A physician’s compensation package rarely accounts for the fact that doctors have different retirement needs than other professionals.
Traditional retirement plans are effective for creating substantial retirement income for employees in most industries, but even if a physician maximizes their qualified plan contributions during their working lifetime, they will come woefully short of accumulating enough wealth to maintain their pre-retirement lifestyle at a standard retirement age. This reality is forcing physicians to remain in practice longer than they’d like to.
A mathematical impossibility
Generally, physicians earn above average incomes and are considered “highly compensated.” With federal regulations limiting the amount of money that may be contributed to qualified retirement plans such as 401(k) plans and profit sharing arrangements, it is mathematically impossible for the “highly compensated” to adequately save for retirement.
Creating supplemental retirement income
Luckily, there are ways to transform various forms of compensation into a retirement benefit for physicians. For example, we specialize in designing call pay programs that convert call pay into deferred compensation, allowing physicians to invest their revenue on a pre-tax basis, resulting in a significant supplemental retirement income benefit.
The impact on retention
There’s a welcomed byproduct of this approach that’s beneficial for hospitals: Increased physician retention. A physician is much less likely to leave a hospital that’s providing this type of benefit. Physician turnover is very expensive and disruptive. Reports indicate that a hospital will spend close to $250,000 in order to recruit a physician. Lost revenue associated with losing a key specialist can exceed $1 million. Therefore, taking the initiative to implement an arrangement that improves retention can have a positive impact on the overall financial welfare of a hospital.
In today’s challenging economic environment, it’s rare to find a tool that advantages both physicians and administrations. As such, repurposing traditional forms of compensation is something every hospital should consider.
To learn more about our Call Pay Solution®, and how it repurposes call pay into a retirement benefit, please visit: https://maxworthconsulting.com/call-pay-solution
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