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Compensation, recruitment experts offer predictions for 2008

Physician Compensation & Recruitment, December 6, 2007
Editor's note: We asked members of the Physician Compensation & Recruitment advisory board and other experts in physician compensation and recruitment to offer predictions for trends they expect to see in 2008. Here are their responses.

James W. Lord, principal, ECG Management Consultants
RVU changes:
"Many physician organizations are not prepared for the RVU changes that have been implemented. These put greater credit on evaluation and management codes and less on procedural services (e.g., endoscopy). This is a major change that will have a significant impact on groups who utilize the RVU system within their compensation plans."
Compensation increases: "Most studies are reporting continued increases in physician compensation on flat production. This is being driven by increasing demand for care that is projected to continue as the baby boomers enter the healthcare system in a major way. "While I think these increases will hold in the near term it is certainly an early warning sign that well-run organizations should track to ensure they aren't letting the competition for physicians cloud their judgment in recruitment. None of us want to revisit the boom and bust of 1990's physician employment structure."

Max Reiboldt, CPA, managing partner and CEO of The Coker Group
Measuring productivity:
"The biggest issues regarding compensation still reside around productivity measurements and metrics. These include the methodologies for measuring productivity, and the debate continues to rage regarding whether this should be based upon RVUs or actual charges/collections. A component of this is the issue pertaining to the CMS increases in work RVU values in 2007 primarily focused around the E&M codes. Because the MGMA and other surveys are based upon the prior year's data, their benchmark conversion factors have been overstated. This has caused a great deal of consternation in the development of compensation plans based heavily on RVU productivity and a conversion factor" (which is usually restricted to hospital-employed physicians).
Ancillary income: "Another top issue continues to be the distribution of earnings for ancillary services. As ancillaries continue to grow, both private groups and those employed by physicians continue to struggle with this issue. Of course, there are some legal constraints, but for the most part there are opportunities to distribute profits (at least non-government reimbursed revenues and profits) to physicians in a manner other than equally.
"Moreover, many physicians who are employed by hospitals want more recognition for the fact that they do not have ancillaries in their practices but would if given the opportunity; they believe they are inherently penalized in this regard and want it 'made up' via more guaranteed pay."
Pay for performance: "Another issue has to do with quality and clinical performance measurements. This is a major consideration for 2008 as the payers (including the government) continue to gravitate more toward reimbursement that at least involves a portion of the total tied to clinical performance. Incorporating such metrics and measurements into the compensation structure is difficult as many practices have limited ability to measure such outcomes and are still lacking significantly in their information technology systems."

Marc Bowles, chief marketing officer, The Delta Companies
Physician demand shifts to cities:
"We've seen a shift in demand for physicians by the population of where we're bringing in our searches; we're seeing an increase in metropolitan areas. Typically our client base has been rural areas that had trouble finding physicians, but now we're seeing more challenges for facilities looking to recruit within larger cities. This is a direct influence of the shortage."
Focus on the intangible: "What we are seeing more from our client base is enlightenment in how they're engaging physicians. Compensation is getting a little more equal regionally. So if I'm a physician and . . . I'm going to a region where the compensation is pretty consistent, what is the differentiator? Those intangible aspects are starting to come up. There's more emphasis on how the leadership is communicating with and engaging physicians."

Craig Southerland, director of search for Delta Physician Placement
Signing bonuses:
"Signing bonuses will continue to be a staple in recruitment packages for 2008. We have seen the dollar amount for signing bonuses continue to increase in 2007."
Hot specialties: "Most searched-for specialties for 2008 will continue to be urology, orthopedic surgery, internal medicine, cardiology, and family medicine. The growing difficulty to recruit primary care physicians is due to the trend for residents to continue on to fellowships or to stay in academics.
"Often when you have 10 primary care residents completing a program, there will be no more than one or two of the 10 that will be entering a private practice career immediately after completing residency. In 2008 we should see the searches for internal medicine and family medicine increase in volume and continue to be a challenge. This challenge is being reflected in the increase in compensation being offered for primary care positions."
Recruitment difficulties: "To the common question of why it so difficult to recruit physicians in today's market, my answer hands down is 'too many options.' Candidates today have an endless amount of opportunities to pick and chose from."

Kim Mobley, principal, Sullivan Cotter & Associates
Focus on productivity:
"Organizations will continue to compensate physicians on the basis of performance, with a key focus on productivity. The productivity indicators are primarily wRVUs and collections. However, organizations that employ physicians are also beginning to take into consideration other aspects of performance such as patient satisfaction and quality."
On-call pay: "The prevalence of on-call pay for physicians continues to increase; however, the growth has slowed. In SullivanCotter's 2007 Physician Compensation and Productivity Survey, we found that about one-half of the physician employers provide on-call pay to physicians in at least some specialties. Hospitals are becoming more sophisticated in terms of how they determine who receives the on-call pay as well as the amount paid. Key variables include the number of days required to provide on-call coverage, the likelihood of being called in, the likelihood of being compensated when called in, and the intensity of services provided when called in."
Hospital employment: "I also believe that there is going to be a trend toward hospitals hiring more physicians as employees due to the regulatory pressure on organizations to comply with Stark III. In addition, I see more hospitals adopting formal guidelines and procedures for determining physician compensation levels."

Ron Siefert, senior consultant, Hay Group, Inc.
Employment:
"As hospitals and healthcare systems seek to strengthen their relationships with physicians, we are seeing more of our clients move toward a model of the employed physician. The structure can benefit the physicians by providing some financial stability, access to resources/technology, and some bargaining power on the reimbursement front.
"The trend benefits the health systems and hospitals with strong physician support for strategic initiatives around the patient care model, innovation and outreach. Interestingly, the employment model does not imply an 'entitlement' model, but rather focuses new employment arrangements on aligning pay delivery with the economic interests of the institutions."
Physician leaders: "As health systems and hospitals look to the future, the challenge of filling the leadership pipeline has become increasingly critical. Many organizations are looking across the enterprise to meet the future leadership challenges with leaders classically trained in clinical service areas.
"In looking to these individuals, it is important to note that many of them do not have a personal portfolio that provides for the experiences that require the same level of influence, flexibility, and long-term thinking required of the future healthcare leader.
"While the increase in the number of physicians with MBAs speaks volumes about the business knowledge required/obtained, many organizations are looking to expand the role of the physician to include clinical and non-clinical operations to grow the individual."
Improved alignment: "In response to the dynamics of both reimbursement and clinical services, many healthcare providers are taking steps to improve physician recruitment, retention, and motivation. The primary focus appears to be to strengthen the line of sight and direct link between contributions and rewards.
"Compensation frameworks are evolving to better communicate priorities, measure physician performance, and reward physicians--as individuals and as a group--relative to that performance.
"The strongest trend has been increased use of work RVUs to measure productivity and the implementation of incentive plans to drive and reward improvements. While productivity is a priority, most recently designed plans balance multiple dimensions of performance expectation. Quality and patient satisfaction are still an important part of the equation and are often prerequisites to incentive eligibility."


Elyas Bakhtiari is the editor of Physician Compensation Report. He may be reached at ebakhtiari@hcpro.com. This story first appeared in the December edition of Physician Compensation & Recruitment, a monthly newsletter by HCPro Inc. For information on all of HCPro's products, visit www.hcmarketplace.com.