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Compensation for Physician Leaders Follows 'No Standard Blueprint'

Analysis  |  By Debra Shute  
   July 21, 2016

An expert in determining payment packages and executive incentives discusses how to factor the many variables that influence how to pay practicing physicians for administrative work.

Hospitals and health systems increasingly recognize the need and benefits of physicians serving in leadership roles—and the importance of providing those physician leaders with support and resources to succeed.

Sure, the physicians stand to gain skills, prestige, and the opportunity to help more patients through a medical directorship than they can through episodic care.

But if physicians are going to commit to these extra responsibilities and he held accountable for results, shouldn't they be paid for that work? And if so, how much?

Related: 5 Keys to Physician Leadership Development

Of course, there are numerous factors to consider when compensating physicians serving in leadership or medical directorship positions, and no standard blueprint for organizations to follow.

Challenges may include regulatory issues, accounting for various ratios of clinical and administrative work, and more. Nonetheless, organizations have to look at the big picture in aligning physician executive incentives with organizational goals.

In an a webcast recorded for HealthLeaders Media, David Taylor, FACHE, FACMPE, corporate vice president of Cox Health in Springfield, Missouri, discusses these topics and more.

He followed up with me to answer additional questions. The following transcript of our conversation has been lightly edited.

HLM: Is it outdated to still be talking about work relative value units (WRVUs) when determining physician compensation? How do you factor quality into compensation for physician leaders?

David Taylor: First, for leadership roles, you would not see physicians paid based on WRVUs. This would only be utilized for a physician's clinical compensation.

Despite the industry's shift toward value, WRVU is the basis for most physician compensation plans today. It best approximates work effort and recognizes physicians for their level of production. 

For purposes of determining a factor for quality, I would determine a range of what a comp rate per WRVU would be from a fair market value perspective, and then settle on a value within that range.

Let's say we agree with the physician on a rate of no more than $50/WRVU for her clinical work. Then for pay-for-performance, the plan would call for a withhold of 10% of the $50.

This $5 being withheld would be placed into a pool that would be paid out only if the physician achieves certain predetermined measures/goals as they relate to quality or other incentives that help meet the larger organizational goals.

HLM: How do you handle compensation for various specialists who want to be paid for their time lost from practice?

DT: The two don't equate. The administrative rates, per the published data and defined by the market, have reflected lower compensation for most administrative roles as compared to what can be earned by providing patient care. 

A physician in a leadership role should take on the position for reasons besides just compensation, which may include the honor, having an interest in seeking a new challenge/experience, or to earn an income to augment an already full-time clinic practice.

Also, note that different specialties can or will command different hourly rates. It is common when looking at a department head or chair of a department to pay differentiating rates based on specialty.

HLM: Do you see compensation committees that approve or reject compensation plans for individual physicians include other physicians?

DT: For the purpose of designing a compensation methodology and creating your group's culture, you should have a compensation committee that includes physicians. This group can help set the parameters as it relates to the group's needs and overall goals.

However, when reviewing the compensation plan from a legal perspective and compliance, there may be physicians that attend the committee meeting, but typically would not vote.

For more on compensation methodologies for physician leaders, join David Taylor, Corporate Vice President, Cox Health, for the HealthLeaders Media webcast, "Determining Compensation for Physicians in Leadership Positions." Available on demand.

Debra Shute is the Senior Physicians Editor for HealthLeaders Media.

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