so much information available to physicians, particularly through social media, it's not surprising doctors wonder if their practice is run in an efficient or fair manner.

In particular, compensation is often an issue. Groups that share compensation equally are often challenged on this approach, as younger doctors may prefer to have productivity rewarded. Should the group change their model to take into account varying contributions that each physician makes? Should physicians who see more patients or who perform certain highly reimbursed services be more highly compensated? What about less highly compensated services that are essential to the group and fall disproportionately on certain providers? How do you account for leadership and administrative contributions not captured in a productivity model? How do doctors with aging populations that require more time and attention fit this model? There are many factors to consider and every practice's story is different.

A lack of communication among physicians can splinter a medical practice if not handled properly. The way I like to manage these situations is the following:

1. Set up an informal physician meeting.

Encourage the group to meet and share amongst themselves ideas and concerns. The first step should always been an effort to resolve matters internally.

2. Set up a physician meeting with expert counsel.

If internal accord cannot be reached, I suggest a meeting with legal, accounting, or consulting support. It's important these parties be neutral and not enter the meeting with an eye to protecting or advocating any particular view. I also recommend experienced advisers in this situation. During the meeting every physician should verbalize his likes and dislikes about the current model(s) and share ideas. Sometimes additional one-on-one meetings with each physician may help those hesitant to air concerns in a group setting. Everyone attending the meeting should be respectful and allow all attendees to have their say.

3. Solicit physician input and alternate solutions.

The lawyer or consultant should take the opportunity to make sure each physician has the opportunity to share her thoughts and experience on what she has seen successfully employed. It's also helpful to suggest alternatives that may not have been considered (if any). For example, a group might consider dividing its income into two pools - a portion of which is shared equally and a portion of which is shared based on productivity. Alternatively, giving physicians a base salary and incentivizing through a bonus that rewards productivity can be a good combination to consider for those torn between a fixed model and a productivity model.

4. Present suggested legal/financial models to the group.

The lawyer, accountant, or consultant should follow up with possible legal and financial models for consideration. Each approach should be laid out so the physicians can visualize how their current productivity and operations would be translated under the new models.

It is possible that no new approach will satisfy all physicians in the practice. Those who cannot live with the newly proposed approach will need to consider whether a departure from the group is the only solution. Sometimes, if the resistant figure is an older physician nearing retirement, delaying a new approach until a certain date can be workable. Finally, a possible consideration for large groups is dividing the practice into different sub-business units and, within those units, allowing the physicians to use different formulas. However, it's important if considering this option to talk with counsel.

While not every physician may be happy with how his practice operates, using an approach that considers different points of views and allows everyone to share thoughts and ideas can allow a group to improve its practice in a collaborative fashion.