This document summarizes different physician compensation models for allergy practices. It discusses straight salary, salary plus productivity, full productivity-based compensation, equal sharing, salary plus contribution margin, and compensation based on revenue, cost centers, full-time percentage and shares. The key advantages and disadvantages of each model are provided for both employees and employers. It also outlines steps to structure a compensation system, including defining goals, physician input, appointing a committee, and balancing group and individual objectives.

1. Practice Management Workshop July 9-11, 2004 The Westin O’Hare  Rosemont, IL

2. Compensation and Benefit Distribution for Allergists in Larger Single Specialty Practices Robert J. Holzhauer, MD, MBA, FAAAAI and Michael J. Caruso, CPA

3. Part One Basic Principals of Compensation Systems Michael J. Caruso, CPA

4. No Compensation System is Perfect

5. No Compensation System Lasts Forever

6. No Two Compensation Systems are Alike: “Once you’ve seen one compensation system, you’ve seen one compensation system.”

7. The Ideal Compensation System for a Practice is one in which each Physician is Equally Unhappy

8. The Compensation Formula Should Fit the Group’s Goals and Objectives

9. Need to Define the Goals and Objectives of the Group (i.e., mission statement or practice vision, a good starting point)

10. The System should be Simple and Understandable

11. The System should be Fair and Equitable

24. Physician Compensation Formulas: Salary Plus Share of Contribution Margin Contribution Margin= Revenue minus Marginal Cost Marginal Cost=Costs attributable solely to the Revenue in question Costs which practice bore before new physician(s) arrive are not part of Marginal Cost

27. Physician Compensation Formulas: Compensation Based Upon Revenue and Cost Centers, Percentage of Full-Time Work and % Full Shares Individual Productivity X Clinical Profit % (CP%) +Practice Productivity X Full-Time % (FT%) X Full-Share%(FS%) X CP% +Research Revenue X FT% X FS% X Research Profit % +Management Compensation =Total Compensation -Benefits =Salary

30. Part Three Structuring a Compensation System to Balance Group Goals with Individual Physician Needs

31. Define the Goals and Objectives of the Group (i.e., mission statement or practice vision)

32. Expression by Physicians of Individual Goals and Objectives

33. Appointment of Compensation Committee and/or Outside Assistance Team (i.e., CPA, Consultant, Attorney)

34. Review of Equal versus Productivity Based Systems, and applicability relative to Balancing Group and Individual Objectives

35. Definition of Equal, Production and Direct Expenses (for your group)

36. System Proposals (Based upon Prior Year and/or Pro-Forma Data)

37. Group Discussion

38. Approval

39. Implementation and Documentation