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Ericka L. Adler, JD, LLM has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute, and HIPAA. Ericka has been writing for Physicians Practice since 2011.
It's a complicated issue when physicians express an interest in cutting back hours. Here are six key issues to consider if this occurs at your medical practice.
There are often changes within medical practices that require physicians to address issues not originally contemplated in their written contracts. One such event occurs when owners of a group practice decide, for whatever reason, to become part-time employees of the practice. How the change of an owner from full- to part-time is handled within the group, and the related issues it can create, can be complicated to address.
Issues to consider when addressing a change to part-time status include the following:
1. Should the group accept the stated desire to go part-time? This may or may not be addressed in the group’s governing documents and, if not, it may become an issue requiring a vote. Should the owner going part-time be allowed to vote on the matter? If the vote taken is in favor of allowing the owner to go part-time, what conditions should be linked to that part-time status, if any?
2. If the owner’s request to go part-time has been accepted, the practice will need to consider the many ways in which the practice’s operations may be impacted. For example, if the remaining partners will absorb the patients once seen by the now half-time partner, there may be no issue. However, if there is a need to hire a new part-time provider, this may require a substantial amount of time. For this reason, a practice should consider requiring significant notice or a waiting period between any approval to go part-time and the effective date of the change. This may, of course, depend on the reason for the change in status.
3. How will call be handled by the group with one less full-time physician? Some groups may allow a half-time physician to just take a 50 percent share of call, and this works out quite nicely. However, depending on how the group shares call, especially with regard to holidays, this can become a contentious issue.
4. Should the owner who is now part-time be allowed to remain as a voting member of the organization or should his vote be decreased or removed? Should 50 percent of the shares or ownership be redeemed, or can a full amount of shares be retained? To the extent this issue is not addressed in governing documents, I’ve seen groups handle this in different ways. The practice may also need to determine if 50 percent of the physician’s severance needs to be paid out at the time there is a change to part-time status (if such provision is part of the group’s documents). These issues are often very difficult to resolve.
5. How is compensation impacted by a switch to part-time? Where physicians receive base salary, this may be an easy adjustment. However, for practices that use a formula, the change of a shareholder to part-time status can be significant. For example, if the physicians in the group share in “Cash Available for Distribution” (CAD) equally, their normal distribution might look as follows: CAD multiplied by a fraction, the numerator which is one and the denominator which is the total number of shareholder physicians covered by the formula. To the extent a physician is now half-time, the formula would look very different. Assuming a total of four shareholders, the new formula would be CAD multiplied by a fraction, the numerator which is .5 and the denominator which is 3.5. However your formula or compensation may be impacted, it is important to make the necessary adjustments to all documentation to reflect the change. For complicated formulas, this can prove challenging.
6. What other items might be impacted by a change to part-time status? Profit sharing? Health insurance? Distribution of overhead costs or DHS?
These are just some issues that arise when dealing with a shareholder who desires to go to part-time status. Groups are advised to think through the various elements of their operations that may be impacted. Planning in advance and developing a written approach on how part-time status will be handled is an even better idea!