Got FOMO with Your Physician Compensation Strategy?

Here’s How Hospitals Can Fix That

Hospitals have a variety of physician alignment strategies, including expanding the number of employed physicians. It makes sense. Physicians have so many headwinds to being independent these days – the costs of technology, their own staffing challenges, call coverage for their practice – that more and more are choosing the employment road. And, naturally, that means more work for hospital teams managing these compensation plans. At the same time, this scenario can bring on what I like to call, “physician comp FOMO” or a fear of missing out. Specifically, fear of not achieving the goals of your physician compensation strategy. After working with hospitals extensively for years now though, I’ve got some tips to help you set those fears aside.

The challenge hospitals face with physician alignment is that simply getting physicians hired and onboarded these days can be consuming, especially for hospitals struggling with their own staffing challenges. So, the day-to-day crisis of getting physicians credentialed in the health plans and at the hospital correctly (so they can get paid), becomes the main driver.

Making matters even more complex, the pool of physicians interested in employment varies greatly by market and recruiting into non-urban areas continues to be a challenge. Recruiting from a smaller pool also drives up the employment packages. Hospital balance sheets make it imperative to have an employed physician strategy that not only aligns with independent physicians, but your overarching compensation goals, too. And that’s easier said than done (and where the FOMO begins to set in). 

Complex Physician Payment Systems – A Real-World Example
The complex payment systems used for physician employments have a couple of parts that are often processed in different areas of the organization. Here’s an example of just some of the pieces that can make up an employed physician’s contract and the source of reconciling that particular piece of pay:

1. A salary based on productivity that varies by quarter. A physician is to be paid $43.00 up to a threshold of wRVU, then $45.95 over that threshold with a 10% withhold to be trued up every quarter by pulling the EHR data by doctor by month.
2. Medical directorship. The physician provides medical directorship support for up to 10 hours a month at $200, or up to a maximum $2,000 per month based on the actual time log submission.
3. On-call duties. The first two, 24-hour shifts need to be provided as part of the physician employment contract; the physician will be paid $500 per 24-hour shift and $750 per 24-hour weekend and/or holiday shift up to a maximum of $5,000 per month. The on-call ER coverage calendar is the source for this payment.
4. Teaching. Physician will be paid $150 per lecture hour to the residents and $600 per two-week period of rounding coverage with residents in office, not to exceed $2,000 per month based on actual time log submission from the physician.

This physician’s overall compensation will have a cap – meaning, under no circumstance should the physician be paid more than x in any rolling 12 months. The challenge is, keeping track of these line items (a-d, listed above) individually, not exceeding any max and then in total toward the compensation cap.

The question for hospital payment teams becomes this: Do you have the payment processes and people in place to support each individual calculation as well as the compensation cap monitoring? If any of these calculations are being made with manual data and calculations, there is a better way.

Compensation Questions Every Hospital Should Consider  
Here are the most critical questions you can ask yourself to determine how well your payment operations align with your compensation goals.

1. Are we partnered with the right physicians?
2. Who are we paying, and for what?
3. How much are we spending on each type of physician contract?
4. Do we know all aspects of our arrangements – PSAs, part-time employment contracts, etc.?
5. Is this the best way to spend our physician alignment budget?
6. Why is Hospital A in our system spending less than Hospital B, and yet, is more profitable?
7. How can we reduce, streamline and automate any of this?
8. And the most important question: Is there a way to reduce the total physician expenditure? (The answer here is always yes.)

As hospital executives look for ways to simplify the processes of paying physicians, they often focus on how to put a low-cost solution in place to make collecting time from physicians easier on them, but not necessarily on the doctor. Setting up a SharePoint file for doctors, for example, to have them log into (when they remember), is not really solving the administrative burden doctors face in long run – especially when 68 percent of doctors say burnout is still an issue and 55 percent reported spending 1 to 3 hours per day on admin work already.

Automation of these delicate partnerships is critical. Health systems, still dealing with the impact of Covid and labor shortages, cannot afford to manage physician agreements via silos, because collectively, these contracts account for millions in an operating budget (depending on the local market strategy). There has to be one source of physician payment truth that provides a holistic view of what you’re spending. The reality is, at the end of the day, you cannot measure what you don’t know. Not staying on top of what your hospital spends on physician agreements is a luxury of a bygone era in healthcare, and something that can heavily contribute to physician comp FOMO.