When we began working with our first radiology clients well over 10 years ago, we assumed they would be similar to most other medical and law groups for which we had consulted. More than a decade later, we understand that radiology is one of the most dynamic and challenging (yet fertile) environments in which to operate a retirement program.
Practices and their ancillary businesses are frequently diverse; as are the constituents that their retirement plans intend to serve. This article will focus on the specific challenges faced by radiology groups in offering retirement plans and will provide guidance on effectively meeting this need, as well as tips on achieving excellence that ultimately will benefit the business as a whole.
Meeting varying demographic needs
No two radiology groups are alike, either in business structure or employee make-up. Not only does size matter, so does business mix. We have one smaller radiology client that’s composed of a dozen physicians, a managing executive and two PAs. Their plan structure is largely based on what the doctors want to contribute as individuals and statutory limitations.
At the other end of the spectrum, we work with a much larger group of nearly 50 physicians and more than 100 employees in their billing service, imaging centers and real estate concerns. In this complex environment, cost-effectively meeting the needs of both physicians and staff can prove to be a challenge.
|“Never underestimate the challenge of finding solutions to maximizing M.D. contribution levels at the same time as maximizing employee participation. Having expert assistance in developing strategies is the key.”
Bill Ziemann, CFO, Kern Radiology
The best solutions are crafted through detailed analysis, robust employee communications and custom plan designs. Client Bill Ziemann, CFO of California-based Kern Radiology has the following advice for radiology executives.
When a great number of your employees make less than $40,000-$50,000 per year, one must get very creative with the benefits structure. Each unique organization will have an optimal plan design to maximize physician deferrals while still leading to meaningful retirement savings for all participants.
Possible solutions include combining multiple plan types, like 401(k) profit-sharing plans with Defined Benefit plans, designing modernized matching formulas and profit-sharing contributions or using auto-enrollment to drive participation higher. The key is designing it correctly and then to keeping it optimized as the organization and pension laws change.
Controlling, Managing and Reducing Costs
The reimbursement environment in healthcare—and radiology specifically—contribute to the challenges when crafting retirement plans. “Radiology organizations… are constantly responding to the continued reduction in reimbursement from the government and health insurance payors,” Ziemann reminds us. “As a result, we need to be very mindful of costs that we can control, with one of them being retirement plan costs.”
Efficiency in plan design and maximizing participation can go a long way towards optimizing contribution expenses from the organization, while maximizing deferrals for the partners of the practice.
A plan’s operational expenses are another place where costs can add up quickly. Radiology businesses, like many other physician groups, historically bought retirement plans financed by asset-based fees (often embedded in the investment expenses).
|Dale Hansen, MD
Memphis Radiological P.C. (MRPC)
Frequently, as insurance providers had easy access to these groups, plan services were bought from insurance entities with opaque pricing structures, further complicating matters. As the plans grew larger over the years, the fees often would grow astronomically. Dale Hansen, MD, Memphis Radiological P.C. (MRPC) describes the practice’s former insurance-based retirement plan structure before we worked together to modernize the plan.
“We would have had no way of looking at what they [were] telling us and what our fee structures were, and knowing if they were good or bad,” Dr. Hansen says. “[Since the restructuring], we’ve been able to trim [out] commission structures and fees… that we didn’t even know existed.”
Recent regulatory changes and case law have brought into the spotlight the requirement to ensure that all plan expenses, both administrative as well as investment expenses, are reasonable in light of the services the plan is receiving. Plans that fail to