Group Practice
Book your Slot

Compensation Models

One of the most important aspects of a successful group practice is a frictionless compensation plan or model. Common questions that may arise include: ‘How should revenue be shared in a group practice?’ or ‘How should profits be distributed in a group practice?’

However, to devise a suitable compensation model, it is essential to first KYP. Once you have done the KYP and developed an understanding for your practice, then it boils down to selecting from the limited options applicable to your setup.

Before understanding the compensation models, it is important to understand that these are applicable only for the professionals’ hat of the Group Practice and not the owners’ hat. Please read about it here.

Discussed below are some of the most common compensation models.

How? Members of the Group share the rewards equally.
For whom?
Professionals with:
  • High Mutual Trust
  • Less complex and similar practice in terms of
  • Patient count and value
  • Procedure type
  • Location
Positives
  • Certainty
  • No internal competition
  • Internal referral of patients leading to work-life balance
Negatives
  • Fierce repulsion by overperforming member as there is significant loss to her at the cost of benefit to others.
  • Creeping in of complacency in the members as individual growth gives them very little additional reward (and is split amongst all)
How? Members of the Group share the rewards in the ratio in which they bring in work.
For whom?
Professionals with:
  • Less Mutual Trust
  • More complex and dissimilar practice in terms of
  • Patient count and value
  • Procedure type
  • Location
    Positives
    • Fear of complacency kicking in is eliminated
    • Possibility of healthy internal competition fuelling growth if planned well
    Negatives
    • No certainty of pay-out – Earn as you work model. No work-life benefits of Group Practice.
    • Possibility of fierce unhealthy internal competition if not planned well
    • No internal referral as each referred patient leads to loss of income
    How? Members of the Group decide to share the professional income in ratio of their investment.
    For whom?
    Professionals with:
    • Sheer lack of clarity on the concept of Group Practice
    Positives
    • The only positive that we have come across this model is that it provides certainty to the members i.e., just a number/ratio in which the results of the Group Practice will be shared. The ratio is flawed and hence, if it has worked for you, then the only chance is that the practice dynamics somehow aligned with the investment figures, and no other way!
    Negatives
    • The very genesis of this model is flawed
    • Conceptual gap in implementing this for the professionals’ hat
    • Root cause of various problems
    How? The pie (the pay-out pool) is broken up into percentages – 40%, 35%, 25% – 40% pre-fixed ratio, 35% based on performance, and 25% equally.
    For whom?

    Professionals with:

    • Group members having different ideologies for sharing. This allows satisfaction of everyone’s ego that their way of sharing has been incorporated into the model.
    Positives
    • Balances the positives of all the other-discussed models.
    Negatives
    • Balances the positives of all the other-discussed models.
    How? The pie (the pay-out pool) is broken up into percentages – 40%, 35%, 25% – 40% investment based, 35% based on performance and 25% equally.
    For whom?

    For people with group members having different ideology for sharing. This allows satisfaction of everyone’s ego that my way of sharing has been incorporated in the model.
    Positives
    • Balances the positives of all the above discussed models
    Negatives
    • Balances the negatives of all the above discussed models

    There are various other factors also that are considered by various Group Practices, such as:

    Seniority

    Admin Tasks

    Emergencies

    Outstation

    However, they are added iterations to the above models and fundamentally, the models remain as above.

    Are above the only Compensation Models?

    No! There may be many more compensation models in many more ways that they may be designed. However, above is the general guidance of the most common models that are applied worldwide by Group Practices.

    One of our most common recommendations for measuring and rewarding efforts is in the field of academics, research, and new age solutions. Events like taking a CME seminar at a national conference (not a paid/arranged conference) or to publish a research article is something that establishes the professional proficiency of the Group Practice and makes it emerge as a thought leader in its field of practice. This allows the Group Practice to command leadership in its area of practice and have patients referred to it from other medical practitioners as a natural corollary.

    Over and above the above-referred models, we have developed a proprietary “Profit Unit Method” of Compensation Model that has worked well for a large variety of our clients. However, we share that Tried and Tested, Customization Compensation Model only after we ascertain about your Group Practice, know it, and recommend it after customizing it to your Group’s situation.

    The Profit Unit method addresses the problems of fierce competition in the performance-based model as well as eliminates the fear of complacency in the equal/pre-determined sharing model. It is one of the inventions we are extremely proud of and hence, cannot share for it to fail if implemented improperly. Hence, that is available only if we are onboarded for guiding your Group Practice well.

    What works best for your Group Practice?

    There is no ‘one size fits all’ approach in deciding a compensation model. You need to brainstorm this well internally between the members. However, conceptual clarity of the underlying principles of a Group Practice is a must for the members to constructively conclude.

    More often than not, we have seen that Groups spend more time in discussions that may not have that material an impact on the overall functioning and less time in discussing what matters. Hence, the most appropriate compensation model for Your Group needs to be designed considering your preferences and not by copying what has worked for others:

    • The Compensation Model has to support the Work Ethic and the Vision of the Group.
    • The Compensation Model has to be dynamic to fuel growth.
    • The Compensation Model has to be inclusive to allow adding and exiting members.

    The Compensation Model is the most critical aspect that leads to the success or failure of the Group Practice and hence, it has to be well thought of. We definitely recommend you book a consultation with us to understand more about Group Practice in your customized setup and let all the Group Members participate in the discussion to understand your own readiness for the Group Practice or to evaluate what is missing in your existing Group Practice.

    Book your Slot
    Models in Spreadsheet