The physician in transition: A three-phase plan

February 1, 2010

When a physician decides to make a change in the way they practice, regardless of whether that change is reduced hours or retirement, the ramifications need to be considered by the rest of the practice.

The three phases

The assessment phase also involves an understanding of the life plans and other similar physician needs or wants that have been shared by the physicians to-date. The assessment phase will also entail an articulation of practice preferences such as financial requirements, strategic planning, and other practice-specific obligations that need to be met.

Phase 3. The last phase is to develop the plan's technical dimensions or mechanics. In this phase, the specific physician eligibility and notification requirements are set forth, as are time limits such as the length of time a physician can remain in a transition status prior to termination, a change to a new status, or retirement. In addition, the financial impact of transition should be spelled out as it relates to buy-in/buy-out arrangements, compensation, practice expense distribution, on-call arrangements, and other details of the plan.

On-call and financial compensation

A key component to the third phase is clearly defining what will change for the physician in terms of on-call hours and financial compensation. A physician going to part-time status may be limited in income to a percentage of what he/she made as a full-time physician. In addition, he/she may be required to take full on-call. Part-time partner status is generally defined in the range of 60% to 75% of the workload that is required for a full-time schedule.

A combination of age and years of service may determine whether a physician in transition can make changes in weekend or weeknight call. For example, a physician with at least 15 years of service may, at 58 years of age, cease weekend call and, at age 63, cease weeknight call. This arrangement should have an end date, at which time the physician retires.

There will also be a financial cost associated with on-call termination-such as a price per day or a reduction in compensation as a percentage of market. For example, if the physician is currently paid at benchmark median levels, a reduction in on-call may reduce his/her income to 80% of median. As another example, a urologic practice may reduce the physician's salary by 20% for each of two years, at which time the physician transitions out of the practice.

Dr. Keegan notes that 80% to 85% of the overhead in a medical practice represents a fixed cost that must be paid regardless of patient volume. Thus, a transitioned physician may still be required to pay his/her full share of the majority of overhead expenses regardless of his/her status. Financial changes also include partial or no share of ancillary revenue distribution and other revenue streams.

When a physician requests a transition, there will also typically be a change to his/her status in the group. For example, if a physician drops below 75% time, that physician can no longer be a partner and thus will no longer have voting rights, or the practice may decide that the physician can remain in a transitional state for no more than 3 years, at which time he/she retires, terminates, or converts to an employee status.

Bottom line: None of us can practice forever. We all have to start, work, and then transition toward retirement. Developing a transition plan before it is needed is the best way to create harmony in the practice and help older physicians lighten their workload, decrease their salary, and ease them into full retirement.

Modern Medicine NETWORK

EDUCATION

Nell H. Baum, MD and Robert A.Dowling, MD examine types of physician transitions and whether transition is a right of privilege in part one of this series. See: http://www.urologytimes.com/movingon

Neil H. Baum, MDDr. Baum is a urologist in private practice in New Orleans. He is the author of Marketing Your Clinical Practice-Ethically, Effectively, and Economically.

Robert A. Dowling, MDDr. Dowling is medical director of Urology Associates of North Texas, a 48-physician, community-based, single-specialty group in the Dallas-Fort Worth metroplex.