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Finding fairness in physician compensation, part 3
Depending on the compensation model used, especially those rewarding individual productivity, bad feelings can emerge when group funds are spent for equipment, marketing or staff resources that benefit individuals unilaterally. This is a problem in groups where only one doctor is the LASIK surgeon.
In some settings, physician rancor is so high that we take a micro-allocation approach to expenses, rather than the broad approach in the last example. With micro-allocation, physicians precisely account for portions of the facility, staff and supplies they consume. Staff payroll hours are divided up among partners. A pod of lanes is essentially rented by the hour. I’ve seen this approach lead to ridiculous hair-splitting, where a carton of Kimwipes (Kimtech Science) was subdivided among each physician’s private lanes and accounted for on that month’s compensation worksheet. This is a little compulsive for most tastes, but it allows for a degree of exactitude and perfect fairness needed in those settings where physicians would otherwise split up.
The most common approach today, and the best starting point for discussion if you contemplate a change, is a hybrid between “eat what you kill” and equal sharing. Under this approach, a minority of available profits (typically 20% to 30%) are doled out pro-rata to practice ownership, and the balance of available profits are shared proportional to individual productivity — typically collections net of retinal drugs or facility fees. This approach is simple, readily tweaked as conditions change and works with a wide variety of productivity levels.
Like a country’s complex tax code, every practice’s compensation model should be designed to consciously reward mutually agreed upon, desired behaviors and be reviewed often for continued relevancy and fairness.