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The aging baby-boom population will make eye care a growth industry, resulting in ophthalmology practices adding new physicians. Examine whether the practice really needs to add another physician, avoid overcompensating new hires, and negotiate an associate's buy-in as a partner carefully.
Incline Village, NV-The aging of the vast baby-boom population will make eye care a growth industry during the coming decades. As a result, many ophthalmology practices will need to add physicians, said Bruce Maller, founder and president of BSM Consulting, a nationally recognized health care consulting firm.
Maller, in a recent presentation, advised eye-care professionals that recruiting and signing the right person, then integrating that person successfully into a practice, requires a great deal of careful planning and attention to detail.
Determine your need
Calculate the projected expenses of an extra physician-including the person's compensation, fringe benefits, and any additions to the overhead needed to support the new person-then figure out how many patient visits and what revenue rate per visit would be needed to match that sum. If a new person isn't likely to bring in enough revenue to meet the additional costs, don't bring someone on board.
In some cases it may be that the practice can increase its patient load just by improving the efficiency of its existing physicians and administrative staff.
"A new physician is a very expensive commodity and you want to be sure that before you commit to it you've exhausted all other ways of improving efficiency," Maller explained.
Negotiate the contract
Once a decision is made to add a new person, it is important to understand what should be part of his or her contract. This includes a compensation package-salary plus benefits-with provisions for increases over time. The size of the package is generally determined by factors such as the physician's level of experience and the location of the practice. Rural and small-town practices, for example, can expect to pay more to attract an ophthalmologist than those based in cities.
Along with base pay and benefits, many practices provide new physicians with performance incentives. The most common approach to structuring these, Maller explained, is to pay the ophthalmologist a percentage of his or her receipts over a certain multiple of the base salary.
For example, if the ophthalmologist's base salary is $150,000 and the multiple is three times base, the ophthalmologist would receive a bonus equal to some percentage-usually 25% to 35%-of what they collect over $450,000.
Maller discouraged protracted contract negotiations. "Put it out there and say, 'We think this is a fair and reasonable offer,'" he said. "Be flexible, but don't let it go on too long. Look for expressions of appreciation and respect, that they think it's a great opportunity. And trust your gut. If it doesn't feel right, there's always someone else out there."
On the other hand, avoid overcompensating new hires.
"Often, I see a situation where an ophthalmologist has been in a practice for 3 or 4 years and is ready to become a partner. Then, he or she realizes that would mean making less money than they did as an associate," Maller explained. "They scratch their head and say, 'How did this happen?' It's because, in a sense, you paid them too much when they started out. You've got to be careful when you negotiate the incentive provisions that you don't fall into the overcompensation trap."
Negotiating an associate's buy-in as a partner in the practice is complex, Maller said, in part because it involves valuation of the practice. Generally, three components determine the value of a practice, each with different methods of buying in: