Advice on structuring small-group pay plans
Here are models to choose from
Medical groups with 10 or fewer physicians face unique challenges in designing a workable compensation plan, says Bruce Johnson, JD, MPA, a consultant with the Medical Group Management Association’s in Englewood, CO.
For one thing, "a smaller group’s administrative staff may not have the time or resources necessary to properly administer a plan based on multiple and complex measurements of physician production and behavior," notes Johnson.
Overinvolvement of all the physicians in a small group is another common factor that creates its own set of concerns. Particularly because "the defection of just one physician from the group can mean a big hit in income to the rest, each physician in a small group — even a nonshareholder — can give that doc effective veto power," he observes.
The fact that group members often are asked to make subjective judgments about each other’s performance also complicates compensation planning.
Two approaches
Most groups deal with those issues by taking one of two different routes — either the individualistic or team approach — toward their physician payment programs, he says.
Groups taking the individualistic approach act more like a cost-sharing alliance with each physician responsible for his or her own costs and revenues. The downside to that can be internal squabbling over cost allocation, micromanagement of expenses, and a lack of group identity.
Johnson calls the other strategy the "single economic unit" or team approach, in which each physician receives base salary and they all share business costs. "This approach promotes the group concept but does not impose direct responsibility for costs," he notes. Another potential problem is that it fails to account for large variations in production and work level among physicians.
For most groups, a middle-ground approach that combines features of the individualistic and team models is probably best, Johnson says. "Compensation under these models can be based on production, equal share, a base salary plus incentives, or a combination of approaches," says Johnson. Warning: Practices taking this approach must ensure that the method of allocating revenues they use complies with physician self-referral laws.
Other details he feels should be part of your physician compensation plan include:
• Buy-in. "There must be physician buy-in as to what data the plan will be based on, how it will work, and what goals and values it will promote," he stresses.
• Education and assessment. "Physicians should understand exactly how the plan works and which benchmarks or comparisons will be used; otherwise, it’s a dictatorship," he says.
• A time frame. To keep everyone focused on the task at hand, set a date to complete and present the proposal for approval or disapproval before starting to design a plan.
• Goals and values. Do you know exactly what you want? Is the goal to promote the individualistic approach, or are you after better teamwork?
• Modeling. Physicians will want to see how the plan will affect them, so make sure the proposal contains a model that uses recent financials to show how everyone’s pay would be affected.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content