Compensation for Physician Execs Sees Slow Growth

The 7% growth in physician executive compensation across all titles between 2010 and 2012 is consistent with growth seen in the previous two-year period, but down significantly from the mid-2000s.

Compensation for physician-executives increased in the past two years but at a much slower pace than five or six years ago, a survey shows.

The more than 2,300 physician-executives responding to the 2013 Physician Executive Compensation Survey by Cejka Executive Search reported a median total compensation of $325,000, up 7% from $305,000 reported in the 2011 survey.

The results were better in the C-Suite, where chief quality/patient safety officers reported compensation increases averaging 22% and other C-Suite executives reported increases averaging 25%.

"Physician executive compensation really reflects the slowness of the economic recovery and we believe the uncertainty of healthcare and healthcare reform. It kind of goes hand in hand," says Paul Esselman, executive vice president, managing principal at St. Louis-based Cejka.

"We saw an average for all physician executive compensation of about 7% between 2010 and 2012 across all titles. That is consistent with our survey that we did the previous two years, 2008–2010, but it is far behind what we historically saw back in the mid–2000s of 12% plus growth."

A further breakdown of the survey data showed that physician-executives spend an average of 68% of their time on their administrative responsibilities, with 26% spent on clinical work, and 3% on research. Within the C-Suite, that allocation is much higher, with chief medical officers averaging about 89% of their time on administrative duties.

"We are seeing more physicians enter into the top C-suite roles," Esselman says. "You are seeing them as CEO, chief integration and chief strategy officer; the top-level positions within organizations that are helping to drive the strategy. We are seeing those numbers grow every year. The reason why we will see compensation increases for physicians is simply because physicians are getting into more of those positions of greater responsibility, especially when they are looking at quality, safety and patient satisfaction, everything that drives the success of the organization."

It also appears that the time spent on administrative duties is reflected in the paycheck. Esselman says median compensation for administrative duties for all physician executives went from $39,944 for those spending 25% or less of their time in administration to $340,000 for those who allocated 100% of their time. C-suite executives spending 100% of their time on administrative duties reported the highest median compensation, $535,000.

Physician-executives holding post-graduate management degrees saw a 10% difference in median compensation when compared with their physician colleagues with no post-management degrees. The difference is even more pronounced at the C-Suite level, with a 7% to 28% difference in median compensation between those holding a master's in business administration and those with no post-graduate management degree.

"We have continually seen more and more physicians seek those degrees in all of our surveys," Esselman says. "For physicians, especially the younger generation of physicians who are just getting started in their leadership career, this is very important. It will be a good return on investment."

In the coming decade Esselman says he expects that physician-executive compensation will steadily increase even amid the uncertainty of healthcare reform as the payment models shift away from volume and toward quality, safety and patient satisfaction.

"The satisfaction is not only for the patients but the caregivers, nurses, physicians, etc. That is going to be the focus going forward," he says. "We will certainly see more at-risk compensation, how an organization does in those areas. Not that the financial performance isn't going to be important, but many health leaders feel that if they have good quality, great safety and excellent service, meaning patient satisfaction, the patients and the finances will follow."