APMA News - September/October 2020 - A1

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SEP T EMBER / O C T O BER 2020 / ISSUE 66

JOINING A PRACTICE? CONSIDER THESE
THREE TYPES OF COMPENSATION PLANS
Ted Ginsburg, CPA, JD, and Julie Ipavec, Marcum LLP

APMA has partnered with Marcum LLP to provide a series of articles about
compensation. This excerpt is from the article "Small Medical Practice:
How Do You Determine How Much to Pay a New Doctor that You Bring on
Board?" Find the full article at www.apma.org/compensation.

W

hen you think of compensation plans
for medical practices, they can be
divided into three groups-TeamOriented Plans, Individualistic Focused
Plans, and the basic Flat Salary Plan.

TEAM-ORIENTED PLANS
In Team-Oriented Plans, compensation is
directly linked to the overall medical practice
performance. These plans recognize and
reward team-oriented activity. Team-oriented
plans generally recognize and pay practice
expenses "off the top," to create a compensation pool that is then allocated among the
practice physicians. One advantage of teamoriented plans is that they recognize the
reality of a person's importance to the profitability of the group practice; programs of this
type will provide a base salary to a physician

APMA IS SOCIAL: ARE YOU?

and a bonus based on practice profitability.
These plans promote a collaborative work
ethic, and are simple and straightforward.
Team-oriented plans can also be linked to
market levels of compensation, and can provide the physician detailed, clear messages
regarding performance expectations.
Of course, there are also disadvantages to
this type of program. Team-oriented plans are
more difficult to sustain with large fluctuations
in production and work levels of the physicians. Owners would need to share financial
data of the practice to show non-ownership
physicians the basis for the bonus award; as
a result, non-owners may become concerned
about levels of costs and/or resource utilization. Additionally, new physicians would need
to be convinced that the base pay and bonus
potential would provide sufficient compensation, and that the bonus potential provides
sufficient reward for "working harder."

INDIVIDUALISTIC FOCUSED PLAN

@APMA
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EDITOR Will Scott; wpscott@apma.org
DESIGN Suzanne Kleinwaks Design

APMA gratefully acknowledges the
support of PICA, a ProAssurance
Company, founding sponsor of the
Young Physicians' Program.

The second type of compensation plan is
the Individualistic Focused Plan. This plan
places emphasis on the performance of each
individual physician in the practice. This
approach is usually implemented by treating
each physician as a separate profit-and-loss
center for compensation plan purposes. A
financial model of individualistic focused
plans typically addresses both revenue and
expense allocation that are agreed upon in
advance; for example, a particular physician
may be allocated a certain percentage of

the salary of nurses or physical therapists
with whom the physician works as well as
an overhead allocation. Some advantages of
individualistic focused plans are they provide
an "eat-what-you-treat" format to reward
individual physician work, they promote a
sense of individual responsibility for costs,
they include a clear message regarding
expectations, and they are consistent with
how income is determined (i.e., revenues
minus expenses).
Some disadvantages of individualistic
focused plans include inconsistency with
the group practice concept; promoting
behaviors associated with the "dark side" of
productivity (e.g., patient theft or scheduling
patients for more visits than necessary); and
disagreements regarding up-front expense
allocations.

FLAT SALARY PLAN
The third plan is the Flat Salary Plan. This
plan has no performance incentives, is easy
to communicate, and has no need to share
practice financial information with the physicians. The physician's only incentive is the
practice's promise to review their salary next
year. This type of plan does not foster a group
mentality.


http://www.apma.org/compensation

APMA News - September/October 2020

Table of Contents for the Digital Edition of APMA News - September/October 2020

Contents
APMA News - September/October 2020 - Cover1
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APMA News - September/October 2020 - Contents
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APMA News - September/October 2020 - Cover3
APMA News - September/October 2020 - Cover4
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