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Semi-retirement options for senior MDs

By Vasilios J. Kalogredis, J.D

One of the nice things about being a physician is the potential to cut down one’s workload at some point, while still being able to maintain a level of clinical activities. It can be difficult for a doctor who has been working very hard for decades, and actually enjoys the clinical and patient contact aspects of the profession, to fully walk away from the practice of medicine “cold turkey.”

Many group practices with which we work have developed formalized semi-retirement arrangements. When properly structured, it can be a “win-win” for all involved. Although this is not a “one size fits all” thing, set forth below are some of the issues that need addressing.

Agreement needs to be reached as to when a physician may elect to semi-retire. Usually the threshold to be met has years of service and age requirements. For example, in a recent agreement, the physician had to have either been an employee of the practice for at least 20 years with no minimum age requirement, or 15 years of service and attainment of age 60.

What type of notice is required also needs to be set forth. Most call for somewhere between 6 to 12 months written notice by the electing physician to the practice. In some cases, that is all that is needed to kick in the semi-retirement.

In others, the practice may have the right to extend the start of the semi-retirement period for an additional time frame, or until a replacement physician is found (if earlier than that extended time frame). A lot depends upon the size and “busyness” of the group. In some settings, if more than one physician has made a valid semi-retirement election, the doctor or doctors doing so subsequent to the first doctor’s election may not actually semi-retire until a replacement physician has been found, so that the practice is never more than one physician short. In other settings, there is a maximum wait (12 to 24 months is common) after which an electing physician may semi-retire whether a replacement physician has been found or not.

There is usually a limit as to how long the physician may work in a semi-retired status. Five years is common. There may be different maximum time frames for different types of semi-retirements.

Some practices allow the physician to retain an ownership interest in the practice while in semi-retired status. The ownership interest is often valued as of the full retirement date in those situations. Other practices will not allow a part-timer to retain an ownership interest and will buy the doctor out as of the semi-retirement date.

If the physician is entitled to Separation Pay/Deferred Compensation, it is important that the Agreement defines when it will be paid and as of what date it will be computed. Some groups tie this to the numbers as of the date semi-retirement ends, even if the payments do not start until actual retirement. Others use the actual full retirement date. This is relevant because the numbers involved may be substantially different, depending upon what date is used.

The Semi-Retirement Options can vary a great deal. In most groups, the electable options are limited to two or three. One option might entail a semi-retired doctor electing to work a certain percentage (say, 50 percent) of a full workload (e.g., day schedule, weekend call, night call, etc.). For example, that doctor may elect a 50 percent workload for 50 percent of “full pay.”

Another option might entail the semi-retiring doctor working a full-time day schedule, with no night or weekend responsibilities.

Another option might entail the semi-retiring doctor working a less than full-time (say, 75 percent) day load, with no night or weekend responsibilities.

Another option might entail the semi-retiring doctor dropping procedures (e.g., dropping OB, no longer doing surgical cases, etc.), while maintaining an office-only practice.

When the above semi-retirement options are agreed to, compensation arrangements relative thereto need to be determined as well. Sometimes a set percentage of what a full-time physician is earning is the answer. In others, a purely productivity-based compensation arrangement is the answer. There is no one formula that works in each instance.

Different practices place different weights upon different pieces of the puzzle. Some groups will just never allow part-timers in the practice. In one group that I recently dealt with, there was much bitterness among some of the younger, “fully compensated” physicians, because the added on call responsibilities were wearing them down and, even though a pay reduction had been negotiated and agreed to up front, as time went on, the younger doctors began to feel that the extra money was not worth the additional work burden.

In other situations, the younger doctors are fine with providing a senior physician with a lesser workload, feeling that he has “paid his dues” and also viewing positively the ability for the young doctors to make more money.

Each situation is different. The key to making it work is to have an open and frank discussion to arrive at a “win-win” situation. Then put it in writing so that there will be no confusion and so that a framework will be in place for the future.

If properly structured, it will allow a senior physician to continue to work in a reasonable fashion at a fair compensation. It will allow the practice to add extra doctor help, benefit from the “goodwill” of the senior doctor’s continued involvement with the practice and/or make its present doctors busier. In some situations, the senior doctor’s managerial experience is viewed as a positive that the group would lose if this new work arrangement were not developed.

This is becoming more popular than ever in group practices today.

Vasilios J. Kalogredis, J.D., is Founder and President of Kalogredis, Sansweet, Dearden and Burke, Ltd., a boutique health care law firm in Wayne, Pa.

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