It is important for physicians or practice managers to understand the finances of the office to ensure efficiency and productivity while thwarting mismanagement.
One source of conflict in many offices is the method of splitting physician compensation. Physicians are faced with gross income and overhead.
Ultimately, physicians can have an office-sharing relationship where they compete against each other, or a total partnership, which encourages referrals and cooperation. Gross income can be divided equally or divided by production.
“This is the one issue that has caused partnerships to split up,” Dr. Gregory Brinton explained.
Calculating income can be done from charges or collections, and overhead can be fixed and split equally. Staff and equipment can be variable and divided according to production. The line between fixed and variable can be a hard line to draw. Staff can work more with one partner than another.
“As you look at overhead costs, it is more important to decide how it effects your relationship, that to really decide if they are fixed or variable.” Dr. Gregory Brinton said.
“If you want to light a fire under doctors (encourage them to see more patients), consider all of your overhead as fixed, and divide the dollars equally. On the other hand, if you want to encourage cooperation, rather than competition, consider all of your overhead as variable, and charge it to each doctor as a percentage of income. There are, of course, many options in between.”
Money is at the root of many battles, both private and professional, and financial issues can drive a wedge in a practice if caution isn’t used.
“When it comes right down to it, it isn’t how people are paid. It is their perception of how they are paid,” Dr. Gregory Brinton concluded. “People need to feel good at the end of the day when they go home. That is more important than the numbers.”
Gregory S. Brinton, MD
E: [email protected]
Eric P. Brinton, MD
This article was adapted from Dr. Gregory S. Brinton and Dr. Eric P. Brinton’s presentation at the 2018 meeting of the American Academy of Ophthalmic Executives. They have no financial interest in the subject matter.