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How should the burden of softening practice economics be shared with associate providers?
We have experienced slow-motion, adverse changes in practice economics over the past decade. Costs are rising while fees are stagnating, and perhaps falling sharply in 2010 and beyond. Even before the arrival of the Great Recession, there have been looming limits on the degree to which working harder and smarter can mitigate these environmental changes.
As a result, I've observed a strong trend in the last year that associate providers (both partners and non-partners) are increasingly coming forward, unhappily, with a tone of entitlement and feelings of injustice, and asking for "more." (Or at least not accepting any "less.")
The overlapping perfect storm of stagnant fees, the recession and pending health reform is causing owners to look for ways to share the burden with non-owners. Employment contracts written many years ago in an environment of normal 40%-plus profit margins are no longer fair in a -35% profit environment.
When I approach reasonable associates, they are commonly happy to recast old contract terms and create a new win-win. However, some associates are unable to negotiate from a position of seeing both sides and end up very frustrated - and very at risk of losing their jobs.
If your (or your boss's) new/lower profit margin will no longer sustain higher-than-margin payouts to an associate, there are only three options:
- Keep paying the higher amounts to the associate on the argument that if they leave there will still be fixed overhead to cover and the doctors left behind take a personal pay cut.
- Negotiate lower payouts, working through any hurt feelings that this negotiation may engender.
- Terminate the candidate if s/he's being unreasonable.
It's relatively easy to judge the best course of action with the numbers of the practice in hand, creating a pro forma review, with and without any given provider, with or without any given associate's wage concession. As the owner, rather than keeping this data to yourself, open the books, and show your colleague how both of you winning on consensus is far better than both of you losing on principle.