Post-Pandemic Considerations for Physician Practices
During the acute stages of the COVID-19 pandemic, Optum assisted its clients in making changes to some of their corporate documents and practice patterns. Now that the pandemic has subsided, it may be prudent for physician practices to revisit any decisions or changes they made during this acute phase and consider memorializing these decisions.
Importance of reviewing corporate documents
For many groups, there are shareholder and non-shareholder agreements, with the latter document applicable to those physicians who are often paid a fixed salary for the first 2-3 years until they are shareholder-eligible. During the acute phase, due to severely depressed volumes, some groups voted to temporarily decrease shareholders’ salaries, and also decrease and even eliminate any bonus payouts. However, to ensure compensation parity, several groups amended their non-shareholder employment agreements, allowing the group to also reduce non-shareholder compensation. Without these changes, it would be possible that non-shareholders would be compensated at levels higher than the thendepressed shareholder compensation levels.
As a result, Optum advised clients to restructure how certain mid-level providers (MLPs) were to be compensated. For example, anesthesia groups with employed CRNAs who were paid a salary had their employment agreements modified so that the CRNAs would now be paid on an hourly or PRN basis. We recommend that any current and future MLP employment agreements include language allowing the group to alter the compensation methodology, assuming changes are consistent with any regulatory requirements. Groups could also allow employees to combine “PTO years,” with PTO from more than one period combined, and allow employees to elect extended paid PTO.
Another change groups may want to consider is amending their employment agreements, perhaps even for all physician members and mid-level employees. Then the time frame for a departing employee can be accelerated in certain circumstances such as a pandemic.
Update current group policies and consider new policies
During the acute phase, some groups elected to temporarily suspend any extra pay such as overtime and additional shift and call pay, if these changes are consistent with any regulatory requirements. Therefore, it may be prudent to proactively develop a group policy surrounding this issue to avoid any potential internal group stress the lack of a group policy may cause.
Modify your deferred compensation policy
Several groups have deferred compensation formulas consisting of the current level of accounts receivable (A/R) times a historical gross collection percentage (GCR), billing and management costs and then divided by the number of shareholders:
(A/R x GCR – billing and management costs) / # of shareholders
Not surprisingly, during the acute phase of the pandemic, groups’ A/R and GCR became severely skewed. Therefore, it may be prudent to insert an amendment into their deferred compensation policy. Then, if volumes are significantly altered for a protracted period of time, the above calculation will instead be based on the level of A/R and GCR that existed prior to the beginning of this phase.
Additionally, if permitted in this corporate document, groups may want to insert language allowing any deferred compensation payments to eligible group members be deferred until the acute phase has ended. For example, if average volumes over the past three months have reached at least 20% of preacute phase levels.
Optum recommends that groups that received some form of government financial support — such as PPP loans, Provider Relief Fund distributions, Economic Injury Disaster Loan (EIDL), the Employee Retention Credit or payroll tax deferral programs — amend their deferred compensation/buyout policies to address those circumstances whereby the group has to refund the government some or all of these funds, perhaps requesting that the departed employee receiving some type of payout has any remaining payouts reduced to account for their portion of any of these refunds.
Consider developing part-time options
Implementing a policy for reduced work schedules is highly recommended, so that groups can have some flexibility with their staffing needs, if there is a resurgence in the COVID-19 pandemic (or a subsequent one) but also a glide path for older members of the group who desire to work less than a full-time schedule.
This policy may be a valuable tool versus having experienced members leave altogether. It is very important to consider that the availability of this policy does not necessarily mean that the group has to offer this option to an eligible group member. Optum can provide the typical key components of a parttime policy, included upon request.
Proactively restructure your facility/vendor agreements
Groups may now want to attempt to restructure any facility or vendor agreements in the event of a future pandemic-like scenario. This could also include a weather-related event that causes temporary or permanent damage to your facility.
For example, a facility agreement may include certain on-site coverage requirements including call. An amendment to the facility agreement could include both parties agreeing to either reduced or increased onsite coverage requirements in the event of significant volume changes. Additionally, check to see whether your facility agreement references any changes to the level of financial support in the event of significant decreases in volumes.
Insurance coverages and other considerations
During unusual circumstances, a group’s governance structure and decision-making process may require alterations so that making decisions is more efficient. We recommend inserting language in the applicable group corporate document, allowing for a smaller body of group members making decisions during unusual circumstances or altering the threshold for which decisions can be enforced, for example, with a simple majority.
Now is an excellent time to review your group’s insurance coverages and limits.
Some of these areas are:
- Loss or damage to property: The presence of COVID-19 may constitute the requisite physical loss or damage for coverage.
- Business interruption insurance and contingent business interruption insurancemay provide recovery of lost profits from facility closures.
- Directors and officers liability insurancecovers claims made against directors and officer concerning business contingency plans and the company’s overall response to COVID-19.
- Commercial general liability insurancemay cover third-party claims for property damage and bodily injury.
- Employment practices liability insurancemay protect groups that adjust their workforce against discrimination claims that could follow.
The Optum physician practice management services were instrumental in ensuring that several clients had the ability to successfully navigate their business during the pandemic. Now that the pandemic has subsided, groups are relying on our expertise to ensure they are prepared for any future events that could significantly threaten their financial stability. This could include weather-related events that cause temporary or permanent damage to your facility