Group Culture

Who’ll Be The First to Be Let Go If Case Volume Drops Off?

March 21, 2022

LIFO and FIFO are concepts from the world of wholesale and retail inventory. LIFO stands for last in, first out. FIFO stands for first in, first out.

They’re a perfect analogy for a core staffing issue within medical groups.

The concepts have to do with how a company accounts for the profit on the sales. Let’s say they have 100 widgets in stock, some of which were purchased by the company for $1 each, and others of which for $1.50 each. When a widget is sold, how do you know whether the gain (i.e., the profit) is measured against the wholesale price of $1 or $1.50? If the system is based on FIFO, then the first (or earliest) widget purchased (at whatever its purchase price was) is treated as the first one that was sold, and so on.

The same notion of looking at the first one in, or at the last one in, applies to medical groups in the context of the changes that are going on in healthcare, especially as regards hospital-based medical groups and the number of hospitals that are shrinking or closing.

How does a group of, say, 100 physicians account for whose work is going to be cut back, or who will have to be let go, when and if a facility the group serves closes or drastically scales back?

Is it by seniority, in which case it would be that the last one in is the first one to go? 

Or is it by some other method, say based on specialty?

What if your group’s business has shifted focus to outpatient centers such as to work at ASCs? Would a last in, first out policy suit the group’s business goals if the recently hired folks are better suited to outpatient practice?

There are several issues here and there’s no easy answer. But, you don’t want to have the discussion or make decisions with your back against the wall.

You need to consider these issues now, because it takes time to come to tough decisions, to gain acceptance from the group’s owners, and to incorporate corresponding provisions into your group’s employment and organizational documents.

If not, you’re simply asking for a lawsuit that will be far more expensive and difficult to resolve than dealing with this up front.

Leave a Reply