Fall 2006 issue of Horizons

When we are asked about the best compensation system for a practice, there isn't a simple answer. There are as many compensation systems as there are practices, and no one exact system works for each group or each specialty. We have never seen the same system in any two practices. Compensation systems tend to vary by specialty. Radiology, anesthesia and pathology are among the practices that gen- erally share revenues equally. But even those specialties have compensation systems that modify the results. Other primary groups or specialties allocate income and expenses based on factors such as revenue production, hours spent in the practice, procedures performed and many other measurable alternatives. Some practices split expens- es evenly, while others allocate costs in a variety of ways, such as dividing fixed and variable expenses, which are in turn allocated based on revenue, procedures performed or many other measurable factors. Generally the systems that work best are transparent and completely understandable by the group. The systems should not be so complicated that your staff cannot readily produce the information needed to implement it within a reasonable amount of time. Multi-spe- cialty practices have to satisfy all of the preceding in the development of their compensation system. In addition to tangible calculations, the systems will need to recognize the difference in job satisfaction of younger mem- bers as well as senior members of the professional staff. Some systems reward the doctor responsible for leading and managing the practice while the professionals are compen- sated based on productivity, and the managing doctor must take time to fulfill the management role beyond caring for patients. The system also must take into account call

requirements, health issues, vacation and any other factors affecting the practitioners.

Beyond keeping the professional staff content and satisfied, there also are compliance issues to consider with federal and state laws on health care regulations. The Stark laws were created to prevent doctors from benefiting directly from the self-referral of patients to health care facilities in which they have an interest. The Stark laws also prevent doctors in groups that offer ancillary services such as laboratory and radiology from ordering procedures that will directly benefit them. The group practice compensation system must segre- gate ancillary revenues into a separate account that then can be allocated on a basis other than productivity. The tax laws make it unpopular to allocate the ancillary revenues equally to shareholders unless the practice operates as an S corpo- ration, thus the preceding is a complicated maneuver that must be navigated with care. There are many other factors affecting the compensation system, including collections, reimbursements, changes in professional staff, call coverage, vacations and a variety of other factors. We at RubinBrown have helped many profes- sional groups develop compensation systems that meet the practice members' requirements. If you would like advice about your current system or are implementing a totally new system, please contact us.

Questions? Contact Dan Bindler, CPA Partner-in-Charge, Health Care Services Group 314-290-3316 dan.bindler@rubinbrown.com

38 • summer 2006 issue