Practice Management
September 2022
by John B. Pinto and Corinne Wohl, MHSA, COE
In a world with significantly more MD job listings than MD applicants, an unsurprising portion of our phone calls and emails start like this: “We’ve been looking for a new partner-track surgeon to join our practice for over a year without a nibble. What can we do next?”
The tough, potentially costly answer comes down to five options:
- Offer a higher base salary, bonus, and benefits package to compete with other employers.
- Sweeten the partnership terms with a lower cost or accelerated buy-in.
- Be a more attentive, attractive employer.
- Substitute missing MD labor with OD labor.
- Relinquish practice growth or succession planning goals.
Let’s cover each of these in turn.
Upping your initial employment offer
Starting base wages for a general ophthalmologist slowly rose with inflation until about 10 years ago. During that earlier time, jobs and job seekers were pretty nearly matched. Most doctors got a couple of job offers, and most employers were able to fill their ophthalmologist positions within a few months. Since then, a twin bloom in retiring doctors and senior patient populations and a steady decline in job seekers has boosted wage levels sharply. The typical job seeker has multiple offers, which for generalists can approach $400,000 and $600,000 for subspecialists in less desirable markets.
If you have been looking for a new physician without any luck, compare your base salary offer to these new realities. If you are a PE-partnered or health system practice and don’t offer a physician partner track, these base wage figures have to be taken higher still.
Forty years ago, the starting salary for a general ophthalmologist was around $75,000, close to the median price for a home in America back then. Today, the typical starting salary is around $350,000, which was—at least until the blistering real estate appreciation of the last two pandemic years—about the same as the median price of a home. So we should not be too surprised by these wage figures, which will continue to rise, until there is a material decline in allowable professional fees.
Sweeten the partnership terms
There are a lot of ways to do this. You can accelerate partnership from the typical 2- or 3-year track to just 1 year, or even immediate partnership. Remember that partnership is a reversible event. If you err and make someone a partner who turns out to lack the required productivity or temperament, the transaction can always be reversed, if you plan ahead.
You can revise the buy-in terms:
- Increase the percent of ownership; even if you are diluted below 50% ownership, your rights as the senior or founding doctor can be preserved in your legal agreements.
- Reduce the buy-in cost; this generally obliges a reduction in the goodwill component value.
- Revise the partner compensation model to be more favorable to young doctors.
Owners and associates are rarely on the same page regarding a fair percentage. Owners can be too parsimonious, offering just 15% of the practice, even if their associate is now doing nearly half of the work. We find even more often that it’s the associates who are over-reaching. It’s not unusual for us during a consulting assignment in this area to speak with an associate who perhaps generates just 20% of the practice’s revenue but expects to be granted a full 50% equity position. The key is to memorialize all of the anticipated (but non-binding) terms of future partnership in the original employment agreement or in a side letter.
Be a more attractive employer
[template id=14580]For most practices, there is a practical limit to how much they can pay new MDs. In today’s competitive market, you may also need to reframe other aspects of employment beyond salary.
It can feel lonely being the new doctor in a group practice. New hires should be matched to a partner-level physician mentor for the first year, with regular one-on-one meetings. All providers in the practice should meet at least quarterly, partly to discuss pearls and protocols, and partly to give everyone a feeling of belonging.
As an owner, foster a group spirit. Even if you are the founder and highest producer, be an “us” practice, not a “me” practice in all communication: at staff meetings, in speaking with patients, and in marketing materials.
The best quality associates want to get involved with decision making and with special projects they can call their own. Allow associates to sit in on non-sensitive portions of your practice’s partner meetings. Give them a voice, even if they don’t have a vote. By allowing a young doctor to participate in the group’s discussions on strategy and spending philosophy today, you’ll be helping a partner in training make better decisions with you in the future.
Doctors who have not yet made partner along with younger partners are often sensitive about how new patients are assigned in the practice, especially if the compensation methodology leans toward topline production. There should be a written protocol for scheduling new patients, and the appointment clerks should be checked periodically so that the very human tendency to please the senior partner by feeding them the best patients is not biasing the system.
Most associates (and partners, too) detest being clinically pigeon-holed and kept from areas of practice that they enjoy. As a general principle, unless an associate has been hired with the expressed agreement that they will stick to defined practice areas, it works best if every doctor is permitted to provide whatever care that they are trained for and reasonably competent at.
That said, associate doctors also want clear boundaries. A common complaint we hear from associates we’re about to terminate is, “I never knew I was expected to do that; why didn’t someone tell me?” Every new associate should be given a written summary of your minimum performance expectations. This list may be quite different for partner-track associates, who should take on extra work in such areas as staff training, community outreach, and quality assurance review.
Would it be better to hire an OD than an MD?
There are roughly three ODs for every practicing ophthalmologist in America. Optometrists are vastly more available on the job market than MDs. For some perspective, a terrific optometrist can usually be onboarded within a few months of starting your search. It might take the same practice a couple of years to find a suitable MD.
At times, an optometrist may be a better fit with the needs of your expanding patient population. Here’s a question we will often ask general ophthalmology clients: “What percent of your current personal monthly patient encounters could be handled by an optometrist?” The average answer we get back is “About a third or more.”
Change your business growth and succession plans
Being able to find and hire new providers is critical if you have a growing practice or are heading for retirement and need a successor. But in the years ahead, especially in non-coastal, non-urban environments, it will become increasingly difficult and expensive to hire an ophthalmologist. Here are a couple of examples of how a surgeon’s plans might change:
- You may have a growing practice and strong demand for your services (as often happens in underserved, rural markets) but find it challenging to attract a colleague. The reality may be that you can’t grow a larger ophthalmic practice, but you can still grow in relative income terms. As described above, you might decide to increase the OD to MD ratio in your practice. Or you could narrow your patient base away from routine medical care and develop a surgical referral center rather than a comprehensive practice. Either way, your personal income per hour worked will grow, even if that growth is not MD-driven.
- You may have been dreaming of a traditional succession event: finding a young doctor, working alongside them a few years, then riding off into the sunset. What if you can’t find a successor? You are left with two basic options. First, find a nearby peer practice (even if it has been a nominal competitor) and sell your practice to them. Or second, simply wind down the practice if you can’t find a new doctor or a local buyer. Interestingly, with falling goodwill values, you may be financially better off working on your own for your last few years and closing rather than bringing in a young doctor who cannibalizes some of the earnings you will need to retire.
About the authors
John Pinto
President
J. Pinto & Associates
San Diego, California
Corinne Wohl, MHSA, COE
President
C. Wohl & Associates
San Diego California
Contact
Pinto: pintoinc@aol.com; 619-223-2233
Wohl: czwohl@gmail.com; 609-410-2932
