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Aging doctors present part-time compensation obstacles

Physician Compensation & Recruitment, December 20, 2007
Part-time physicians haven't presented a major compensation challenge for groups in the past--a physician or two may have occasionally requested part-time work options, but it wasn't enough to destabilize the entire group. However, a convergence of several market pressures will make part-time work commonplace in the near future, and practices would be wise to integrate a transition compensation policy into their overarching plan, said Deborah Walker Keegan, PhD, president of Medical Practice Dimensions, Inc., a healthcare consulting company based in Arden, NC, who spoke about transition physician compensation plans at the MGMA annual conference in October.

In addition to the "graying" of the physician work force, younger physicians' desires for work-life balance and the increasing rejection of traditional call-coverage duties make requests for part-time work more common, says Peg L. Stone, principal with PLS Professional Associates, LLC, a Cumming, GA-based firm that specializes in developing and evaluating physician compensation plans.

Whether it's an older physician looking for a semiretirement option, a Generation X physician seeking work-life balance, or a committed specialist who no longer wants to take call, practices should anticipate the effects of part-timers on their bottom line and work to develop part-time compensation plans if they want to retain these physicians.

"It's going to be a fact of life--we will have part-time physicians, and it's not going to be the one or two per practice we've had in the past," Stone says. "Groups are going to have to step out of the box and plan for those events as a normal everyday operational factor."

Older doctors dissatisfied
Although a part-time request can come from any physician, the primary source is older physicians looking to scale back their practice rather than completely retire. early half of all physicians in the United States are 50 years or older, making scale-downs an important issue already, and one that will have a greater effect on healthcare in the next decade.

For example, a recent Merritt, Hawkins & Associates (MHA)--a physician search and consulting firm in Irving, TX--survey of physicians 50-65 years old found that only half plan to continue practicing as they currently are in the next three years. Twenty-four percent said they plan on working part-time, reducing their workload, or switching to locum tenens, and 14% will completely retire. Others are turning to jobs in a nonclinical setting or even in a field other than medicine. It's not just that physicians are getting older; they are more dissatisfied with the practice of medicine than in the past, and many would rather retire early than deal with the hassles of running a business when reimbursement is stagnant and costs are rising. When asked how many hours they spent on administrative duties such as billing and compliance in their first three years of practicing medicine, the vast majority of respondents said fewer than four hours per week. Contrast that with the more than half who said today they spend between five and 10 hours on administration, and the roughly 12% who dedicate more than 14 hours to administration weekly.

Combine the shifting demographics with an increasing administrative burden, and practices face a large cohort of discontented doctors: Fifty-two percent of respondents to the MHA survey say practicing medicine has become less satisfying in the past five years, and 56% say they wouldn't choose medicine as a career if starting today.

Being near the end of their careers, these physicians have an out--retirement--that their younger dissatisfied counterparts don't, and practices may have to show some flexibility in order to keep these doctors happy and in the practice, Stone says.

Allocate overhead fairly
Aside from an obvious loss of revenue and a drop in patient access, a physician going part-time can put additional strain on practice operations and other physicians' compensation levels, said Keegan. The effect will depend on whether the group allocates revenue and expenses based on productivity--in an eat-what-you-kill manner--or divides them equally. Revenue allocation is relatively easy to handle: If a group divides revenue based on productivity, then a physician working part-time will produce less and see a natural drop in compensation, and if a physician receives an equal share of revenue, then that share can simply be adjusted if he or she scales back. For example, a physician working as a 0.75 full-time equivalent (FTE) physician will see a 25% reduction in revenue. It is dividing overhead that becomes tricky, because typically 60%-80% of a group's costs are fixed--for example, building and equipment leases and staff salaries don't vary based on how much one physician works, said Keegan, who is also the coauthor of Physician Compensation Plans: State-of-the-Art Strategies, an MGMA book. That means overall costs usually don't decline as significantly as revenue when a physician goes part-time.

Prepare ahead of time
Practices should keep an eye on culture and demographics to anticipate waves of retirements or unhappiness with call duties, Keegan said. "Graph physician ages today, five years from today, 10 years from today" to assess when it might be an issue and avoid a precedent-setting case. Practice leaders will need to answer questions such as:

  • What will be the eligibility criteria for scaling back?

  • Should part-time physicians still have a vote about governance issues?

  • Should part-time physicians still have a stake in expanded revenue from ancillaries and other ventures?
  • How will the group define an FTE?

"Develop a plan now--hopefully before it is needed--so that a precedent-setting decision based on any one individual physician's circumstances is not made that will be detrimental to other physicians in the practice or the future health of the medical practice itself," Keegan said.


Elyas Bakhtiari is the editor of Physician Compensation & Recruitment. He may be reached at ebakhtiari@hcpro.com. This story first appeared in the November edition of Physician Compensation & Recruitment, a monthly newsletter by HCPro Inc. For information on all of HCPro's products, visit www.hcmarketplace.com.