My partner has proposed that we change our
method of income distribution from a production-based method to a profitability
method. How do we determine what is the best method for our two man group?
There is no single or best compensation method
for any practice. Physician compensation can be handled in any number of
different ways, depending on the economics of the practice and the philosophy
of its shareholders. Some practices use the profitability method, while
other practices divide income proportionally (resulting in equal overhead
rates), while still other practices divide income equally. All of these
methods can be considered appropriate if they are consistently applied
and reflect the philosophy of the practice and the method of dividing workload.
The profitability method is essentially an expense-sharing method under
which each physician is economically autonomous with the only common interests
being the sharing of call and expenses. Otherwise, there is little or no
"group practice" element to this particular method of compensation. Downsides
can also include conflicts over cost allocation and micro-management of
expenses. You and your partner need to discuss this issue from a philosophical
perspective to see if this method is consistent with both of your objectives.
A compensation plan is more than just another way of dividing up the pie.
It's a reflection of the values, benefits and perceptions of the physicians
in the practice.
Director of Consulting Services
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