1 in 3 Medical Directors in Line for Bonus Pay

Adding a medical director to a hospital's staff is costing some healthcare institutions about $1 million each year, while creating a lucrative career path for the physicians who are hired in that role.

This year, nearly 35% of medical directors are getting bonuses, 8% more than last year, a compensation survey shows.

These medical directors aren't in the C-suite, but they are running service lines or filling  other administrative roles. For the most part, they are not also considered chief medical officers.

The findings were revealed in the 2012 Medical Director Compensation Survey published by Integrated Healthcare Strategies, a healthcare human resource and compensation consulting firm headquartered in Dallas. The survey included data on 179 organizations and more than 3,000 medical directors. For the most part, CMOs were excluded from the survey, which examined 94 medical director positions.

At least 60% of hospitals reported spending at least $500,000 in medical director compensation in 2011. Psychiatry, general, emergency medicine and family medicine were among the most common medical director positions, the survey showed.

The report stated that there is an "explosion of physicians in medical directorship and being involved in leadership positions." Independent contractors accounted for 54% of the medical directorships, while 46% were employed physicians.

Generally, hospitals are "putting much more time and money into medical leadership positions," Chad Stutelberg, executive vice president and practice leader for physician services at HIS, told HealthLeaders Media. "Twenty years ago, all of these guys would have been independent contractors, because physicians weren't employed by hospitals."

Over time, as hospitals move from fee-for-service toward value-based care, Stutelberg anticipates increasingly advantageous medical director contracts for physicians, especially in the form of bonuses.

While 34.7% of the organizations offered a medical director performance bonuses this year, 65.3% did not.  But more than 25% reported they are considering implementing a bonus for medical directors, an increase from 19.4% last year, according to the survey.  It would not be surprising if the actual bonuses climb the next year, Stutelberg said.

About a decade ago, only 5% to 10% of employed physicians were paid bonuses. "You've seen an expansion of bonuses in contracts, with the concept of incentives filtering down to these physicians, and the number of overall organizations that use incentives are increasing," Stutelberg explained.  

While most executives in the C-suite may get bonuses of 10% to 30% of their salaries, medical directors may reach 10%, whether they are employed or independent, he continued.

Hospitals have been "selective" on the bonuses, the survey states, focusing more on larger programs and "those positions associated with a larger management system."

Hospitals with less than $100 million in net revenue averaged at least 10 medical director positions, while hospitals with more than $500 million averaged 30 positions, according to the report. The scope and hours of a medical director vary, but the majority of positions are part-time and from the medical staff.

The survey results showed that median hourly rates increased by 2% from 2011 to 2012 for medical directors who worked as independent contractors. But some specialties far exceeded that percentage, according to the survey.

Cardiology and nuclear/echo increased the most, at nearly 35%.  Orthopedic spine surgery showed the greatest decline in median hourly rate at 28.8%. The survey data shows that on average, independent contractors received an hourly rate that is 2.8% higher than employed physicians at the market median.

The IHS survey found that it is not uncommon for a hospital or other healthcare entity to provide a premium on the pay provided to an independent contractor for assuming a medical director role.

Stutelberg foresees hospitals employing more medical directors, particularly with specialty-based service lines, such as cardiology.  In some instances, hospitals may offer less money for each physician, but may have more medical directors in their systems, "like having medical directors on steroids, instead of paying one physician, I'm going to pay five or six, working actively," he says.

The survey results confirmed that 77% of organizations use formal contracts for their medical directors, with one year the most common length.  Stutelberg says IHS recommends that every medical director should have a contract that specifies qualifications, job duties, responsibilities and hours. 

One in four, (23%) of the hospitals surveyed do not maintain a time log for independent physicians or specify the number of hours that should be worked. As a result, the hospitals may be unable to prove that their compensation arrangement is reasonable and representative of fair market value, the survey states.

Hospitals should review their medical director contracts on an annual basis to determine if job duties are still appropriate or require changes, according to IHS.