During a Nov. 14 session at Becker’s Hospital Review Annual CEO Strategy Roundtable in Chicago, Integrated Healthcare Strategies Executive Vice President and COO Steven Rice and Vice President Mark Ryberg discussed five steps all hospitals should follow when determining and assessing the fair-market compensation of high-earning physicians.
Integrated Healthcare Strategies has done more than 35,000 fair-market assessments across the country, and “no matter where we’re at, an urban or rural area or a small or large hospital, people are dealing with this issue,” said Mr. Rice. To help ensure pay to highly compensated physicians (those earning above the 90th percentile for their specialty) is reasonable and limits an organization’s risk to legal liability, Integrated Healthcare Strategies recommends the following steps.
1. Gather information. “Gather the pertinent facts and circumstances, which is everything you can know,” said Mr. Ryberg. This includes the physician’s background, outcomes data, quality performances, any other duties including medical directorships and academic positions and any other information that might help justify the physician’s compensation. Most importantly, all this information should be confirmed. “It’s often a natural assumption that information you’re given is accurate,” says Mr. Ryberg. “Every fact needs to be confirmed at the outset.”
2. Ask, “Does this make sense?” Before moving forward with a physician compensation agreement, the agreement should pass a “sniff test,” said Mr. Ryberg. “Ask yourselves, ‘Would my peer enter into the same arrangement?’” he said. The arrangement should also make sense within the framework of how the hospital usually compensates physicians, as outliers usually attract government and regulatory attention, he said.
3. Conduct a market analysis. After all relevant information has been gathered and the agreement seems to make sense, hospitals should then conduct a market analysis to ensure the physician’s compensation is still in line with market expectations. Compensation surveys from the Medical Group Management Association and Sullivan Cotter were cited by Mr. Rice as trustworthy sources on compensation data.
4. Step back. “Next, put yourself in the shoes of an auditor and ask if the agreement makes sense and be able to lay out support for why it’s rational,” said Mr. Ryberg. Hospitals should also make sure there are no alternative options, or other ways the hospital could get the same services for less.
5. Ensure thorough documentation. “You need to be able to tell a persuasive and compelling story” about why a physician is being compensated above the 90th percentile, said Mr. Ryberg. This requires thorough documentation of all relevant facts and conversations. “This documentation is critical,” said Mr. Rice. “If it’s not documented, it didn’t happen.”
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