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Hiring a New Physician — Answers to Some Key Questions
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Most practices eventually need to add a new physician, whether to meet increasing demand or to maintain practice capacity. If you’re considering the addition of a new associate, here are answers to some of the critical questions involved.

Can I Support Another Physician?

As you might imagine, success depends largely on your associate becoming busy as quickly as possible. This is more likely to occur if:

  • One of your colleagues is slowing down or retiring;
  • Patient waiting times for routine exams and procedures are excessive;
  • You or your colleagues are unable to add needed surgery days due to a heavy clinic schedule;
  • You are routinely referring a significant number of surgical or subspecialty cases to others outside the practice; or
  • A new satellite office or certain demographic trends suggest that new service areas may be available to the practice.
Issues such as these typically indicate that recruitment may be feasible.

undefinedEven in the face of such obvious demand, however, the practice must be able to provide the physical office space, surgical/procedural time at the hospital or ASC, staffing, equipment and other essential elements needed to support the new doctor. The question of viability is not just an issue of unmet demand, but also one of available infrastructure. Be sure both are aligned before proceeding.

Finding the Right Physician for Your Practice

Most doctors seeking new opportunities regularly consult the Ophthalmology Job Center listings on the Academy website, so positioning an ad there is a good place to start. Jobs can also be publicized through the websites of other professional societies (especially if a subspecialty is involved) and through printed journals, word of mouth, professional meetings or letters to residency program directors.

The first step after receiving a candidate’s CV involves assessing his or her ability to satisfy defined practice needs. Before beginning the search, you’ll want to outline your practice’s recruitment objectives in writing, noting those clinical skills and personal characteristics you desire of your ideal candidate. Although not every candidate may satisfy every listed requirement, those you will consider further should satisfy certain essential needs.

After comparing each candidate’s CV and cover letter with your predefined needs, the second assessment step is a telephone interview to evaluate remaining candidates’ responses to predetermined questions reflecting those needs. Each candidate should be asked similar questions to allow valid comparisons. Structure questions to provide insight into the candidates, rather than to encourage “canned” responses. Such questions might include:

  • What was the best part of your training? What specific skills make you especially valuable?
  • How do you work best with people? What have been your biggest challenges in working with others? 
  • What are the characteristics of your ideal practice opportunity? How does our practice match? 
  • Where do you see yourself as a physician in five years? What steps will you take to ensure that you meet your goals? 
  • What do you do to vent work-related stress? Tell me about a stressful situation and how you coped with it. 
  • What are we likely to discover after working with you that won’t be obvious in the interview process?

The third step in the assessment is to evaluate the tangible and intangible aspects of each candidate’s fit during the course of an on-site interview. This means observing candidates’ social and communication skills, confirming their ability to present themselves well to your patients.

The “right” physician for your practice will satisfy the vast majority of the needs you identified before beginning the interview process. Beyond that, the individual should also be compatible on an interpersonal level, showing signs that he or she would work well with you, your colleagues and staff members.

Compatibility is, in many respects, a subjective judgment involving observation of how the candidate interacts with others, whether the individual expresses viewpoints that are consistent with the practice’s philosophy regarding patient care and work ethic and whether the candidate shows enthusiasm for what the opportunity might offer. Of course, clinical competency is essential. Your discussion with the candidates’ references should confirm that aspect.

Compensation and Benefits

Most physicians expect a combination of a salary guarantee and an incentive-based bonus. The guarantee provides an appropriate financial foundation for the individual while he or she becomes established in the area. The appropriate guarantee amount depends primarily on (a) the nature of the individual’s training, (b) the scope of practice the individual is expected to provide and (c) the practice’s circumstances and your local labor market.

For the most part, candidates with fellowship training will command higher base guarantees than candidates without. However, base guarantees recognize the value of that additional training only to the extent that it will be used in the practice. Consequently, if you are recruiting for a comprehensive ophthalmologist, a corneal or glaucoma fellow who accepts the position is likely to be paid at a level closer to that of a comprehensive ophthalmologist without a fellowship.

Finally, base guarantees reflect the reality of supply and demand within the local market. Practices located in less desirable areas often must pay higher salaries than those in more desirable locations. Costs of living affect competitive offers too. And, of course, experience affects guarantees as well.

Incentive-based compensation can be structured in different ways. The most common approach is to pay a percentage of the individual’s net collections (i.e., gross collections less refunds and injectables) exceeding a defined threshold. The threshold is often set at a multiple of the base guarantee amount. The percentage used varies somewhat among practices, depending on the practice’s overhead rate. Other options include paying the new doctor the greater of either the defined base guarantee or a percentage of total net collections or paying a series of defined bonuses based on the attainment of certain collections targets. Other alternatives to these structures are also possible.

Some practices pay only a salary, without incentive-based compensation. This approach is viable if the parties can agree on a satisfactory salary relative to the work expected of the new doctor. However, most candidates like the idea of having increased compensation linked to their practice growth. On the other hand, few candidates will accept an offer without a guarantee in some form due to the uncertainty of the compensation they would receive under a performance-only structure.

In addition to compensation, you should expect to provide those fringe benefits common to physicians and other employees in the practice, which typically include health insurance and retirement-plan contributions. Most contracts offer two to three weeks of vacation in the first year, along with one week of education leave. CME costs for at least one major annual meeting are normally reimbursed — either in full or subject to a defined annual allowance. Most practices also provide partial or full reimbursement for relocation costs.

As a rule, professional costs incurred by the new doctor in fulfilling terms of the contract are covered in full by the practice. These typically include professional dues, journals, pager/phone costs, hospital/ASC dues, licenses, parking, mileage between offices/facilities (excluding any segment from/to the doctor’s home, since that is not a deductible business expense), DEA registration and other such costs. Malpractice insurance is also included. Although most contracts require the employee to pay tail costs upon termination, an equal sharing of premiums is fairer.

Arranging for a New Doctor’s Eventual Co-Ownership

The details of co-ownership are numerous and reflect a number of variables specific to the practice and its circumstances. However, you should expect to address the following key issues if a co-ownership track is under consideration:

  • The time frame for the co-ownership offer (usually after one to three years of employment).
  • The percentage of co-ownership to be offered (usually not less than the percentage owned by any other co-owner).
  • The manner in which the buy-in amount will be determined (the formula to be used, not a dollar amount). 
  • The terms of payment expected for the buy-in (i.e., the time frame for payment and tax allocations involved). 
  • The manner in which net income will be distributed among co-owners (this affects the new co-owner’s cash flow and goodwill value). 
  • The way in which co-owners are bought out when they leave (this affects not only the new doctor’s potential buyout, but his/her obligation to buy out senior co-owners as well).

Note that none of these terms should obligate the practice or the candidate at this point of the recruitment process and that all references to co-ownership should specify that any co-ownership arrangement would be based on mutual consent. For that reason, buy-in terms are usually placed in a separate letter or memorandum rather than within the employment agreement. However, outlining these aspects during recruitment is highly recommended. Doing so can reduce misunderstandings later on.

Many smaller practices have difficulty developing this level of detail regarding co-ownership when the employment agreement is being signed. The absence of such details doesn’t preclude a successful recruitment, but it does increase the risk that the parties may not reach agreement down the road when co-ownership comes up for discussion.

Making All of This Happen

Who you enlist for help in the recruitment process depends on how much and what kind of help you need. Your accountant or office manager may be helpful in constructing projections to confirm the financial viability of adding a new doctor to the practice. 

A consultant may be able to assist in establishing links to potential candidates and outlining essential terms for the employment period. An attorney is indispensable in constructing an enforceable employment agreement with solid provisions protecting the interests of both parties. And a consultant or accountant can help assemble the co-ownership elements for illustration to a potential co-owner.

Some practices seek the help of a professional recruiter, especially if the practice has limited time and resources for the recruitment process or if characteristics of the position create difficulties in recruitment. A recruiter can help you to define your needs, identify competitive terms, advertise the position, locate and screen candidates, coordinate interviews and smooth the transition process. The services of the recruiter will be defined within a contract, with fees based either on a retainer (meaning that the recruiter is paid for services rendered) or by contingency (meaning the recruiter is paid only if a candidate is placed).

Although a contingent approach may seem less risky, retainer-based recruitment provides a broad level of service that can often enhance prospects for recruitment success. Both approaches can work well depending on the practice’s circumstances and needs.

With either approach, read the contract carefully before signing it, confirming the exact services the recruiter is to provide as well as the fees and payment dates specified. Be sure the contract clearly excludes payments for candidates who contact you directly but are later referred coincidentally by the recruiter. And also examine provisions for placement guarantees, allowing you to receive at least a partial refund or credit toward subsequent recruitment if the candidate fails to complete at least six months with your practice.

In addition to professional assistance, take advantage of available resources for self-education about the various aspects involved in the employment process. Read pertinent articles and obtain copies of recent AAOE lectures. These can provide the key information you need. The more you know about the recruitment process, the more likely that your efforts will be successful.

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About the author: This article originally appeared in the September/October 2010 issue of Executive Update. It was written by Richard C. Koval, MPA, CMPE, is a principal/senior consultant at BSM Consulting and a member of the AAOE Consultant Directory.

 
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