Physician Executive Compensation Growth Slow, but Healthy

Even though compensation growth has slowed a bit—CEOs report a gain of only 4% over two years—the demand for physician executives continues to increase. Median annual pay reported by doctors in executive roles is $325,000.

The sluggish economy and the uncertainty around healthcare reform have slowed physician executive median compensation growth over the last two years. However, it's still a very good living.

The 2,364 physician executives who responded to the 2013 Physician Executive Compensation Survey from Cejka Executive Search and American College of Physician Executives reported that their compensation grew an average of 7% between 2010 and 2012 with median of $325,000 across all 19 titles and 26 organization types.

Cejka President Lori Schutte says the news on slower compensation growth isn't really surprising given the state of affairs in healthcare and the overall economy. "Compensation has slowed a little bit," she says. "While we used to see 12% increases, this year it was 7% over the last two years. That is indicative of the economy. Nobody is getting big raises."

In the C-Suite, chief executive officers reported a 4% gain over two years, the smallest median increase among executive groups, which Schutte says may reflect the reliance of their pay packages on organizational financial performance during an economically and politically uncertain period.

Seniority and longevity are rewarded, but only to an extent.

The survey found "a discernible shift this year in a long-term pattern. From 2005 through 2011, there was little or no growth in compensation after an executive has spent more than 15 years in administration. For the first time since the 2005 report, the rate of increase in median compensation did not drop as significantly between those with 10–15 years and those with 16 or more years."

"It isn't necessarily how long you are in the role determines how much your pay is going to increase," Schutte says. "You may not be getting big increases every year where if you are earlier in your career, you've only been there a few years and you've had good performance, you're likely to get bigger increases. It may also be that once you've been in that job, after 15 years you may be topped out, especially if you are with the same organization. It is not that you aren't performing well, you're just at a different spot in your career."

Even as compensation growth slows, however, Schutte says the demand for physician executives continues to increase "in a lot of different areas."

"It used to be just their niche was [vice president of medical affairs] or [chief medical officer] but now it's really expanded and it continues to expand," Schutte says. "There is a growing demand for physician executives in lots of different areas – chief quality officers, chief medical information officers, and CEOs. I don't know if it is necessarily a surprise."

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And increasingly, Schutte says physician executives are demonstrating the value of obtaining advanced graduate degrees such as masters in business administration.

"That shows the complexity of what they are asked to deal with," she says. "Those jobs are harder. They're dealing with many of the business issues as much as they are the medical issues. Whereas in the past it was just 'we are hiring you to direct the physicians.' Now the physicians are dealing with the business of the hospital."

Schutte says there is a clear link between advanced degrees such as MBAs and job opportunities in senior management and earning power for physician executives. The survey found that physician executives holding MBAs enjoyed a 10% difference in median compensation when compared with colleagues with no post-graduate management degree.

The difference is even more pronounced at the C-Level. The MBA is the most prevalent post-graduate business degree among C-Level executives and respondents showed that there is a 7% to 28% difference in median compensation between those holding an MBA and those with no post-graduate management degree.

"They will get paid more having an advanced degree," she says. "We have some clients who will require it and we have other clients that don't necessarily require it but prefer it, but will consider applicants based on their experience and what roles they have. So, it depends upon the individual client. It also depends on the scope of the position, how large of a facility it is, what the scope of the responsibility is. If a physician who wanted a leadership role asked me if they should get an MBA I'd tell them they'd get a good return on investment."

For the sake of perspective, the median compensation of $325,000 reported by physician executives keeps them among the top 1% of wage earners in the United States, federal data shows.