Employment Lite

At SimpliMD we are experts at helping physicians set up their own individual corporations.

“Employment Lite” is a hybrid employment model that mirrors most of the components of employment without full integration. Employment is the fullest form of alignment among hospitals and physicians, while employment lite signifies a high level of physician-hospital alignment that falls just short of full employment.

It is formalized by a professional services agreement that is specific to this arrangement. The term PSA is not to be confused with other arrangements such as clinical co-management, directorship, or other professional arrangements. Technically, these arrangements may be considered professional services agreements, but do not holistically encompass the definition of a traditional PSA. PSAs provide hospitals and health systems with a convenient and highly flexible mechanism to obtain services from physicians and achieve care coordination, access, and alignment goals. Under a PSA, a physician (or medical group) remains independent (i.e., not employed by the hospital) and provides professional services in the hospital or at a hospital clinic. Locums Tenens has been one of the more common PSA arrangements that healthcare employers use to tap into the professional services of doctors.

Over the years employment lite agreements were developed by large corporate employers as a bridge for bringing private practice physicians into the safe harbor of employment. This same bridge can be used now to allow a traditionally employed doctor also function independently both within and outside of an employer’s harbor.

While employment typically entails an IRS W-2 relationship, most PSAs result in an “IRS 1099” relationship. The physician remains employed by their practice entity, most commonly a PC. Visually it looks like this in comparison to the standard employment model:

Standard-Employment-Vs-Employment-Lite-copy

The PSA structure allows for many of the same benefits and elements of employment, while the physician remains an independent contractor rather than an employee. Corporate citizenship and organizational governance can be built into the PSA such that the doctor functions in nearly the same manner as his/her fully employed peers. Organizational alignment remains strong for both traditional employees and those who chose employment lite.

In a traditional PSA, the organization contracts with a physician (vis-à-vis their practice entity, most commonly a PC) for professional services that are reimbursed through a rate fair market value rate, as noted in this illustration. The organization assumes ownership of the administrative structure of the practice by employing all support staff, performing the billing and collection functions, owning the accounts receivable, etc.. The physician is paid via 1099 to his/her PC for the wRVU compensation at a mutually agreed-upon rate. Salary with bonus is another option.

The benefits to an employment lite structure are numerous for most doctors and include:

Gain greater control of your life with enhanced professional autonomy that is associated with running your own professional corporation-small business
Grow your household income without working harder, via retained earnings strategies that are unique to small businesses and increasingly limited to W-2 traditional employees, as noted in this illustration
Individualize your fringe benefit programs to those that benefit you most- including unrestricted international CME, private school reimbursement, and automobile leasing just to name a few

Access substantially larger tax-advantaged retirement plans in comparison to traditional employment
Lower your effective tax rate
No job change or moving is needed with this transition, so your family is not disrupted by this change
Seamless and invisible implementation within your existing employment structure in a manner that is not recognizable by your peers
Burnout risks are lower due to enhanced professional satisfaction

To learn more about employment lite, download our free e-book here