Revenue sharing in a multi-physician practice is often done on a production based system. Production based pay gives the harder working physicians a larger slice of the earnings. Revenue allocation is also sometimes done based on a percentage of the revenue regardless of an individual's production. Both of these methods have pros and cons.
If the group is a single specialty group, both systems can often be used – a flat, smaller percentage divided equally and another portion based on production. This can depend on the type of specialty; if two doctors share the same specialty, equal payment can encourage them to back each other up; if one doctor is out sick or on vacation, the other doctor willingly steps up to help cover the workload.
In practices with multiples specialties, production based revenue allocation is an often used method. A large number of groups use receipts to measure productivity, where the direct costs are subtracted from the revenue and overhead costs are assigned. This system may seem fair but in areas of the country where most patients have low billable amounts, some physicians will be at a disadvantage. This will require the group to find a way to balance the mix.
How expenses of the practice itself are divided among the group can have a huge effect on income distributions. If expenses are to be divided evenly, it would be best if all the doctors’ revenue is somewhat equal. The other option is to charge all expenses that can be tracked to the doctor who uses them. This, however, could cause physicians to start taking shortcuts to save money and could affect the quality of care given to patients.
Regardless of how the revenue allocation is decided, an accurate and understandable system must be in place. All members of the group need to feel that they are getting a fair share and no one should feel as if they are carrying the bulk of the load.
Additional profits are often the items that can help bridge the gap between earnings. Lab work, radiology, x-rays, and other services that are ordered by the physician but not performed by him or her are often sources of extra money. There are two ways that some practices use these profits. The first is to split it between all members and the second is to pay indirect costs out of that money so that each doctor is charged only direct expenses against his share of the revenue allocation.
This may sound complicated, but with the right computer software the work becomes much easier and more transparent for the physicians in the group. The revenue allocation can be easily explained and the details are available in reports that practically produce themselves. The cost accounting involved will be easier and, overall, the whole process will flow smoothly.
In a multi-physician practice the decision of how to allocate revenue is important for several reasons. First, the method that a practice chooses will either attract or repel physicians; without a fair and equitable revenue allocation plan, it would be difficult for a practice to keep talented physicians. Second, depending on the method used, some physicians may be much more productive than others and some will give better care to their patients.
Keeping everyone in the group happy and satisfied with the revenue allocation system is extremely important. Please contact Oates & Company for more information and assistance.
