Pay and Partnership in Radiology Practices

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In the past, many radiology private practices used a fairly traditional (and extended) track leading to full partnership in the practice. Now, however, many practices are exploring emerging compensation models—including accelerated partnership tracks and enhanced flexibility in balancing earnings and hours—to accommodate the needs and preferences of a new generation of radiologists. Making these changes without antagonizing established partners is particularly difficult in some practices, so considerable finesse, patience, and communication skills will often be required. For practices seeking physicians, it really is a buyer’s market right now. Many physicians are coming out of training now and finding that there are fewer jobs to be had, partly because physicians have become more productive. In addition, advances in health IT (such as PACS) have made it possible for fewer physicians to cover a given geographic area. A recent look at the ACR® Career Center (www.jobs.acr.org) gave me an indication of the subspecialties that are now in highest demand. The top four fields, based on the number of job openings, are breast imaging, neuroradiology, musculoskeletal radiology, and teleradiology. The only surprise here is teleradiology; its position as the fourth most requested subspecialty tells us not only about the growth of teleradiology itself, but about the ability of teleradiology companies to get radiologists to work for less compensation than they might once have expected. Some of us will remember that in the early 1990s, practices were discussing how they were going to raise the starting salary for radiologists from $120,000 per year to $144,000; there was a lot of heated debate. Today’s radiologists are typically seen starting at $250,000 to $300,000 per year and ramping up from there. Under the traditional model of the partnership track, radiologists could expect fixed compensation and benefits for their first and second years of working with a practice. Partnership was usually offered after the second or third year, depending on the supply of available radiologists and the demand for their services. The third year offered fixed base compensation plus a bonus that was based on a percentage of the practice’s earnings (but was not equal to the full partners’ bonus). During the fourth year, the radiologist earned base compensation plus the full bonus distributed to partners. Today’s partnership track in radiology looks quite different in its early phases, although it reaches the same point—base compensation plus the full partners’ bonus—during the fourth year. In effect, the first and second (bonus-free) years of the old model are being skipped, and the third year, under the traditional system, is being extended to last for the first three years of work. The radiologist begins working with the practice in exchange for base compensation plus a percentage of the partners’ bonus. Based on the results of quarterly performance evaluations, partnership is often offered at the end of the first year. During the second and third years, the bonus percentage is increased annually, reaching the full amount in the fourth year.
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Table . Example of an evaluation form used for quarterly assessment of newly hired radiologists.
This is a way of spreading risk, since the fixed compensation is a smaller amount and the bonus percentage depends on the financial health of the practice. If there are revenue problems, the practice will be responsible for paying a lower amount than it would have paid under the traditional partnership model (which had larger fixed compensation and had smaller—and later—bonuses). The risk borne by the senior shareholders is spread, in this way, to the newcomers as well. In addition, the practice’s efficiency and income can benefit when making an earlier offer of partnership becomes the norm. If the practice knows, by the end of the first year, that it likes a new radiologist, offering that person partnership status can inspire greater effort on that physician’s part—by making him or her a stakeholder (as well as a shareholder). The new partners in a practice are more willing to bring forward new ideas, and they are more likely to participate in the committees and governance activities of the group. Evaluating New Radiologists The earlier a partnership in the practice is offered, however, the more certain the practice must be of the new radiologist’s abilities, qualifications, and general suitability for the position. Evaluating new radiologists becomes more critically important when they could become partners (or seek employment elsewhere) after only a year. At Radiology of Huntsville, PC, in Alabama, we use an evaluation form (see figure) that is used at the end of three, six, and nine months of work; after 12 months, the practice members vote on whether a partnership will be offered to the new radiologist. Because this leaves little time for gradual adjustment to the expectations of the practice, new radiologists need the feedback (both early and ongoing) that the evaluation form provides. After each round of evaluations, in which forms are completed by the new radiologist’s colleagues, the executive committee and I meet with the radiologist to go over the results. For this reason, free-text comments can be even more important than the form’s checkboxes in providing specific, useful feedback that the radiologist can use to adapt to the expectations of the practice. In some cases, these expectations are easily met, but might not have been apparent without the evaluation. One radiologist was stunned to find, at his first evaluation, that his habits of arriving late and leaving early were attracting the negative notice of his colleagues; it had simply never occurred to this high achiever that maintaining a fixed schedule would be expected of him. Frequent evaluation sessions allow misperceptions of this kind to be corrected quickly and easily, before they can impair the new radiologist’s chances at partnership. image The group does a one-week orientation when a new person comes into the practice. A senior radiologist in the same subspecialty is assigned to sit down with the new radiologist and answer questions. Advice is also given concerning which referrers prefer certain reporting conventions, so the orientation is customized to prepare the newly hired person to make a solid start. There is a chance that a referrer will refuse to have a particular radiologist perform interpretations in the future if the referrer’s preferences are not observed initially, so it is important both to the new radiologist and to the practice to ensure that the information needed to accommodate these preferences is communicated at the beginning. In addition, a handbook for new associates is given to cover broader topics that will apply to all new physicians; it covers such mundane (but important) topics as where to find the restrooms and how to use the practice’s information systems. Examining Contract Terms All of the practice’s physicians should be on the same contract (shareholder employment agreement). That might seem obvious, but I have actually known groups in which the physicians all have different contracts—and that does not make for harmony. If you give everyone the same contract, that makes things simple, especially when it is time to update contracts. If the new contracts offered to radiologists at that time are identical, there is an element of peer pressure that will encourage them all to sign the new agreements. About 80% of any contract’s text concerns itself with how the physician and the practice are going to part ways, if that time comes. The termination portion of a contract should always have for-cause provisions that include loss of medical licensure or loss of medical-staff privileges. It is important to add to these causes for termination any event that impairs the physician’s ability to generate charges or bill for services. An example might be loss of Medicare privileges, but there could be several other situations that affect charges, so inability to bill for services (not the reason for that inability) should be the focus of the contract’s clause. The contract should also give the practice the ability to end its relationship with a physician without showing any cause at all. Some hospitals, for example, reserve the right to terminate any physician, without cause, on 30 days’ notice. Contract clauses that permit termination without cause might lead some physicians to raise objections, but they are in the best interests of the practice and its shareholders. For example, there might be a radiologist who continually does a number of small things poorly, leading to great frustration within the practice—but none of those small problems might be significant enough to be considered cause for termination. If there is a without-cause termination clause in the contract, it is possible to end this person’s employment without worrying about discrimination suits (or other legal action against the practice). If the contract permits only for-cause termination, however, then the group will be forced to prove that some egregious failure on this radiologist’s part has taken place. That could be impossible, particularly in practices that require a high percentage of partners (rather than a simple majority) to vote out a radiologist. Earning More According to a 2010 survey¹ involving 15 medical associations and physician-search companies, the compensation range for radiologists is $377,300 to $478,000. Only five medical specialties showed pay increases, from 2009 to 2010, that exceeded the 2.7% inflation rate for the survey period. They were dermatology, pediatrics, neurology, pathology, and hospital medicine. Nonetheless, the survey showed that few specialists made more money than radiologists did; cardiologists, neurosurgeons, and orthopedists were among them. Pediatricians’ average compensation was $193,135; for family practitioners, the average was $187,821. This kind of information is reviewed at the legislative and regulatory levels of government, so it’s easy to see why radiology is a target for those who intend to reduce per-procedure physician compensation. On the practice and individual scales, variations in compensation for radiologists are naturally a concern as well. There are always physicians who want to earn more by working longer, and there are always physicians who are willing to accept lower incomes in exchange for more time off work. The challenge, under traditional compensation models, has been to find a way to accommodate the preferences of both groups. Where the income of the practice is shared equally among the partners, it will be difficult to keep everyone (or, perhaps, anyone) happy. At either end of the spectrum of preferences for free time versus income, some physicians will always blame those at the other end either for diminishing everyone’s compensation or for decreasing everyone’s available time off work. Although splitting practice profits equally has been a common compensation model, it is not a good fit unless the practice partners happen to be quite alike in their preferences for income and free time. A good compensation model must answer one key question: How can radiologists who want to earn more do so within the practice? One solution to this problem has been to adjust radiologists’ individual compensation based on their productivity, either to determine their overall share of the practice’s profits or to award them additional income on top of a fixed share. In the model that is often employed in practices that are heavily involved in teleradiology, the radiologist is assigned a fee per study. In the hospital-employee model, the radiologist’s income is based on work RVUs. An emerging hybrid model is likely to be better than either the traditional model or the productivity model at adjusting radiologists’ compensation to match their added efforts. This modified equal-share model awards points for taking longer and/or less desirable shifts (for example) and equalizes the points at the end of the year to determine the amount of the radiologist’s bonus. Radiologists can trade shift point for days (or weeks) off if they want to work less, since the partners who have higher shift-point totals will earn larger bonuses. Shift points are assigned to each work period in advance, based on the perceived desirability of working that shift. An index of shift desirability is constructed based on the hours of the shift (with higher points awarded for evening and night shifts) and the day of the week (with higher points awarded for weekend shifts). When applicable, a holiday adjustment factor is also used to award extra points to radiologists who work holiday shifts that are considered mildly undesirable (Memorial Day, Independence Day, and Labor Day), moderately undesirable (Thanksgiving and New Year’s Day), or highly undesirable (Christmas). A 10-hour weekday shift, for example, is worth the same number of points (10) as a five-hour weekend evening shift, and a shift worked on Labor Day is worth an additional 10 points beyond its basic day/night and weekday/weekend points. Radiologists who want extra compensation can work shifts with higher point counts—and when radiologists must cover undesirable shifts, they do so knowing that they will gain a larger year-end bonus for doing so. The modified equal-share model also has mechanisms that let radiologists earn more outside the shift-point system. For a flat daily fee, a radiologist can act as an internal locum tenens. The practice also can become a broker for a partner’s work, allowing that partner to accept outside opportunities that the group, as a whole, does not want. For external work that the group does want, such as site coverage, the group can handle billing and collections for individual radiologists who want to take on these extra assignments. This kind of flexibility is vital to keeping a practice running smoothly. This evolving compensation model, by making it possible for each radiologist to achieve an individual balance between compensation and time off, makes the practice more harmonious, more efficient, and more productive. Joseph A. Serio, FRBMA, FACMPE, CPA, MBA, is executive director of Radiology of Huntsville, PC, in Alabama. This article has been adapted from “Trends in Private-practice Partnership and Compensation Models,” which he presented at the RBMA Executive Education Program in Scottsdale, Arizona, on July 23, 2011.