This article is Part III in a series dedicated to helping physicians plan their next career move. Click here for Part I and find Part II here.
Medical school training is both comprehensive and exhaustive for today’s physicians, and the one area that too little time is spent talking about is compensation. After all, physicians don’t want to spend almost ten years training for a career and not have a clear understanding of how they are going to be paid.
Part of the challenge in understanding physician compensation models is that they vary across the board. Often times, when weighing one job opportunity against another, it is difficult to make an apple-to-apple comparison regarding the salary structure.
Hopefully, by the time you reach the end of this article, you will have a better understanding of the different types of compensation packages and will feel more confident in negotiating an offer that is fair and aligns with your personal and career priorities.
Types of Compensation Packages
Without question, the easiest compensation model to understand, in any industry, is the concept of a preset level of income for the hours and work that you perform. To support the salary level, physicians are typically required to achieve pre-defined, reportable metrics, such as productivity and quality. With a straight salary model, physicians will have a sense of security due to the guaranteed level of income, but may not be motivated to pursue innovation or cost reduction initiatives.
Salary Plus Bonus
As a mechanism to encourage innovation, reduce costs, or achieve other performance metrics that aren’t tied to a guaranteed salary, administrators often implement a bonus structure on top of the straight salary. For many healthcare organizations, this is a popular method of physician compensation. An important consideration for physicians negotiating the bonus portion of the offer is to ensure the appropriate metrics are included and are transparently reported regularly.
One of the more complex and administratively burdensome pay structures is the pay-for-performance model. Health systems are increasingly moving to tie financial incentives to the achievement of predetermined performance goals. This model has an obvious benefit to the organization as physicians are being incentivized to achieve performance and quality targets. Pay-for-performance models also succeed in motivating physicians to find innovations and efficiencies. When this type of compensation model is contained within an offer, it is important for physicians to understand all of the individual components that are going to be impacting their salary.
Ever since the enactment of the Affordable Care Act, the healthcare industry has been evolving toward value-based outcomes. Similarly, physician compensation models are gravitating toward value-based compensation. In the past, physician compensation was often driven by patient volume and the number of procedures performed. Today, many other factors are included, such as costs of care, patient experience, coordination of care, quality, and productivity. And, while productivity still comprises the largest factor in physician compensation, a mix of value-based factors can contribute up to 20% of total compensation.
Another trend that was more pronounced after the passing of the Affordable Care Act was a move toward mergers and consolidations across the healthcare industry. Relative Value Units (RVUs), a concept introduced in the 1990s, have not only played a role in physician compensation, but also in determining the value of medical practice buyouts and mergers. In its simplest form, an RVU accounts for physician time, technical skill and effort, mental effort and judgment, and stress as components of providing a service. Some physician compensation models use a base salary, but add to it a bonus factor that is based on the number of RVUs generated. This is another example of a compensation structure that needs to be carefully studied when considering employment offers.
When a compensation model includes stacking, physicians can be sure that it will have a higher level of complexity. Stacking occurs when a physician is performing multiple roles and being compensated for each individually. For example, hours spent working as the medical director or other leadership capacities will be paid at a different level then hours worked in their regular capacity. This type of arrangement can serve as a motivator for doctors who may be considering a leadership position, or possibly a move to a different position altogether. Stacking models can lead to higher compensation for physicians but is more challenging to track to ensure you are being paid for work performed.
Just looking at the name, physicians may think that this compensation model is the most straight forward and easiest to understand. Not necessarily. In some cases, your contract may state that you are 100% guaranteed to earn a specific salary annually. In other contracts, your guaranteed salary may be a lower overall number that is guaranteed but includes incentive triggers that allow you to increase your compensation. Just because the name suggests a guarantee, it is still wise to have your lawyer examine the contract to ensure you understand what is guaranteed. Whenever incentives are involved, it is important to understand how the RVUs are calculated and how they are tied to your salary.
As we have discussed, in most compensation models, your compensation doesn’t consist solely of a base salary. Most employers combine an agreed-upon salary with variable components that affect total compensation. You need to determine – and be comfortable with – how much of your pay will be based on your individual performance, organizational performance, and other factors like patient satisfaction. It is fair to ask how those variables have affected compensation in recent years – and why.
Bonuses are playing an essential role in physician compensation. They can be productivity-based, quality-based, or a combination of both. Factors that impact a healthcare organization’s bonus structure include payer mix, overhead costs, percentage of self-payed patients, RVUs, and more. Let’s take a closer look at how bonuses can be used in a physician’s compensation package.
As mentioned above, the passage of the Affordable Care Act ushered in a new era in healthcare, where more emphasis was placed on the quality of care. Healthcare administrators are increasingly looking for ways to incentivize the achievement of quality indicators. Part of that effort is in the form of quality bonuses for physicians. Quality bonuses can be tied to many factors, such as patient satisfaction, throughput time, paperwork/medical records completion, etc. One way a physician can determine the fairness of the quality bonus structure is to ask what percentage of employees are earning the quality bonus. This will give you an indicator of whether the bonus plan is achievable. You will also want to know how often the bonuses are paid out, as some are quarterly, bi-annually, or annually.
As the physician shortage continues to drive up the competition for services, sign-on bonuses have become a differentiator for healthcare organizations when filling vacant positions. Something for physicians to consider is that sign-on bonuses are impacted by geographic location. In some areas, physicians can expect signing bonuses of up to $40,000. By contrast, in other localities, bonuses of $10,000 or less are common. Physicians who are not tied to a specific location can seek out more lucrative offers if they are willing to relocate.
Student Loan Forgiveness
Most physicians finish medical school training with an incredible amount of student loan debt. That kind of pressure adds stress to a young physician who is starting their career. Student loan forgiveness and assistance is another way healthcare administrators are attracting physicians to fill their vacancies. In most cases, a physician will receive a set amount of student loan assistance for a contractual commitment to stay in the position for a number of years. In the past, student loan forgiveness was a key drawing card for rural and community health systems to aid their recruitment efforts. Now, as the competition for physician services becomes fiercer, organizations in all settings are using student loan forgiveness as a recruitment tool.
As the costs to recruit and hire physicians continue to escalate, healthcare administrators are paying more attention to finding ways to keep the doctors they already employ. One way administrators are addressing this is through the implementation of retention bonuses. These bonuses are typically paid at periodic intervals throughout the length of an employment contract, but some are held until a physician has completed the entire agreed upon term.
Arguably the most popular benefit that healthcare organizations are providing to their physicians is insurance against malpractice claims. These benefits can include variable coverage limits and other claim specific details. This is another essential clause for your lawyer to review, so you understand your coverage, limitations, and what happens should you leave the position.
Many healthcare organizations are sweetening their offers by offering relocation benefits to physicians who are willing to move to a new location to accept a job offer. Relocation benefits are typically negotiable based on the geographic area and other location-specific circumstances. Physicians should be sure to understand the specifics of what is required to earn the stipend and how it will be paid out.
Other bonuses and stipends can be available but are less common. In some geographic locations, physicians may be offered a vehicle stipend, housing allowance, parking stipends, and more depending on specific challenges in that area. Other benefits include paid time off (PTO), retirement plans, health insurance, and continuing education programs.
Throughout the years of medical training, the person a physician relies upon the most, is themselves. Physicians are naturally born problem solvers, and most are fiercely independent. One time that being self-reliant should be reconsidered is during a job search. When a physician is ready for their first position or seeking the next step in their career, a recruiter can help navigate the myriad of unforeseen challenges. A trusted, experienced physician recruitment professional will have access to open positions that you may not find on a typical job board. They will be with you every step of the way throughout your search and can provide you with critical information about the organization, the leadership team, geographic considerations, and compensation expectations.
The key is to find a reputable physician recruitment firm. One that has a nationwide network and experienced healthcare industry professionals who can help you find the best fit for your personal and professional goals. Your recruiter is a great sounding board and can help you polish up your CV and provide you with the tips you need to ace the interview process. When it comes time to negotiate an employment offer, your recruiter can give you seasoned insight into what to expect, how achievable the bonus structure is, and a number of other details that will impact your earnings.
To connect with a nationally recognized physician recruitment firm, reach out to the healthcare industry professionals at Jackson Physician Search today.