Integrating a New Associate Into a Practice

1. Integrating a New Associate Into a Practice Bruce Maller, President, BSM Consulting

2. Session Objectives Explore the various methods for compensating employed and contracted physicians. Review case studies to show practical applications.

3. The Situation You have a busy surgical practice and have recently given a lot of thought to adding another physician to your practice. You have a good candidate in mind and have verbally offered him a position, but without any details. You are unsure what to offer the young doctor as compensation. What do you tell him?

4. Employed Physician Compensation Question Answer What is the simplest method for compensating an employed doctor? Salary only. Lack of incentive to produce might result in paying a salary that is too high for the collections produced by the doctor. What problems might paying a salary only create? What method of compensation will create an incentive for the employed doctor to focus on production?

5. Employed Physician Compensation How would you structure a compensation system that includes a bonus? Q. Margin Why is this justified? What might these be? Other Incremental Expenses $ Benefits Pay

6. Employed Physician Compensation How would you structure a compensation system that includes a bonus? Q. Revenue The bonus should be a percentage of this amount. Margin Other Incremental Expenses $ Benefits Pay

7. Employed Physician Compensation Example: 30% bonus over 3 times salary What would be this doctor’s total pay? Revenue Bonus calculated on this amount Margin Salary: $200,000 Bonus*: 7,500 $625,000 Other Incremental Expenses $ TOTAL: $207,500 Threshold: $600,000 (3x pay) Benefits * Bonus: 30% x (625,000 – 600,000) = 7,500 Pay Salary: $200,000

8. Employed Physician Compensation Salary only Salary plus production bonus • Bonus: 30 - 40% over 2½ to 3½ times the salary amount • Bonus usually paid annually Salary plus other types of bonuses • Bonus based on specific MBOs (patient relations, staff relations, skill development, overall practice growth, etc.) Percentage only For example: • Compensation = 35% of net collections • Draw: $17,500 per month • Bonus paid quarterly

9. Percentage Only Example This is what the practice paid him. This is what the practice agreed to pay him. • For whom might a percentage-only compensation • model be appropriate?

10. Contract Norms Compensation Levels Based on: • Geographic considerations • Supply of and demand for physicians • Training, background, value the physician brings to the practice Other Benefits: • Health coverage • Malpractice insurance • Pension contributions • Paid time off • Professional expenses (e.g., budgeted amount for attending medical conferences) • Relocation reimbursement; “signing bonus;” fees paid

11. Independent Contractors Employee vs. Independent Contractor • Intended relationship • Tax consequences • Laws and regulations Typical Payment Models: • Percentage only • Per diem (payment based on number of says worked) • Rental agreement • Independent contractor pays fee for space, equipment, supplies, and staff usage

12. Physician Recruitment and Retention Strategies

13. Session Objective Discuss best practices in recruitment, contracting with, and retention of physicians and other professionals.

14. Recruitment Best Practices Start the process early Be proactive and opportunistic Clearly identify the need Solicit input from colleagues

15. Recruitment Best Practices Find someone that is a good cultural “fit” Create a feasibility analysis Define clear expectations for candidates Be patient

16. Contracting Best Practices Make sure the terms “mark to market” Don’t make the mistake of overpaying Provide incentives that are aligned with your business goals Have a written agreement

17. Retention Best Practices • Have a comprehensive “on boarding” process Make sure staff is involved with this process Encourage the associate to find opportunities to train staff • Where appropriate, involve the associate in your business planning Meet on a regular basis to review the numbers and discuss how things are working • Be open and honest in providing feedback

18. Thank You!