A new report highlights trends and challenges in how organizations are paying providers.
Rural hospitals face no shortage of obstacles to remain viable, but provider compensation is an area they can better strategize for to ensure long-term sustainability.
Currently, pay for rural providers varies significantly and is poorly aligned with organizational goals, leaving hospitals vulnerable to financial challenges, according to a report by Stroudwater Associates, in partnership with the National Rural Health Association and the National Organization of State Offices of Rural Health.
The survey, which fielded 199 responses from 42 states representing over 2,841 providers, revealed that salary variability continues to increase. Though the median pay for a family medicine physician without obstetrics is $260,000, total compensation for these providers ranges from $179,500 to $420,874.
Rural hospitals have difficulties in recruiting and retaining physicians, but they should tie compensation to the services providers deliver to avoid overpayment and excess labor expenses.
Additionally, it’s vital for hospitals to link compensation with incentives so providers are working in step with organizational strategy.
However, 54.7% of respondents report paying providers a straight salary with no performance or quality incentives, a decrease from the mark of 56% in 2023. Less than a third of respondents (32.1%) provide some form of incentive compensation, which is down from 37% last year.
“Despite provider compensation being the single most expensive item on the hospital’s P&L, rural leaders are setting compensation based on provider requests,” Opal H. Greenway, principal at Stroudwater, said in the report. “Rural leaders must start aligning compensation with incentives that support the organization’s goals to maintain operations. Data. Strategy. Alignment. These milestones are the only way forward for rural healthcare leadership to recruit and retain primary care physicians and advanced practice providers and maintain the financial health of the hospital.”
Rather than solely basing incentives on productivity with the use of work relative value units, hospitals should incorporate quality measures so providers can shift their mindset from strictly fee-for-service to more value-based care.
Yet only 13% of surveyed respondents said they provide quality incentives, with more independent hospitals (16.7%) doing so than health systems (7.6%) despite the imbalance of resources and data.
“Rural healthcare organizations must evaluate the relationship between productivity, quality, and compensation,” Greenway said. “Misalignment puts organizations at risk of either losing providers, overpaying for them, or being noncompliant. Coverage or other immediate needs may call for variances outside of this, but should be the exception, not the rule.”
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Provider compensation at rural hospitals varies greatly and is often not tied to incentives, putting organizations at financial risk, a survey by Stroudwater Associates finds.
Incentivizing providers is especially vital for rural hospitals to maximize operational efficiency and aid in recruitment and retention efforts.