Following Physician Compensation Trends? Read This First

Jacqueline Fellows, March 5, 2015

One small Texas hospital has stopped competing with bigger organizations to recruit and retain doctors. Instead, it offers physicians something they crave—financial certainty.

Health systems and hospitals in smaller communities are under the same pressure as organizations in large cities to tailor physician compensation packages that recruit and retain doctors, but instead of trying to compete with them, one Texas hospital has found a way to offer something physicians crave in a constantly changing healthcare economy—certainty.

Peterson Regional Medical Center (PRMC) is a small, private, nonprofit, 124-bed hospital in Kerrville, Texas, a pretty spot near San Antonio and Austin, in what locals call Hill Country. The town's population is about 25,000, but its catchment area means the system, which includes an ASC, a primary care practice, a specialty clinic, and an OB-GYN clinic, serves four times that number.



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The trend toward hospital employment of physicians has not escaped the small town, and that led to the opening of its primary care practice group, says Peterson Regional Medical Center Practice Manager Tim Rye.

"The hospital has been [in Kerrville] since 1949, and up until the last 10 years, the physician base has been here to support that," he says. "But with the financial changes in healthcare, doctors want to be employed, so the hospital formed Peterson Medical Associates to fulfill that need and we've done a lot of primary care recruitment."

Prior to joining Peterson Regional Medical Center in 2013, Rye recruited physicians to work in Austin, an easy draw. Rye says there he could easily get physicians to participate in a pure productivity model. Productivity as a component of physician compensation is still widespread, but Rye says that last year PRMC made the decision to offer the physicians it was recruiting salary assurance.

"The number one thing in a community like ours is to build certainty," says Rye. "When I set up contracts with doctors, I say, 'Here is your base salary, guaranteed base for three years.'

Prior to the switch to a guaranteed salary, which Rye says is in line with MGMA's median salary for primary care physicians in the south ($224,532), PRMC's physician compensation contracts were highly dependent on physician productivity, with their salaries by the end of their third year being based on 45% of collections. The problem with that model, says Rye, is that PRMC's patient population is older.

Jacqueline Fellows

Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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