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Pac-12 Revenue Sharing Model: Socialism in Action.
- Thread starter RalphieMalph
- Start date
No.
Where you're having the disconnect is that you want to make equal revenue sharing the same as socialism. It's not.
Private businesses doing a joint venture in which the new venture has the right in an area where it can do something better than any of the businesses could do on its own, and then pays out an equal distribution to the members of the venture, is not socialism.
You may not think that each party to the venture owning an equal share is equitable. There are valid arguments on each side. But it's not socialism. That's a business decision, and in the cases of the Pac-12, Big 10 and SEC the business decision that the parties to the joint venture agreement made, was that equal distribution was the best model for the venture. In the ACC and Big 12, the parties decided that weighting it toward members in larger markets and with more prestige in football was the equitable way to distribute revenues. Equality has proved to make all members more money and create greater stability, so it would seem that it works very well as a conference business model.
RalphieMalph
Well-Known Member
No, that would be in communism. There's a difference. There are very wealthy people in socialist countries, and people on the lower strata of relative prosperity as well.
Ralph, I'm trying to understand your motivation here. Do you want us to agree and say "Yes, certain aspects of the Pac-12 revenue model, when simplified, appear to have a socialist tinge to them."? Even if what you say is true, which I happen to think is not, what does that have to do with the price of rice in China?
RalphieMalph
Well-Known Member
For one, let's bear in mind that with few exceptions this is a pact created by public universities, not private businesses. But anyway, falling back on the medicine model, how would the collective citizenry of America (in essence, a collection of several hundred million businesses) deciding that they could collectively pay for a service better than any one person could pay for on their own be any different than what you're describing?
Mind you, I follow that there's a distinction between trying to maximize profits vs. trying to maximize access to something, but in both cases you're joining together to collectively absolve the greatest risk (in medicine, that you'd require an expensive life saving treatment and be unable to pay for it) as well as the greatest possible benefit (in medicine, that you'd not get sick at all over the course of your whole life, and thereby you'll end up spending tens of thousands of dollars on "nothing" by the time you expire in the socialist model) that you could encounter in a particular arena.
RalphieMalph
Well-Known Member
I don't know, every now and again I stumble on an idea and it takes a little while for its momentum to run out. I've got no particular goal in mind, or motivation for doing this beyond entertaining myself... I just find a measure of irony in all these folks who occasionally profess to blaming the poor for being poor, or blaming black people for collectively not achieving greater financial success "on their own" are the same people who've been saying for the past year "thank god we got in on this equal revenue sharing in the Pac-12, without all this money coming in from the conference we'd be completely ****ed!"
It just strikes me as a semi-sloppy little sociological experiment. Rooting for a program that's been down on its luck (luck, some would contest, exists without question on the football field but does not exist at all in "the real world") kind of puts the shoe on the other foot. Without the money coming in from this conference CU would never have a chance to rebuild itself into a national power - that much, I don't think can be refuted by anyone. And in much the same way, I would contend that without aid coming in from their fellow citizens, people living well below the poverty line would need some help in order to pull themselves up to a level of great social success.
But then, we KNOW that CU has an interest in becoming a national power again. You don't KNOW that about every person living below the poverty line. And therein, lies the rub.
Welcome to my brain.
As I said before, private health insurance is also a case of when "you're joining together collectively to absolve the greatest risk" in the case of medical care. Do you consider that socialism? I think that is the key to the issue here and why you're having the disconnect. The essence of what makes something "socialism" is not you are proposing and if you consider your own example you'll see that you've proved this to yourself.
RalphieMalph
Well-Known Member
You make a good point here, health insurance is a sticky one. I guess I would consider it to be a socialist system if the companies didn't devote so much of their energy towards denying benefits to their policyholders. As is... I don't know, I'll have to think about that.
Well, now we know where chippy and UT come down in this argument:
http://texas.rivals.com/content.asp?CID=1264923
http://texas.rivals.com/content.asp?CID=1264923
fify
is teh joke?
ScottyBuff
Well-Known Member
Actually the medical industry is a great example as an analogy, but not health insurance (that would be like the NCAA in this case).
The better example would be a large group medical practice (Ophthalmology, Cardiology, Radiology, Otolaryngology, etc)
When half a dozen or more specialists group together to form a business partnership they do so to pool assets, centralize administration, and find a peer group that will elevate the medical care to their patients and the training of the partner MDs.
The compensation to these physicians is multi-fold:
1) Base salary and benefits.
2) Performance bonuses (related to their receipts from direct production).
3) Clinical Shareholder dividends or partnership draws (a % of the medical practice company's overall profits that could include non-owner physicians).
4) Facility Shareholder dividends or partnership draws (a % of the net profits from ownership in an Ambulatory Surgical Center (ASC) that could have a different ownership group from the clinical medical practice).
5) Real-estate dividends or partnership draws (a % of rental profits from the buldings rented by the clinical and/or ASC).
Some physicians (usually new physicians) are solely employed physicians who only receive #1 and possibly #2.
These large group practices usually will have a large practice area that would cover a large geographic region and several cities.
For established owner-physicians, even though their ownership share might be "equal" for #3, #4, and #5 certain physicians might have a much larger client base and/or perform more profitable procedures than other physicians so they are able to receive bigger #1 and #2.
For my example, there will be three companies: Medical Care, Inc. an S-corp with 10 owner-physicians that also employs 5 physicians who are not owners. We also have Surgery Center, LLP with 5 owner-physicians, and Healthcare Real Estate, LLP with 8 owner-physicians. All ownership in each entity will be equal, meaning being a shareholder or partner in Medical Care, Inc. is a 10% stake, 20% in Surgery Center, LLP, and 12.5% in Healthcare Real Estate, LLP.
Physician A might be a surgical-intensive physician who has been in practice for 25 years and practices in a large and affluent city with corporate headquarters and high rates of private insurance demographics. He receives a base salary of $400,000 (#1), average annual production bonuses of $150,000 (#2), a clinical dividend/distribution of $175,000 (10% ownership of Medical Care, Inc. #3), an ASC dividend/distribution of $100,000 (20% ownership in Surgery Center, LLP, #4), and $75,000 in commercial rental real-estate distributions (12.5% ownership in Healthcare Real Estate, LLP, #5). Total of $900,000.
Physician B might be a fairly new physician who has finally saved up enough cash and developed his practice enough to become a partner in the main practice, he is located in a mid-sized community with high rates of medicare/medicaid demographics (thus lower reimbursement per patient). He receives $150,000 salary (#1), annual bonus of $25,000 (#2), dividend of $175,000 (Medical Care, Inc. #3), but is not an owner in Surgery Center, LLP or Healthcare Real Estate, LLP yet. Total of $350,000.
Now, technically both of the physicians are "equal partners" in the medical practice (they each own 10% of the practice). But they clearly do not bring the same "value" to the group, nor have "equal" access to all the revenue streams. Physician A in this case could be the USC Trojans, Michigan Wolverines, Alabama Crimson Tide, or Texas Longhorns; while Physician B would the Utah Utes, UConn Huskies, or South Florida Bulls.
The rest of the physicians (or schools) would fall in varying levels in-between the two ends of the spectrum.
Medical Care, Inc. would be akin to the conference (the Pac-12 or the Big 12).
Surgery Center, LLP would be akin to the multiple levels of media rights developed by the conference partners.
Healthcare Real Estate, LLP would be akin to the stadium leasing/concessions/ownership deals. On-campus stadiums would be similar to the physician's ownership of Healthcare Real Estate, LLP and the building rent being an additional source of revenue to the established physicians. Physicians that are not involved in the real-estate entity would be akin to those schools paying rent to play in off-campus stadiums (such as Pitt, Miami, South Florida, etc).
The demographics of the market are the same as the TV markets, with the rates of private insurance vs medicare/medicaid being akin to the worth of the recruiting grounds.
NONE of the revenues would exist without the contributions of the members, and none of the members could hope to offset the operating expenses of starting a solo practice (purchasing equipment, marketing, administrative staff, etc.) without taking a significant revenue cut. This is why the partnership is the best option for all of the doctors.
Physician A needs Physician B to help cover his share of the overhead so that Physician A can maximize his revenue. Physician B needs Physician A so that he can utilize that assocation and further develop his practice in the future. Sharing the "practice" profits equally isn't the major factor here, maximizing the revenues by the individual physician through the group practice is. Texas has an annual AD revenue figure in the $125 million range. At best, their conference partnership will produce $25 million of that (20% of the total "compensation"), again similar to the above example's $175k dividend from Medical Care, Inc.. The real money for the school is in the other $100 million that is directly attributable to their own performance (ticket sales, donations, merchandising, etc) which is analagous to the base salary, bonus, and other ownership distributions. Now, removing themselves from a quality conference (medical group) significantly reduces their ability to maximize those sources. They need to be associated with elite partners for their fans (patients) to feel that they are special enough to continue supporting.
For the Physician B type schools that conference distribution could very easily be 50% of their total AD budget for the year, just as it was 50% of Physician B's total compensation. He still is producing enough to cover his share of the company overhead and brings value to the medical group, but the profitability of the group is a much more significant factor in his "take home" than the more established physicians but it puts him in a position to develop those other sources of revenue to a far greater extent than he would as a solo practictioner. As he does develop a larger practice his production will increase the dividend to all the other shareholders and create more stability for the surgery and real-estate entities long-term, also increasing the long-term value of the other partners including Physician A.
You still do not want to partner with someone who is dishonest, practices medicine in a way that you ethically disagree with, or is otherwise disruptive to your ability to serve your patients and develop your future practice (what A&M feels towards UT, and to a lesser extent CU and NU did).
You also do not want to be a "less than equal" partner in the medical practice because then you will NEVER have an equal voice in any issue whatsoever for the rest of your time involved in the group.
The corner Urgent-Care that offers cheap and easy access to medical care but doesn't hire premiere physicians would be akin to the Mountain West or Conference USA; while the WAC or SunBelt Conference would be the free clinic ran by sketchy doctors who barely received their medical degrees.
At some point a national conglomerate will approach the ASC entity, Surgery Center, LLP and offer to purchase a controlling interest to manage the ASC while still producing a distribution back to the owners. By selling a % stake in the ASC, the physicians involved are "cashing-in" their rights to future revenues to get an immediate payment. The physician still has to do the actual work (surgery) that creates the revenue for everyone to get paid but he is now sharing it with a group that can better market, schedule, and maintain compliance of the ASC.
In this example the conglomerate will be the TV networks, such as ABC/ESPN, Fox, etc.
CU is the formerly high-level producing physician who has an established practice and is an owner in all of the entities. Lately, however, he has had to take large amounts of time off due to illness and his salary and production bonus has decreased compared to previous periods. After recovering from his illness and getting trained in a some new techniques, he is looking forward to becoming a much more productive physician in upcoming years.
The better example would be a large group medical practice (Ophthalmology, Cardiology, Radiology, Otolaryngology, etc)
When half a dozen or more specialists group together to form a business partnership they do so to pool assets, centralize administration, and find a peer group that will elevate the medical care to their patients and the training of the partner MDs.
The compensation to these physicians is multi-fold:
1) Base salary and benefits.
2) Performance bonuses (related to their receipts from direct production).
3) Clinical Shareholder dividends or partnership draws (a % of the medical practice company's overall profits that could include non-owner physicians).
4) Facility Shareholder dividends or partnership draws (a % of the net profits from ownership in an Ambulatory Surgical Center (ASC) that could have a different ownership group from the clinical medical practice).
5) Real-estate dividends or partnership draws (a % of rental profits from the buldings rented by the clinical and/or ASC).
Some physicians (usually new physicians) are solely employed physicians who only receive #1 and possibly #2.
These large group practices usually will have a large practice area that would cover a large geographic region and several cities.
For established owner-physicians, even though their ownership share might be "equal" for #3, #4, and #5 certain physicians might have a much larger client base and/or perform more profitable procedures than other physicians so they are able to receive bigger #1 and #2.
For my example, there will be three companies: Medical Care, Inc. an S-corp with 10 owner-physicians that also employs 5 physicians who are not owners. We also have Surgery Center, LLP with 5 owner-physicians, and Healthcare Real Estate, LLP with 8 owner-physicians. All ownership in each entity will be equal, meaning being a shareholder or partner in Medical Care, Inc. is a 10% stake, 20% in Surgery Center, LLP, and 12.5% in Healthcare Real Estate, LLP.
Physician A might be a surgical-intensive physician who has been in practice for 25 years and practices in a large and affluent city with corporate headquarters and high rates of private insurance demographics. He receives a base salary of $400,000 (#1), average annual production bonuses of $150,000 (#2), a clinical dividend/distribution of $175,000 (10% ownership of Medical Care, Inc. #3), an ASC dividend/distribution of $100,000 (20% ownership in Surgery Center, LLP, #4), and $75,000 in commercial rental real-estate distributions (12.5% ownership in Healthcare Real Estate, LLP, #5). Total of $900,000.
Physician B might be a fairly new physician who has finally saved up enough cash and developed his practice enough to become a partner in the main practice, he is located in a mid-sized community with high rates of medicare/medicaid demographics (thus lower reimbursement per patient). He receives $150,000 salary (#1), annual bonus of $25,000 (#2), dividend of $175,000 (Medical Care, Inc. #3), but is not an owner in Surgery Center, LLP or Healthcare Real Estate, LLP yet. Total of $350,000.
Now, technically both of the physicians are "equal partners" in the medical practice (they each own 10% of the practice). But they clearly do not bring the same "value" to the group, nor have "equal" access to all the revenue streams. Physician A in this case could be the USC Trojans, Michigan Wolverines, Alabama Crimson Tide, or Texas Longhorns; while Physician B would the Utah Utes, UConn Huskies, or South Florida Bulls.
The rest of the physicians (or schools) would fall in varying levels in-between the two ends of the spectrum.
Medical Care, Inc. would be akin to the conference (the Pac-12 or the Big 12).
Surgery Center, LLP would be akin to the multiple levels of media rights developed by the conference partners.
Healthcare Real Estate, LLP would be akin to the stadium leasing/concessions/ownership deals. On-campus stadiums would be similar to the physician's ownership of Healthcare Real Estate, LLP and the building rent being an additional source of revenue to the established physicians. Physicians that are not involved in the real-estate entity would be akin to those schools paying rent to play in off-campus stadiums (such as Pitt, Miami, South Florida, etc).
The demographics of the market are the same as the TV markets, with the rates of private insurance vs medicare/medicaid being akin to the worth of the recruiting grounds.
NONE of the revenues would exist without the contributions of the members, and none of the members could hope to offset the operating expenses of starting a solo practice (purchasing equipment, marketing, administrative staff, etc.) without taking a significant revenue cut. This is why the partnership is the best option for all of the doctors.
Physician A needs Physician B to help cover his share of the overhead so that Physician A can maximize his revenue. Physician B needs Physician A so that he can utilize that assocation and further develop his practice in the future. Sharing the "practice" profits equally isn't the major factor here, maximizing the revenues by the individual physician through the group practice is. Texas has an annual AD revenue figure in the $125 million range. At best, their conference partnership will produce $25 million of that (20% of the total "compensation"), again similar to the above example's $175k dividend from Medical Care, Inc.. The real money for the school is in the other $100 million that is directly attributable to their own performance (ticket sales, donations, merchandising, etc) which is analagous to the base salary, bonus, and other ownership distributions. Now, removing themselves from a quality conference (medical group) significantly reduces their ability to maximize those sources. They need to be associated with elite partners for their fans (patients) to feel that they are special enough to continue supporting.
For the Physician B type schools that conference distribution could very easily be 50% of their total AD budget for the year, just as it was 50% of Physician B's total compensation. He still is producing enough to cover his share of the company overhead and brings value to the medical group, but the profitability of the group is a much more significant factor in his "take home" than the more established physicians but it puts him in a position to develop those other sources of revenue to a far greater extent than he would as a solo practictioner. As he does develop a larger practice his production will increase the dividend to all the other shareholders and create more stability for the surgery and real-estate entities long-term, also increasing the long-term value of the other partners including Physician A.
You still do not want to partner with someone who is dishonest, practices medicine in a way that you ethically disagree with, or is otherwise disruptive to your ability to serve your patients and develop your future practice (what A&M feels towards UT, and to a lesser extent CU and NU did).
You also do not want to be a "less than equal" partner in the medical practice because then you will NEVER have an equal voice in any issue whatsoever for the rest of your time involved in the group.
The corner Urgent-Care that offers cheap and easy access to medical care but doesn't hire premiere physicians would be akin to the Mountain West or Conference USA; while the WAC or SunBelt Conference would be the free clinic ran by sketchy doctors who barely received their medical degrees.
At some point a national conglomerate will approach the ASC entity, Surgery Center, LLP and offer to purchase a controlling interest to manage the ASC while still producing a distribution back to the owners. By selling a % stake in the ASC, the physicians involved are "cashing-in" their rights to future revenues to get an immediate payment. The physician still has to do the actual work (surgery) that creates the revenue for everyone to get paid but he is now sharing it with a group that can better market, schedule, and maintain compliance of the ASC.
In this example the conglomerate will be the TV networks, such as ABC/ESPN, Fox, etc.
CU is the formerly high-level producing physician who has an established practice and is an owner in all of the entities. Lately, however, he has had to take large amounts of time off due to illness and his salary and production bonus has decreased compared to previous periods. After recovering from his illness and getting trained in a some new techniques, he is looking forward to becoming a much more productive physician in upcoming years.
Last edited:
The Guest
Guest
I suspect you really mean that we've always belonged. We're home, Comrade.
****. Meant ACC. Typo.
uhoh, our worst fears have been realized. He's one short step from polotics...