Physician compensation in today's market: Key thoughts for hospital executives

Physicians are increasingly interested in hospital employment, and hospitals are struggling to develop a fair and effective compensation model.

There are several factors playing into physician compensation, including physician shortages and an increased demand for advanced practice clinicians. At the Becker's Hospital Review 6th Annual Meeting, President and COO of INTEGRATED Healthcare Strategies Steve Rice and Executive Vice President and Practice Leader of the Physician Services Practice Chad Stutelberg gave a presentation titled "Developing an Effective, Relevant and Compliant Physician Compensation Market."

"There is a movement from volume to value in compensation we are seeing all across the country," said Mr. Stutelberg. "It isn't prevalent in physician compensation models yet."

Hospitals are gathering data to figure out the best compensation models and track what is successful in the move from volume to value. Many organizations are getting ready for a new compensation model that includes:

1. Productivity
2. Work RVUs
3. Quality
4. Population health incentives
5. Cost of services

"Reimbursements are affecting physician income," said Mr. Stutelberg. "There is more employment and we are definitely seeing a lot of complexity in compensation models. We are starting to see programs do accountable care organizations and other incentives. A good compensation program is going to be one you can understand."

There are some hospitals with a new approach to physician compensation; they provide a base salary with call coverage, citizenship and other factors bundled into the package. Not everything needs to be carved out. The surgeons work on patient-centered medical homes, quality outcomes and productivity.

"There is a straddling between culture and strategy here," said Mr. Stutelberg. "You're thinking into the future and wanting to be relevant; it's a tough challenge. Nobody knows where healthcare will end up. Compensation can lead a culture change, and as many people think about shifting to new models, what we'll tell you is the change is slow and there are several reasons to take caution and not move too quickly into the new world of physician compensation."

One of the key considerations for changing compensation is the organization's philosophy. Here are a few quick questions to ask:

1. What is the compensation philosophy?
2. What does the compensation say?
3. Is compensation consistent with the organization's mission?
4. Are you paid on productivity?
5. What is your market for physician compensation?

It's also important to take compliance into account and avoid any issues. Benchmarking compensation and conducting fair market value research is important to creating compliant compensation plans. Mr. Rice typically gives organizations a range of compensation for physicians, and cautions hospitals not to tell physicians the range.

Secondly, make sure the compensation plan is consistent. Offering additional benefits to some, but not all, physicians can create discord.

"Responsibilities include overseeing the compensation process, good committee structures, documenting conflict of interest and taking preventative measures to avoid compliance issues," said Mr. Rice. "The deal should look right from a reasonable person standpoint. Use an established process and limit negotiations. Additionally, conduct a routine review of your model."

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