A growing number of physicians are pursuing part-time work to accommodate lifestyle demands and personal desires. According to a 2010 survey conducted by Cejka Search and the American Medical Group Management Association, 21 percent of physicians in the United States are working part time, compared with only 13 percent in 2005. Among those part-time physicians, the fastest growing categories are men approaching retirement and women in the early to middle stages of their careers. Senior physicians who are tired of a full-time patient load and frequent call responsibilities are increasingly opting for part-time employment as a transition into retirement. Physicians with young children are seeking part-time employment to be more active in child rearing. Physicians who are retained by a group practice or hospital on a part-time basis should be cognizant of the following areas of the physician’s employment or independent contractor agreement: independent contractor or employee status, compensation, benefits, professional liability (malpractice) insurance, call responsibilities and restrictive covenants.
Explore This IssueNovember 2012
Independent Contractor versus Employee
Often, physicians assume that just because they are working part time, they are therefore independent contractors. That is an inaccurate assumption. The amount of time a physician works is not the deciding factor as to whether someone is an employee or an independent contractor of the group practice or hospital. Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws. Generally, labor and employment laws provide protections for employees, but these protections do not extend to independent contractors. With regard to taxes, if a physician is an employee, the employer must withhold income, Social Security, and Medicare taxes, and pay unemployment tax on wages paid to the physician. Conversely, if a physician is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the physician, but rather the individual physician will be responsible for making such payments to the IRS and state tax authorities. Thus, it is imperative that the contract clearly indicate whether the physician is an employee or an independent contractor and spell out the corresponding responsibilities of the parties.
Compensation and Benefits
Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always straightforward when it comes to part-time employees. There are four general models that practices and hospitals use to determine compensation for part-time physicians. First, the physician may be paid a percentage of a full-time physician’s salary, based on the number of hours worked. Second, the physician may be paid a percentage of collected professional fees rendered by the physician. Third, the physician may receive a per diem rate. Fourth, the physician’s compensation may be based on the revenue the physician generates minus the physician’s share of the overhead expenses. However, determining the part-time worker’s share of the overhead expenses can be tricky since the physician is not benefitting from the overhead on a full-time basis. One way to determine a part-time worker’s share of the overhead expenses is to allocate the overhead based on the physician’s share of the schedule. For example, if a practice employs five physicians and a sixth is hired half time, the new part-time physician would be responsible for one-eleventh of the overhead costs (with each of the other full-time physicians responsible for two-elevenths of the overhead expenses). As with full-time physicians, there is a plethora of ways to formulate a part-time physician’s compensation, and the method used should be explicitly outlined in the physician’s employment or independent contractor agreement.