Advanced planning can keep your income, and your practice, afloat

Grady Lee Bryant, MD, an otolaryngologist with Allergy and ENT Associates of Middle Tennessee in Hermitage, knew he was in trouble when he hurt his back. Thanks to disability insurance protection and advance planning, both he and the practice survived this financial challenge.

“A herniated disc compromised my ability to work,” said Dr. Bryant. “I was in conservative therapy for six weeks and working half time. When that failed, I had back surgery, and it was about six months from the injury before I was back to a regular schedule.”

The Council for Disability Awareness reports that a typical female in her mid-30s has a 24% chance of becoming disabled for at least three months during her professional career. The typical male in his mid-30s has a 21% chance.

Planning for disability is a complex undertaking. Legal, contractual, and tax implications for both the individual and the practice necessitate consultation with attorneys, accountants, and insurance advisors to ensure effective preparation.

Disability Insurance

Insurance is an important part of planning for the both the physician and the practice. Understanding exactly what you are getting and when benefits will be paid should be the first cut in decision making. Many practices include group disability insurance for their staff. While this is helpful, physicians should look at integration with any personal policies they have. “I would not suggest any physician rely solely on their group policy,” said Janos Bodnar, senior vice president at Golsan Scruggs Insurance and Risk Management, based in Battle Ground, Wash. “If they leave that practice, these policies are not portable. Doctors should understand the importance of having personal income protection.”

For both personal and group disability policies, it is important to look carefully at the definitions. These parts of the contract outline what constitutes a disability, when you will be paid, at what rate, and for how long.

“One of the things to consider is what is known as ‘own specialty’ definition of disability,” said Bodnar. “This says if a person cannot work in their own specialty, the payments will start. If you are an otolaryngologist and you can no longer perform surgery, you are disabled under the policy.”

Bodnar says this is a “Cadillac” policy with the lowest bar for collecting, and usually the highest premium. Another possibility is “own occupation” where you will be paid if you can no longer function as a physician in any capacity or any specialty.

Additional elements a physician should take into consideration when looking at insurance policies include:

• Amount of time the payments will last;
• Elimination period (how long you have to be disabled before the benefits start);
• Availability of extra money to pay off student loans in addition to the regular benefits; and
• Residual or partial benefits, which base the payment on the amount of time you can still work.

“I think physicians don’t realize that good plans pay even if you aren’t completely disabled,” said Dr. Bryant. “While I was able to still work half-time, I got 50% of my benefit. For the six weeks I was completely out, it went to 100%.”

The Health of Your Practice

Another issue that arises when a physician is disabled is the survivability of the practice itself. The size of the practice determines the types of concerns that need to be addressed.

The business end can also benefit from a kind of disability insurance. Usually called a “business income rider,” this pays the practice for losses in revenue while a physician is unable to work. If you are a single provider or small group, the loss of billings from one physician can put a significant hole in your revenue. At the same time, overhead previously spread between two physicians would be paid by only one. Business income riders replace the disabled physician’s contribution to overhead, which could make the difference between a practice continuing or folding.

Our problem when a physician was disabled is that we are very specialized. You really can’t take a neurotologist’s patient, hand them off to a rhinologist, and hope it works. In our case, we coordinated with the university for patient care. —Lorin Easly, COPM

These policies can be expensive, so each practice must decide whether the expense is worth it. A five-physician group may be able to get by more easily than a one- or two-person practice. Also, those with robust ancillary services, such as hearing aids, can use that income to offset at least some of the overhead expenses and lessen the need for insurance.

“It is a scary thing when a doctor goes down,” said Tricia Long, COPM, the practice administrator for Dr. Bryant’s group. “You don’t know what will happen to the practice, especially in cases where the physician’s return may not be clear.”

Although finances are an important piece of the puzzle, day-to-day operational considerations are at least as important. Decisions regarding who will see patients, how call will be divided up, and how compensation will be rearranged as the workload is shifted around are all critical to ensuring the success of a practice.

Replacing a Physician

In solo or small group practices, replacing the physician is a big problem. Many reach out to others in the community who might be able to see their patients. The medical equivalent of mutual aid agreements can help with physician coverage. In addition, these relationships often include provisions for selling the practice to the covering physician should the disability be permanent. Finding a locum tenens is another possibility; however, the lead time for finding a physician and getting him or her credentialed and ready to go can be problematic.

Larger groups may be able to work around one missing physician. Not only could the remaining physicians take over part of the patient panel, a larger practice is more likely to have midlevel providers who can relieve some of the burden.

Even when more physicians are present, the structure may work against ease of patient distribution. “Our problem when a physician was disabled is that we are very specialized,” said Lorin Easly, COPM, administrator for Central Oregon ENT in Bend. “You really can’t take a neurotologist’s patient, hand them off to a rhinologist, and hope it works. In our case, we coordinated with the university for patient care.”

After the patients have settled in with their new physicians, physician compensation must be sorted out. For smaller practices, a plan for compensation should be included in agreements about covering for one another. Usually, the money follows the patient, with business insurance making up shortages. “Our group has a production-based model of physician payment,” said Long. “If you don’t produce, you don’t get paid more than a base salary. For those doctors and midlevel providers who had to work harder, they saw the benefits.”

Dividing up call is often one of the more contentious issues to address. Few providers volunteer to take call, and working out these issues in advance of a need can be important in keeping the partners, at the least, not unhappy. “We are the only ENTs in our area, so we had to adjust call,” said Easly. “If all of my providers did not cooperate, it could have gotten ugly.”

Permanent Disability

Permanent disability, another facet of the coverage agreement for single or small groups, has to be addressed. For larger practices, buy/sell agreements that are already likely in place should be reviewed to make sure they define the moment when a disability becomes permanent and triggers the provision. “An agreement defining when the buy/sell parts of the partnership or corporation structure come into play [is] important to have in place ahead of time,” said Dr. Bryant. “This ensures all members agree [how to handle] the situation should it arise.”

Although most of the focus is on the physicians, office staff plays an important role that shouldn’t be underestimated. The staff needs to be kept abreast of what is happening, which can be as stressful for them as the providers. Unaddressed staffing concerns only add to the problems already being tackled by management.

“What is often overlooked is [the fact that] when staff is fearful and uncertain about their future, you need to address these issues, good news or bad,” said Long. “People jump ship if the reassurance is not there that the doctors and management are handling things. Decide ahead of time that you will be keeping the staff informed, especially as things change.”

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Kurt Ullman is a freelance medical writer based in Indiana.