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Finding fairness in physician compensation, part 1
Eye surgeons, by nature, are math-heads. And no number is quite so interesting to the average doctor than his or her personal compensation.
You would think that noodling through to find the best group practice compensation model would be a natural, even pleasant task, right? But it’s not. Why?
It’s not an aversion to do the math, which is pretty simple. It’s because any change in a group’s compensation status quo is sure to result in winners and losers. And confrontation. As Mark Twain once quipped, “I’m all for progress. It’s the change I don’t like.”
Here, and in the next couple of postings, are a few perspectives on compensation for your consideration.
Let’s start with the easiest approach, where the practice’s profits are split up equally among the doctors. Let’s say there are three partners in a practice generating $2 million in collections and $900,000 in distributable profits — so, each doctor receives $300,000. One of the only places I still see this approach with any frequency is in New England, where, in the shadow of Harvard, doctors still try to maintain the genteel appearance of being colleagues rather than competitors.
Equal-split compensation can no doubt work in any part of the country, but only with small groups of doctors who are very close in their production levels and potentials, and who are very compatible partners working in an environment of economic expansion, or at least agreed-upon stasis.
The problem with equal-split compensation, obviously, is that no two doctors are ever economically equal. One doctor is always faster, more aggressive or more popular with patients. Trying to maintain equal compensation collides with this obvious truth. If, in the example above, one doctor is generating half of the collections but is only getting a third of the profits, he’s likely not happy.
In reality, most practices using an equal-split approach are subject to either the defection of the most productive members (especially if there is no non-compete provision in place) or to a different kind of competition — for who can take the most vacation time off to equalize production. Either way, productivity suffers, overhead climbs as a percent of revenue and profit margins are reduced sharply. As noble as it sounds in concept, communism for countries or ophthalmic companies goes against human nature.