Part II: Democratic groups must define their core values, clarify the owner’s obligations to the group, and put in place a system of accountability.
In the first part of this series I wrote about the advisability of separating the provider, leadership, management and reinvestment issues of the practice; of compensating all service providers at the same market-based rate; and, of empowering the group’s leadership to make gross margin revenue allocation decisions based on what is best for the practice based on their deeper understanding the practices’ leadership and management needs. This month we’ll explore the reasons that the level of administrative pay might differ from one democratic EM group to another.
The Questions Behind the Question of Administrative Pay
Before we can address the question of how much to pay for practice leadership and administration we need to put the question in context. The answer depends on a variety of other questions that are typically addressed in the group’s Mission/Vision/Values statement development and its annual strategic planning exercise. Some of these questions are:
1Is the group simply trying to maintain the status quo or is it committed to growth and expansion? Actively pursuing growth necessitates more leadership and administrative cost than does just maintaining the status quo.
2If the group’s vision is primarily to maintain the status quo (keep the contract) the level of appropriate administrative expense depends in turn on other factors such as:
The value the practices’ ownership places on administrative and business operational excellence. Just getting by costs less than the pursuit of excellence, but it’s also riskier. Excellence almost always has a positive return on investment but isn’t realized without an up-front investment in the practice.
The level of expectation of hospital administration. Meeting greater hospital expectations means more group leadership and administrative expense.
How well the other 5 pillars of the ED product are functioning. The providers are just one of the 6 pillars upon which the ED product (a satisfied patient treated according to evidence-based practice) stands, the others being nursing, ancillary support services, hospital administration, consulting/admitting medical staff and the culture/esprit de corps that binds all of these together. The more problem issues in these other pillars, the more leadership that’s required to deal with them.
The complexity and pace of change in EM practice administration. The more complex EM practice management becomes and the greater the pace of change to which EM practices must adapt the greater the need for leadership and administration.
The attractiveness of the group’s contract to competitors. The more groups that are lined up seeking to take the contract away the better the incumbent has to perform to keep them at bay.
Hospital-based group practices require physician leadership, business management and administration, and reinvestment in the practice to stay abreast of change. Management and administration’s job is to maintain the status quo as efficiently and inexpensively as possible while leadership’s job is to oversee management, anticipate change, and guide the organization’s adaptation to it. Effectively responding to change always requires the investment of time and money.
In general, efficient practice administration means paying physicians to do only that which absolutely requires a physician to do and paying less expensive personnel to do the other things. Only a physician can lead a medical group, for example, but it is a waste of an expensive resource to have a physician doing the scheduling. Physicians should lead and non-physicians should manage.
What then is the role of group ownership? Ownership work consists of doing all those things that are necessary to sustain the contract but impossible to fully compensate. This would include things like attending ownership meetings, participating in strategic planning, serving on ownership initiative workgroups, serving on hospital committees and taking an active role in the fundraising and public service activities of the medical community. There is to some extent an inverse relationship between how much ownership work the ownership group shoulders (presumably in exchange for their ownership distribution) and how much of the ownership work is left to the group’s leadership. Sadly, the norm in most democratic EM groups seems to be that most owners fail to contribute an equal share of ownership work.
Owner Involvement and Accountability
Successful democratic EM groups are wise enough not to force owners to do what they don’t want to do or aren’t good at doing. They tend to be somewhat less successful at shifting compensation away from those who don’t contribute much ownership work in favor of those who do, but before the group can decide what level of leadership and administrative pay is appropriate it must first answer all of the questions above, define the owner’s obligations to the group, and put in place a system of accountability to assure that these contributions are made. If the group is truly committed to equal pay for equal contribution this should not be (but somehow usually is) a hard sell.