Eat What You Kill...

[Who's_The_Boss]

Hello, long time reader, first post...

I belong to a single specialty practice with 6 partners. We are set up as an S-corp with equal shares of the the business and we also have an LLC for the land and building which we also all own equally. Traditionally, we have paid ourselves 50 percent of collections and then collect profit-sharing at the end of the year. Basically, all activities which earn income on behalf of the practice (call coverage at local hospital, telemedicine call at several other hospitals, directorship at local hospital, MRI, research, infusion, teaching students and residents as well a a couple of other ancillary procedures in the office) are all placed into the collective pot and distributed equally. All overhead is shared equally. This has worked well but has always seemed to be problematic with regards to one partner who wants to take more time off and also is not participating in activities equally... So, we are now considering adjusting our IDP to try and pay based upon what each person brings to the table... More of an eat what you kill model...

My older partners (not the problem partner) are concerned about what this will do the group in terms of people arguing over what they should have to pay for with regards to overhead. I seem to think this could really help with not having to micromanage the other partners schedule or impose penalties for excessive time off. We are not in a situation where we want to part ways with the partner but want to try to come up with something that seems fair to everyone.

Any insight appreciated...

Thanks!

[CordMcNally]

You can always do a mix of the two. You can have a model that isn't 100% eat what you kill but will incentivize and reward those who are more productive. This will likely change the lazy partner's compensation in a negative way while also being a bit more fair to the rest of the group.

[8arclay]

In our group overhead is split equally, unless someone is less than half time at which point they cover 50%. Those who cut down a day/week still cover equal overhead as 5d/week partners

[Hatton]

Have you tried having a honest conversation with the less productive partner? Maybe he/she wants to be 0.8 FTE.

[ACN]

Fixed overhead = equal to all providers no matter how little or hard you work
Variable overhead = variable based on your collections (if you work more, you pay more since you utilize more staff, ect)
Ancillaries = revenue split equal to all providers
Call pay, personal responsibilities that provide revenue = put in your column

I think you guys need to adjust based on work put in. As a new partner, I'd be pissed if I got 1/10th of the call pay when I'm actually doing 4/10ths of the call by taking extra. The only way your model works is if everyone is equal. The one partner not doing as much, needs to have his %% reduced. Unfortunately, overhead doesn't get reduced except variable which is based on production.

[bonebrokemefix]

Fixed overhead = equal to all providers no matter how little or hard you work
Variable overhead = variable based on your collections (if you work more, you pay more since you utilize more staff, ect)
Ancillaries = revenue split equal to all providers
Call pay, personal responsibilities that provide revenue = put in your column

I think you guys need to adjust based on work put in. As a new partner, I'd be pissed if I got 1/10th of the call pay when I'm actually doing 4/10ths of the call by taking extra. The only way your model works is if everyone is equal. The one partner not doing as much, needs to have his %% reduced. Unfortunately, overhead doesn't get reduced except variable which is based on production.

I’d be pissed if I got shorted call pay regardless of my seniority.

[abds]

There are so many options for your group. ACN hit on many.

1: Your collections from CPT and E&M codes should come 100% to you.
Minus: Your direct overhead (your nurses, PA, etc)
Minus: your indirect overhead (receptionists, billing department, call room, xray techs, etc). This is the one that can get dicey.
1a: Either split this via production, since the more you produce and bill the more of the billing department time you use;
1b: or split evenly among partners, since it doesn’t matter if you see 9 patients a day or 90, you are paying one receptionist to sit at a desk in your clinic.

2: Another way I have seen this done is to have 80% of collections come to the partner producing said collections and 20% go into the pot to be split evenly, and effectively subsidize the less busy and make up for the indirect overhead imbalance in a more simple way.

Regardless, the call or directorship pay should go to the person doing it. If call is actually 100% equitable than this is a non-issue anyway but I suspect this isn’t the case for you. Nobody who doesn’t take call will ever get a dime of my call stipend.

The MRI and infusion income is possibly more complex regarding Stark law, and I’ve had too many scotches to articulate the options well.

[EM-CCM MD]

I’d talk to the guy before changing the entire structure of your company. As above, maybe he or she would be cool going part time. Or maybe he would “get it.”

[Cubicle]

OP: How much less productive is the problematic partner? 0-100 (100 is fully productive), where is he/she?

Depending on their productivity score _{(patent pending...)}, I dunno if breaking up a very easy _(sounding) expense & pay formula, for a _(predicted) more complicated system is worth it.

[nephron]

That's going to be tricky to split. The problem is that I imagine that some of the activities that you are describing probably bring in less revenue per hour then other activities, but may be just as valuable. If teaching residents and students generates new consults for the group and helps you maintain your position in the hospital system, it may be just as valuable as sitting in on a monthly meeting as a director for a hospital. It wouldn't be fair for someone to spend the same amount of time doing a different piece of work for the group and getting much less revenue for the work.

My old employer had system where she would assign rvu's for this non-clinical/non-income generating work for the group. The problem was that she always assigned herself a lot of rvu's for whatever she did, and kind of screwed the rest of us. The problem with a straight rvu model with different sites and work loads is that some people are going to generate more then others even if they are working as much as the others. My old employer would assign the junior partners to go to these satellite hospitals where we would round on 2-5 patients. It wasn't really generating that much in rvu's on income, but my employer wanted us to do it so that we would retain our dialysis patients and therefore it was valuable to the group, but not really valuable in terms of income when you consider the amount of driving you needed to see the 2-5 patients.

My current group is no better, set up similar to your group with just straight profit sharing with everything split and the employer seeing the fewest patients/taking the most days off in addition to collecting his directorship fees. I think that you guys need to come up with some sort of hybrid model, maybe keep some 50% revenue split for people working full time with the other 50% split based upon rvu's with some value of rvu's assigned to the different tasks that need to be done for the group. Maybe subtract out days anyone wants to take off from the 50% that was going to be split evenly (ie if someone works 80 days vs someone worked 100 days, the 80 day person would take 20% less then what 100 day person was making). It gets complicated and the person doing the least will not be happy with the pay cut.

[DDSonFIRE]

Not exactly sure how to translate this to medical but my dds partner and I do this:

33% of our own production is drawn throughout the year

remaining profit at end of year (though we draw it equally in "bonus" chunks a few times a year as the account gets too high to let sit, then settle at the end) is divided:
33% ownership (50/50 we split this evenly)
33% time in office (we just use days worked)
33% amount produced (usually 2% or less of eachother)

We both agreed on this as we felt it reasonably valued anyone working "more" and "harder" but still compensated risk of ownership.

Good luck, I hope you find a way that everyone is happy with

[childay]

You're getting some good comments.

Equal split after overhead sounds easy. Assuming everyone works full time and does the same jobs and takes the same call. Your group sounds pretty complicated. Even if complicated, if the non-standard work activities you mention all generated similar incomes it might still be "fair." Seems unlikely to be the case here.

On the overhead side as ACN mentions some overhead is variable. Some partners may use more staff. Some may work less. Some may do some super-expensive but lucrative procedure etc etc.

I like the idea of mixed model. Some % of doctor's collections/profits taken into a group pot, and split evenly. The rest is individual. Overhead will depend on your specialty what is most fair.

[Tim]

I’d talk to the guy before changing the entire structure of your company. As above, maybe he or she would be cool going part time. Or maybe he would “get it.”

“This has worked well but has always seemed to be problematic with regards to one partner who wants to take more time off and also is not participating in activities equally”

This discussion really needs to be had. There is a good chance the partner has been struggling with this conversation as well. No problem with the reduced workload, but his thoughts on how to handle the compensation. Solve that and everything is good to go. The goal is to be fair to all partners. Something needs to change, best if he participates in the solution, rather than be told.

[ENT Doc]

Talking to the individual might help but if you want to plan for future success (account for different partners coming on board in the future, life events, people choosing to work less) I’d break the costs down by individual vs group and fixed vs variable. Allocate accordingly. I think a split of overhead whereby some is a fixed % to all and the remainder variable based on collections is in order.

[Molar Mechanic]

We split fixed overhead by ownership % (including front office staff) and remaining profits by production %. Owners have paid $$$ to be owners, not granted by the partnership fairy. Profit from associates is split by ownership. The goal is for associates to buy in at the two year mark.