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Physician exec compensation increasingly tied to bonuses

Physician Compensation & Recruitment, January 10, 2008
As the physician executive market matures, so do compensation methodologies.

In many cases, this means a greater focus on bonuses tied to performance incentives. More than half of physician executives reported receiving a bonus as part of their compensation package, according to the 2007 Physician Executive Compensation Survey, which was conducted by Cejka Search and the American College of Physician Executives (ACPE). This number is up slightly from the previous year's report.

More emphasis on bonuses typically translates into higher overall compensation for the executive. Median administrative compensation for executives with a bonus of 10 percent or less was $250,000, but administrative compensation levels increased as the bonus percentages rose:

  • Bonus: 11 percent-20 percent, compensation: $282,500
  • Bonus: 21 percent-30 percent, compensation: $307,000
  • Bonus: 31 percent-40 percent, compensation: $377,500
  • Bonus: 41 percent or more, compensation: $400,000
The most common measurement of success is organizational goals--62 percent of respondents reported this bonus component. However, personal objectives, organizational profit, quality measurements, and patient satisfaction are also common measurements of executive performance.

The shift toward more incentive-based compensation is driven in part by the physicians themselves, says Lois Dister, vice president and practice leader with the Cejka Search executive search division. Physicians are more savvy when it comes to compensation packages than they were 10 years ago, and many are eager to tie a greater portion of overall compensation to their performance.

"[Physicians] realize how they can contribute to the clinical outcomes, the financial performance, and the overall goals of the organization. They get very excited by the opportunity . . . and they'll even suggest putting more money at risk," Dister says. "In the last couple of years, I've noticed a marked difference in how they view compensation and how excited they get about the bonus potential."

Physicians enter the C-suite
Physician executives aren't just getting paid more; they're filling new roles and taking on true administrative responsibilities. Traditionally, physicians have held "medical director" and "chief medical officer" (CMO) titles, which account for 46 percent of the respondents to the Cejka Search/ACPE physician executive survey. But some are beginning to move beyond those positions, entering the C-suite and focusing solely on administration.

To attain these business administration physicians, some physician executives are obtaining postgraduate business management degrees, the most common being an MBA--one in five physician executives has this degree, according to the survey.


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

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