Question

Doctors Martin, Oakley, and Choice are partners in a group practice. Martin and Oakley are family doctors, and Choice is a surgeon. Choice receives many referrals for surgery from Martin and Oakley. When the partnership was formed, the doctors agreed to sharing income based on a two part formula. Each doctor receives a salary of $2,000 each. Additional income is divided according to a percent of patient charges the doctors generate for the month. In the current month, Martin generated 15% of the billings, Oakley 20%, and Choice 65%. The group's income for this month is $40,000. Choice has expressed dissatisfaction with the income-sharing formula and asks that income be split entirely on patient charge percent.

1. Compute the income allocation for the current month using the original agreement.
2. Compute the income allocation for the current month using Choice's proposed agreement.
3. Identify the ethical components of this partnership decision for the doctors.

Answer 1

Compute the income allocation for the current month using the original agreement.

$2,000 salary for each and balance shared on the basis of percent patient charges

Salary = $2,000 x 3 = $6,000

Balance to be allocated = $40,000 - $6,000 = $34,000

Martin = ($34,000 x 15%) + $2,000 = $7,100

Oakley = ($34,000 x 20%) + $2,000 = $8,800

Choice = ($34,000 x 65%) + $2,000 = $24,100

Compute the income allocation for the current month using Choice's proposed agreement.

Martin = ($40,000 x 15%) = $6,000

Oakley = ($40,000 x 20%) = $8,000

Choice = ($40,000 x 65%) = $26,000

Identify the ethical components of this partnership decision for the doctors.

The ethical dilemma in this question is that, if the profit is shared entirely based on patient charge percent, doctors will try to increase the same, this could cause reduction in time spent per patient, thus effecting quality of service.