As hospitals bring in medical practices, compensation is a key source of physician satisfaction or dissatisfaction. The main reason physicians leave groups is compensation.
Hospital-owned medical groups need the stability that comes from close attention to each group's requirements. The most common failing is that emphasis is placed on actual plan design. What is needed, first, is a set of clear-cut strategies to build the foundation for good plan designs.
The following strategies are tools to help hospital administrators in charge of hospital-owned medical practices.
1. The primary goal of your compensation plan is the preservation of the group. Physician turnover has destroyed many groups. Studies have shown that it costs more to replace departed physicians than their salaries. Additionally, potential replacements see red flags when recruited to replace physicians who have exited. And, worse, it is not uncommon for the departed physicians to remain in the community or nearby, thereby taking "their" patients with them. This means that the replacement physicians have to build a new patient base. The consequence is that these replacement physicians may require two to three years to make any real contributions to the group's overhead.
2. You can't please the entire group. Consider this example: in a seven-physician group, there are six happy campers and only one who is unhappy. We have found that these less happy souls are usually the top producers, and want the formulas changed. A pleased majority is not to be interpreted to mean that the formula is working. For example, at a six-physian pediatric group, the high producer wanted the long-standing, equal-share formula changed, to provide more reward for production. The remaining five partners resisted for some time, recognizing that changing the formula would result in less take-home for most of them. However, if he left, all of their overheads would quickly rise, resulting in much less take-home than if he stayed. It was also unlikely that a replacement pediatrician would be as productive. For these five it was choosing a little less income versus a lot less income. They chose to allow him greater rewards.
3. Annual review helpful. It helps to anticipate changes. In too many cases the physicians requesting changes have expressed an interest in change, but have not made these requests formally and clearly. At a later stage, the concerned physicians, still unhappy with the current plan, may be seeking a quick decision, only to be stalled and to exit. An annual review with each physician member of the group may help you pick up "early warning" signs of dissatisfaction. Physicians are often reluctant to express their unhappiness over economic issues with their peers, but they may be willing to express their concerns with a non-physician administrator or "outsider."
4. One size usually does not fit all. Surgery groups usually have different formulas than primary care groups that are, in turn, different than medical specialists. Some multi-location groups have found that formulas that apply to one locality may not apply to others. One same-specialty group could be hard-charging; the other more laid back. One of our clients, an internal medicine group, has opted for 8 weeks vacation and is willing to take home less. Others thrive on production, working more hours per week and per year. This is where the annual review, the one-on-one discussions with each physician, the review of production data, can all be combined to arrive at improved formulas, when called for.
5. Employed physicians are unlike usual employees. The ranks of employed physicians have swelled. Today, the majority of practicing physicians fit into that category. These physicians, unlike the rest of us, do not to deal well with things over which they have no control. Most employees will accept a salary review coming from a superior. Physicians won't. They would rather be given the parameters of salary options available and help others arrive at a possible solution. It is in their DNA to be problem-solvers and not easily accepting of others' solutions. This is why there is great merit in involving them in the salary review process. In our work with physicians, we have found that physicians are generally objective on the criteria that should be involved to determining how moneys should be distributed between all colleagues. They understand that this is a zero-sum game (i.e., there is no elasticity in the funds available to be shared).
These five guidelines may help you address a critical part of group success. Before defining compensation formulas, focusing first on simple strategies: keeping the group together; recognition that not everyone is pleased with new formulas; undertaking an annual review with all group members to let them know that their opinions matter; and different groups may require different rewards and different formulas.
Here's a final recommendation — these reviews may best be undertaken by those that are not involved with the physicians on a day-to-day basis. Many administrators have determined that they would not be seen as impartial arbiters. They have brought in other non-involved administrators, or outside consultants, including the group's CPAs.
San Diego-based Conomikes Associates is a nationally-recognized medical practice consulting firm, with over 1,500 on-site assignments. For information contact: rreading@conomikes.com, or phone (858) 720-0379.
Hospital-owned medical groups need the stability that comes from close attention to each group's requirements. The most common failing is that emphasis is placed on actual plan design. What is needed, first, is a set of clear-cut strategies to build the foundation for good plan designs.
The following strategies are tools to help hospital administrators in charge of hospital-owned medical practices.
1. The primary goal of your compensation plan is the preservation of the group. Physician turnover has destroyed many groups. Studies have shown that it costs more to replace departed physicians than their salaries. Additionally, potential replacements see red flags when recruited to replace physicians who have exited. And, worse, it is not uncommon for the departed physicians to remain in the community or nearby, thereby taking "their" patients with them. This means that the replacement physicians have to build a new patient base. The consequence is that these replacement physicians may require two to three years to make any real contributions to the group's overhead.
2. You can't please the entire group. Consider this example: in a seven-physician group, there are six happy campers and only one who is unhappy. We have found that these less happy souls are usually the top producers, and want the formulas changed. A pleased majority is not to be interpreted to mean that the formula is working. For example, at a six-physian pediatric group, the high producer wanted the long-standing, equal-share formula changed, to provide more reward for production. The remaining five partners resisted for some time, recognizing that changing the formula would result in less take-home for most of them. However, if he left, all of their overheads would quickly rise, resulting in much less take-home than if he stayed. It was also unlikely that a replacement pediatrician would be as productive. For these five it was choosing a little less income versus a lot less income. They chose to allow him greater rewards.
3. Annual review helpful. It helps to anticipate changes. In too many cases the physicians requesting changes have expressed an interest in change, but have not made these requests formally and clearly. At a later stage, the concerned physicians, still unhappy with the current plan, may be seeking a quick decision, only to be stalled and to exit. An annual review with each physician member of the group may help you pick up "early warning" signs of dissatisfaction. Physicians are often reluctant to express their unhappiness over economic issues with their peers, but they may be willing to express their concerns with a non-physician administrator or "outsider."
4. One size usually does not fit all. Surgery groups usually have different formulas than primary care groups that are, in turn, different than medical specialists. Some multi-location groups have found that formulas that apply to one locality may not apply to others. One same-specialty group could be hard-charging; the other more laid back. One of our clients, an internal medicine group, has opted for 8 weeks vacation and is willing to take home less. Others thrive on production, working more hours per week and per year. This is where the annual review, the one-on-one discussions with each physician, the review of production data, can all be combined to arrive at improved formulas, when called for.
5. Employed physicians are unlike usual employees. The ranks of employed physicians have swelled. Today, the majority of practicing physicians fit into that category. These physicians, unlike the rest of us, do not to deal well with things over which they have no control. Most employees will accept a salary review coming from a superior. Physicians won't. They would rather be given the parameters of salary options available and help others arrive at a possible solution. It is in their DNA to be problem-solvers and not easily accepting of others' solutions. This is why there is great merit in involving them in the salary review process. In our work with physicians, we have found that physicians are generally objective on the criteria that should be involved to determining how moneys should be distributed between all colleagues. They understand that this is a zero-sum game (i.e., there is no elasticity in the funds available to be shared).
These five guidelines may help you address a critical part of group success. Before defining compensation formulas, focusing first on simple strategies: keeping the group together; recognition that not everyone is pleased with new formulas; undertaking an annual review with all group members to let them know that their opinions matter; and different groups may require different rewards and different formulas.
Here's a final recommendation — these reviews may best be undertaken by those that are not involved with the physicians on a day-to-day basis. Many administrators have determined that they would not be seen as impartial arbiters. They have brought in other non-involved administrators, or outside consultants, including the group's CPAs.
San Diego-based Conomikes Associates is a nationally-recognized medical practice consulting firm, with over 1,500 on-site assignments. For information contact: rreading@conomikes.com, or phone (858) 720-0379.