How to Determine Compensation for Medical Staff Leaders

In the past, many physicians considered their medical staff leadership responsibilities a privilege. Therefore, they did not demand compensation. However, in recent years, it has become common practice for hospitals and medical staffs to compensate chiefs of staff and medical staff presidents, committee chairs, and department chairs for their leadership involvement. This trend is occurring for two reasons.

First, decreased reimbursement and higher overhead have strained physicians' wallets. Many are no longer willing to spend time on volunteer leadership responsibilities when they could be seeing patients and generating revenue.

The second reason is that the scope of medical staff leadership responsibilities has grown in recent years. "If you look at all the responsibilities The Joint Commission and other regulatory bodies place on department chairs, it is arguably a full-time job," says Michael Callahan, Esq., partner at Katten Muchin Rosenman in Chicago.

There is no magic formula to help hospitals determine which leaders to compensate and how much. However, there are some questions that medical staffs and hospital executives should ask themselves before putting their John Hancock on a check.

The first question is should medical staff leaders get paid? If physicians are willing to take on leadership responsibilities because they feel that it is their civic duty, the medical staff or hospital can choose not to compensate them. However, if a hospital has difficulty finding individuals to volunteer, it may need to open up the checkbook. If your organization decides to compensate leaders, it should clearly spell out which leaders receive compensation in an administrative policy.

Your organization may also be asking itself, "If we decide to compensate medical staff leaders, which leaders should get compensated?" According to Mary Hoppa, MD, MBA, senior consultant with The Greeley Company, a division of HCPro, Inc. in Marblehead, MA, hospitals most commonly pay medical staff presidents and chiefs of staff because they spend a significant amount of time way from their clinical practices to tend to their responsibilities.

When deciding how much to pay leaders, hospitals should ensure that the amount of money a physician leader receives is commensurate with his or her responsibilities and stays within fair market value, thus complying with federal regulations. If hospital administration pays a leader exorbitantly to attend one medical staff meeting per month, that may throw up a red flag for the Internal Revenue Service and the Office of Inspector General, which enforce the Stark Law and Anti-kickback statute.

"If it looks like a payment for referrals—meaning that the real reason they made this person the medical director of a service line is to buy his loyalty and patients," says Callahan, "you are arguably violating these federal statutes."

To determine fair market value, medical staffs and hospitals should start by estimating how many hours a leader would need to dedicate to his or her post. "It isn't uncommon for people to say that the value of these administrative services is between $100 and $150 per hour," says Callahan. But this simple calculation may not be enough. Callahan suggests reaching out to other hospitals in your area to find out what they are paying their medical staff leaders. Most hospitals are curious whether they are on the same page as their peers and are willing to share such information, he says.

Who's going to fork over the money—the medical staff, hospital administration, or both? Hoppa says that traditionally, hospital administration has funded the stipend because it wants to ensure that the medical staff has leaders who can carry out their board-delegated duty to promote high quality care. However, some medical staffs feel uncomfortable with that arrangement because they are concerned that medical staff leaders who receive money from hospital administration will act in administration's best interests rather than the medical staff's.

But it might not be as financially sound for medical staffs to compensate leaders rather than the hospital. To afford medical staff leaders' stipends, many medical staffs must increase their annual dues or divert dues away from other purposes, such as the medical staff library or scholarships for up-and-coming physicians. "What we are seeing more often than in the past is that it is a shared responsibility. The hospital puts in half and the medical staff puts in half," says Hoppa.