How group practices can plan for partial retirements

George N. Saliba | Fact-checked by Barbara Bekiesz | March 23, 2022

Over the next decade, two out of every five practicing US physicians will be over the age of 65, according to a report from the Association of American Medical Colleges. It is likely that some of the nation’s clinicians will clearly consider partial retirement within group practice settings.

Advertisement

GettyImages-1221859961

In an exclusive interview with MDLinx, Anjana Patel, member of the Epstein Becker Green law office in Newark, NJ, shared important perspectives on this subject. She said that group practices should be mindful of partial retirement’s effects on issues such as compensation, governance, and administrative and clinical workloads. She advises incorporating partial retirement considerations into shareholder and operating agreements for physician group practices.

To allow, or forbid, partial retirement?

Group practices first need to decide if they will even permit partial retirements, Patel said, and, if they will, what the necessary eligibility guidelines would be.

“[Some] groups’ mentality is that everybody is equal, and it doesn’t matter if you are a founder or just joined: Basically, everybody works the same [amount], and everybody is compensated the same, and so on,” Patel noted. “From that viewpoint, something like partial retirements may not be something they want to consider.”

However, Patel also said that physician group practices have come to realize they may need to change their mind about partial retirement, considering the significant impact that the coronavirus pandemic has had on the healthcare workforce. Doximity’s 2021 Physician Compensation Report found that more than 70% of physicians felt overworked during the pandemic, and 21% were considering early retirement. 

Different forms of partial retirement

Partial retirement doesn’t mean the same thing to everybody. In a report titled “Partial Retirement Within a Group Practice” by the law firm of Wade, Goldstein, Landau, & Abruzzo, the authors noted that phasing down doctors’ work can include working fewer hours, having fewer responsibilities, or being given increased vacation time or leaves of absence―or any combination. Other options described by Patel could be working only three days a week, or having two annual sabbaticals, or even participating in more telehealth.

How might partial retirement play out?

Regardless of the form it takes, there are many factors to consider with partial retirement. Two of the key considerations are compensation and workloads. Patel explains, “If you take away three of the highest producers with partial retirements, that’s not going to be easy on everybody else. For instance, who does the administrative work vs the clinical work? How is that split? Is it shared equally, or is it one or two people who do most of it, and they happen to be the ones who want to go on partial retirement?” 

If the founders of the group are nearing retirement age, Patel adds, the group needs to do some sort of succession planning around that. “Who’s going to step in if they are going part-time?”

Eligibility criteria must also be worked out. Does it depend on age or number of years with the group? How else might eligibility be decided?

Group practices will likewise want to consider how long partial retirements can last. Wade, Goldstein, Landau, & Abruzzo’s report suggests evaluating this on a limited, year-to-year basis, with one-year increments. This allows the group to assess workloads and financial scenarios.

Patel concurs that partial retirement should not be allowed to become permanent. “Somebody might say, ‘I want to be 3 days a week, and I’ll be 3 days a week for the rest of my life.’ Well, that may not work. There should probably be an endpoint, like 3 days a week for 2 years, and then the partial retirement ends.” 

Groups need to bring in new physicians, or there may be other reasons for wanting to fill those positions, she points out. Limiting the length of partial retirement permits this.

Planning Ahead

 The biggest mistake physician practices make, Patel warned, is not considering how to handle partial retirements until multiple physicians want to do it, and there are no rules or even a general framework in place.

“The best way to address this is head on,” she explained. “When you are setting up your group practice or adding new physicians over the years, you should be updating your shareholder and operating agreements.”

“You won’t be able to spell out every possible way somebody can partially retire…because it has to be tailored to the practice, but you can have general rules and procedures.”

Some practices might require a supermajority of partners or shareholders to decide and approve specific arrangements. Voting rights enter into the picture, too.

“Overall, as a group,” Patel says, “you have to decide which of the parameters you will permit if somebody wants to partially retire.”

A lot of factors need to be addressed in the shareholder or operating agreement. “There should be provisions in there that speak to them,” she said.

Advertisement