Thinking about hiring a new clinician? It may be a smart move, especially if your practice is having trouble handling its current work volume and your goal is to expand.But before you put that ad in PedJobs, ask yourself this question: can my practice really afford to pay another associate and ensure profitability at the same time?
Don't guess, says PCC's Chip Hart. Do the math. It can mean the difference between growing your practice and making a costly mistake in the long run.
"I've seen a number of practices burned by not calculating this figure properly," says Hart, who has hosted a webinar on the subject. "Your assumption in hiring a new employee physician should be to become more profitable, or at least break-even profitable, and expand the number of patients you see. You should never be so desperate for an additional clinician that you're willing to take a financial loss in order to employ one without the expectation of reaching profitability in a short period of time."
Keep Your Eye on the Margin
As a general rule, Hart likes to tell practices to estimate that the total compensation for an employed clinician shouldn't be more than 20-30 percent of the revenue generated by that clinician. Since roughly 60 percent of a practice's annual revenue typically goes toward overhead (fixed and variable costs), paying out a larger percentage for salaries will begin eating into the profit margin.
It may seem tempting to set salaries based on what the competition is paying new physician hires. Forget it, Hart says.
"It doesn't matter what the salaries are around you. At the end of the day, as the owner of a practice, you need to be profitable. Otherwise it comes right out of the practice's bottom line."
Finding the Right Fit
So you've done the math and can afford to hire a new employee physician at "x" salary. You'll now want to find the perfect fit - a physician whose clinical skills, personality, work ethic and philosophy on health care match those of your practice. Tuning in to what candidates value, beyond money, will likely help you in coming up with the perfect compensation package.
"Employee physicians today value schedule flexibility and time off as much as income," says Hart, "so when you talk about the dollars, talk about all of those costs, not just the salary."
How to Reimburse Thee: Let Me Count the Ways
Payment models, especially in the era of healthcare reform, run the gamut, but the basic plans include salary compensation, salaries with bonuses, incentive or productivity-based plans and models that mix salary and productivity.
Based on his recent survey of 120 pediatric practices around the country, Hart found that 20 percent, or 1 out of 5 offices, use a straight salary model, while 30 percent offer salaries with bonuses based on the profitability of the company, not individual performance. Another 25 percent of practices employe a mix of salary and productivity, but only 6 percent of practices surveyed use a pureproductivity model. It is up to the practice to decide which model works best, says Hart.