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Regulatory Issues
• Non-Profit Private Inurement - IRS
– Non-Profit Ownership of Physician Practices
• Tax Exempt Financing Issues
• Medicare Fraud and Abuse
• Internal Revenue Service (Pediatric Surgical Associates)
• Stark II
– Group Practice Exception
– Compensating Designated Health Services
• Cannot Be Based on Value or Volume of Referrals
Today’s Marketplace
– Net incomes are declining
– Doctors working harder; making less
– It costs more to do business: “overhead”
– Doctors are fighting over a smaller pie
– The number one reason doctors leave medical groups: compensation!
Key Components to Consider When Designing a Physician
Compensation Model
Market Salary
– Geographic
• National
• State
• Local
Fringe Benefits
Practice Philosophy
Quality
The Seniority (Debate)
Productivity
– Dollars Billed
– Dollars Collected
– Patient Visits
– Panel Size
– RVUs
Key Components to Consider When Designing a Physician Compensation Model
Services to the Group
Administration
Research
Teaching
Lecturing
Membership
Community
What Physician Compensation Plans Do and Do Not Accomplish
• Compensation plans do: – supports organizational goals – motivate – influence behavior
• Compensation plans do not: – replace organizational goals – manage behavior – manage budgets – make administrative decisions – make everyone happy – grow the pie
Appropriateness
The comp plan enhances practice's ability to achieve long term goals
Financial viability
Harmony within group; "fits" culture
Reflects competitive market environment
Ensures clinic's can recruit and retain MD's
Promotes efficient and effective practice
MD's involved and understand plan
Fairness
The comp plan distributes compensation equitably
Rewards MD effort and contribution
Consistent with clinic's revenue stream
Considers built in biases, constraints and flexibility
Simple to understand
Based on reliable and timely data
Key Questions to Always Ask Yourself
• What behaviors should the compensation plan motivate? – Quantitative vs. qualitative
• Does the plan reflect revenue streams flowing into the practice?
• Are salaries competitive with other groups?
• Are risk and reward properly balanced?
• How are costs monitored and controlled?
• How important is alignment and coordination to group effectiveness?
Gross Charges $3,000,000 Gross Collections 2,300,000 Overhead (42%) 966,000 Net Income 1,334,000 Production % Dr. New 22% Dr. Slowdown 17% Dr. Steady 25%
Dr. NeedsCash 36%
Productivity Based Model: Rolling off the Bottom Line
Equal Compensation
Single Specialty
Simple, Team Focused
Lacks Productivity Incentive
No Incentive for Behavior Changes
Other Productivity Models
• Production with Proportional Overhead
• Production with Equal Overhead
• Production with Variable and Fixed Overhead
Other Productivity Models
• Production with Fixed, Variable, and Direct Costing
• Production with Equal Share
• Fixed Salary and Production Incentive Bonus
• Production Plus Incentive Pool
Incentive Pools (20% of Available Income) 1. Cost Effectiveness $ 80,000
2. Patient Satisfaction $ 50,000
3. Seniority $ 20,000
4. Group Meetings and
Administration $ 50,000
Production Plus Incentive Pool
Distributable Income from Productivity Plan $ 1,000,000 Less: 20% for Incentive Pools (200,000) Distributable Income Per Production Basis $ 800,000
Production Models
All Groups
Encourages High Production
Simple, Objective
Promotes Over-Utilization
Patient Competition
Collections vs. Production
No Incentive for Behavior Changes
PROBLEM: Solo practices operating under a group name
Compensating Designated Health Services
• Equal Share
• Percentage Ownership
• Patients Seen
• Office Visits
• Production Excluding Designated Health Service Production
• RVUs
Important Physician Owner Contract Issues
• Leaving the call schedule (How to reduce compensation?)
• Leaving the group – timing
• Disability
• Ability to terminate
• Addressing non-compliance with practice policies – Coding practices
– Timely dictation/documentation
Things to Remember
There is not a Perfect Plan Always Some Bias Cannot Please Everyone
Each Group is Unique Compensation Plans Should be Unique
Compensation Plans are Not Governance Tools Need Leadership Need Common Goals Management Must ACT!
Compensation Plans Must Address Group’s Goals and Mission