BY Catherine Lightfoot, EEPB
I recently heard a presentation by Don Harkey of People Centric Consulting Group at the 2024 Texas Orthopedic Administrators Society conference (a.k.a. T-Bones). The topic, “How the Millennials will Save Healthcare,” touched upon all the generations in the modern workforce. The premise of the discussion was to embrace the generational differences and how they make a positive contribution, rather than criticizing how they differ. At the same conference, a few administrators talked to me about some ways to adjust compensation because the “new partners” are not working like the “legacy partners.” It occurred to me that these are really the same conversations.
Obsolete Cost Models
The typical model of dividing cost in a practice is either an even split or a basic “eat what you kill” model. This model divides all the costs based on the allocation of the revenue earned. But traditional, simplistic models are no longer working for many practices. Consider that the current workforce consists of as many as five generations—the Silent Generation, Baby Boomers, Generation X, Millennials, and Generation Z. Today’s healthcare leadership team could easily have four of these groups, each with different focuses and priorities that effect the way they work. Some may be contributing in ways that are not time intensive but still valuable to the practice; therefore, an even share is no longer valid.
Change in Attitude and Work Style
I have heard multiple complaints about the younger generation not wanting to take call. The established providers got most of their referrals by doing just that, taking call. Fast forward twenty or thirty years, and the original team, the Boomers, are overworked and want to slow down. This leaves plenty of patients for the newcomers, so there is less motivation to be on call. Plus, Millennials and Gen Z’ers rely on modern technology like websites and social media platforms to attract business. And there are also more collaborative projects that require the full team, making the “eat what you kill” model obsolete.
Coping Strategies: How to Align Expenses
To meet the moment, I invite you to try the below strategies for properly aligning expenses.
Compensation for administrative oversight
Certain responsibilities should be warranted annual compensation that is a part of the overhead everyone shares. For example, the managing physician or the compliance coordinator. Other special positions to consider for compensation could be Marketing, HR, Ancillary, Capital Improvements, and Technology oversight positions. These positions could be voted on by the group and rotated on an agreed upon term time limit.
Splitting the total overhead
Three different types of overhead expenses can be allocated accordingly:
- Direct expenses: includes specific expenses unique to a single provider. This includes employee payroll, equipment charges, insurance, and other operating expenses for that provider.
- Indirect expenses: includes general expenses that the full practice has and would be there regardless of how many providers are dividing them—rent, utilities, insurance, and employees who support the entire group. For example, front desk, human resources, accounting, etc.
- Variable expenses: includes expenses that change based on the volume of their use. These expenses should be divided based on production. For example, billing fees, supplies, and laboratory costs.
Conclusion
The medical practice of today encompasses multiple generations that, while they may have different mindsets, enhance delivery of care in various ways. As we welcome new partners, certain adjustments must be made to reflect generational differences that will inevitably arise—whether it be work style, compensation, or cost sharing. Refreshing your overhead allocation is one way to bring generations together, reaching a consensus and accepting the updated model as fair and equitable.