Getting Paid: Curing Part-Time Headaches

It wasn’t lack of professional commitment that prompted Jennifer Shu to request part-time status at the Atlanta-based Children’s Medical Group at which she works. To the contrary, the pediatrician, who spends eight hours a week seeing patients, uses her extra hours pursuing her additional time-consuming interests.

Shu writes award-winning parenting books, reviews products for a juvenile equipment manufacturer, provides consulting services, and, of course, spends time with her son. “I’m part of a generational push for a better quality of life,” she says. “We’ve watched our parents and mentors work so hard, and now we want to go in the other direction - spend more time with family, do things we find personally rewarding.”

She’s not alone. The demand for flexible hours among physicians, both male and female, is well-documented and on the rise. Why? Part of the reason, says Maria Hayduk, senior manager for ECG Management Consultants in St. Louis, is that a growing number of baby boomers are looking to scale back as their retirement approaches.

“We’re seeing it at both ends of the spectrum, with baby boomers looking to retire and wanting part-time hours toward the end of their career and the X and Y millennial generations wanting more flexible schedules too,” says Hayduk. “There’s definitely pressure on physician organizations to accommodate part-time providers.”

In some cases, opening your practice up to physicians working less than full-time offers distinct advantages. Offering flexible hours can be a powerful recruitment tool for specialty practices struggling to find qualified doctors, particularly those that attract more women physicians, such as pediatrics, obstetrics, gynecology, psychiatry, and family practice. Working women still tend to remain the primary caregivers in their families. And according to the Association of American Medical Colleges, nearly 49 percent of medical degrees were awarded to women in 2005-2006, up from 27 percent in 1982-1983.

“Part-time hours are perfect for practices that suffer a critical shortage of physicians, such as radiology and anesthesiology,” says Jeffry Peters, president of the Chicago-based practice management consulting firm Health Directions. “It helps them attract flexible physicians who are better able to relate to patients with a demanding lifestyle.” Physicians eager for reduced hours, he notes, are also often amendable to weekend and evening schedules, giving practices the competitive advantage of being able to offer extended hours.

But with such flexibility also comes challenges. For starters, there is the increased administrative burden of accommodating part-time doctors, which can create scheduling conflicts and may necessitate completely revamping your compensation model.

And you’ll have to resolve how part-time providers will fit into your on-call mix, how reduced hours will affect their ownership track, and what impact, if any, such arrangements may have on continuity of care.

At what cost?

For most practices, the biggest hurdle is determining an appropriate pay level for providers who work less than full-time. Pay them too little and you won’t be able to recruit. Pay them too much and you’ll fuel resentment among your full-time physicians who understandably want to be rewarded with higher pay and timely promotions. “It’s important that compensation be consistent with their level of responsibility,” says Hayduk. “You will get tension between physicians if there is any perceived inequity of workloads and compensation.”

The Medical Group Management Association’s 2007 Compensation and Production Survey, which provides a breakdown of part-time physicians’ average compensation, retirement benefits, gross charges, collection ratios, and surgery cases can provide some guidance. But since all practices and specialties differ, you’ll need to define what your specific practice expects from its FTE physicians, says Bruce Johnson, an MGMA consultant and healthcare lawyer.

That includes the number of days you need an FTE physician in the office, how often you expect them to take call, the number of hours per day you need them to work, and how productive you need them to be, as measured by work RVUs or number of patients seen. By defining your own expectations, not only will you be better positioned to adjust a part-time provider’s pay, but you’ll also be able to review on a case-by-case basis whether such arrangements can meet your practice’s needs.

“There is incredible value in defining what you expect because it makes it easier to see when physicians may be varying from that,” says Johnson. “There are part-time physicians who are highly efficient in terms of seeing patients, but the real challenge is when a part-timer has low levels of production. In that instance, it may not be worth it for the practice to spend money on that flexibility.”

Doing the math

As for direct compensation, most small- to mid-sized practices keep it simple. They choose to pay reduced-hour physicians based on a percentage of the salary full-timers earn or a percentage of the practice’s profits.

“These are what we call team-oriented models where everyone shares in the profits, and you don’t focus as much on expenses,” says Johnson. “If your practice’s normal compensation plan is truly a salary-based system, or you divide profits equally, you can build a contingency in for part-timers.”

For example, if your FTE physicians earn a $200,000 salary, you would reduce that salary to $150,000 for a doctor who works 75 percent of the time a full-time physician works.

But Johnson notes that such models do not account for the cost of benefits. “How you treat benefits in your compensation plan will have financial implications,” he says. Practices that prorate benefits based on the number of hours worked should experience no adverse affects under such a system. But those that provide full-time health and retirement benefits to all physicians may find that the part-timers, who generate less revenue, contribute disproportionately to overhead.

Many practices draw the line at providing additional benefits to part-timers, such as retirement contributions, paid vacation, and reimbursement for continuing education. And they may also prevent their part-time physicians from pursuing ownership tracks.

As such, paying your physicians based on some measure of productivity - be it work RVUs, gross revenue, net collections, or net income - often works best. “You would allocate a portion of your practice’s money to the physician based on productivity, and then subtract a portion of the office’s expenses so the compensation calculation is made on an individual basis,” says Johnson. “It’s revenue minus expenses equals compensation.”

So a physician who brings in $400,000 with an overhead share of $200,000 would earn $200,000. The extent to which productivity models make economic sense for your practice (and the part-time physician) depends largely on how you allocate overhead.

Of course, it’s most equitable to distribute overhead costs among your physicians based on the percentage of hours worked, their utilization of resources, and the revenue they generate. But realistically, says Oliva, most practices don’t track those figures, opting instead to distribute overhead equally among all their physicians, resulting in a disproportional reduction in take-home pay for part-time doctors.

One formula that helps balance the equation is to take the portion of your fixed overhead allocated for rent, reception, and the office manager’s salary, and then divide that amount equally among your physicians. The remaining variable expenses, including direct labor costs for support staff, can then be divided based on collections or the percentage of patients seen. But no formula is a magic bullet.

“As much as we want to accommodate the part-timers, it’s the full-timers who we need to keep happy because they are the work horses,” says Oliva.

Compensation models based on productivity do have their drawbacks. For one thing, they can create additional administrative work, since benchmarks must be established and monitored. They are also sometimes criticized for fostering a competitive work environment.

“How do you define productivity?” questions Oliva. “That’s where people get angry at each other. One doctor may feel that he’s doing deliveries all the time, and all you’re doing is sitting around doing office visits.” And productivity alone doesn’t account for subjective performance measures, such as quality care, academic and research efforts, and the time spent in the office performing nonclinical administrative tasks.

Ultimately, practices need to consider their own administrative prowess and limitations when determining how to compensate part-time providers. “All small practices are not the same,” says Oliva. “Some have a very good handle on revenue and expenses and why they are so, and others do not.” Those that keep their finger on the pulse of practice performance are usually better positioned to implement a pay structure based on individual productivity.

Who answers the phone?

Dividing call must also be handled with finesse. Some practices require all physicians to shoulder an equal percentage of call, regardless of hours worked. Others allow their physicians to bow out completely or to only accept call during the work week. Regardless of the schedule your practice sets, compensating for call duty is complicated. “If some take call [on the weekends] and others only take call during the workdays, that’s fine, but compensate for those who are taking on more difficult schedules,” advises Hayduk. To even the playing ground, you may want to ask part-timers to accept patient calls at home during nights and weekends, leaving full-time physicians to take hospital calls.

Finally, you’ll have to ensure that any arrangements you make to fold part-time physicians into your caregiver mix do not affect continuity of care. It’s off-putting
for patients to get bounced around among an ever-changing line-up of physicians. And it’s hard on the doctors, too, who usually prefer to retain their own patient base regardless of how often they work.

One solution is to implement a care delivery panel in which two or more physicians handle the work of one FTE doctor, says Oliva. The designated group of physicians would be assigned the same group of patients - allowing the patients to become familiar with all the physicians in that panel. This also enables the designated physician group to maintain consistent communication within their patients’ records.

“The physicians on the panel would see each other’s patients so if there’s an emergent need on Thursday and you’re not here, I know that I have to take care of that patient,” says Oliva.

As physician demand for flexible hours grows, practices must address how they can accommodate part-timers. Carefully considering the division of compensation, on-call duty, overhead, partnership tracks, and benefits can turn nontraditional work schedules into win-win situations. But failing to plan ahead while attempting to accommodate all parties can deal a negative blow to your bottom line and catalyze a mutiny among the full-time physicians your practice needs to survive.

“There’s a risk of having arrangements that are almost too good to be true for part-time doctors,” says Johnson. “You need to craft an arrangement that works for the practice (financially) and works for all the physicians at the same time.”

Ultimately, it’s up to you to determine what your own budget will allow and just how far you need to bend to attract part-time providers.

Shelly K. Schwartz, BA is a freelance writer in Maplewood, N.J., who has covered personal finance, technology, and healthcare for 12 years. Her work has appeared on CNNMoney.com, Bankrate.com, and Healthy Family magazine. She can be reached via editor@physicianspractice.com.

This article originally appeared in the May 2008 issue of Physicians Practice.