Home Career Getting creative with compensation

Getting creative with compensation

July 2010

Published in the July 2010 issue of Today’s Hospitalist

When hospitalist groups try to get creative with compensation plans, they often get a reality check from physicians. Because demand outstrips supply in so many markets, hospitalist groups often have to make sure their compensation mirrors that of their competitors. If compensation is too low “or if too much of it is at risk, based on productivity ” the thinking goes, hospitalists will simply vote with their feet and find another opportunity.

Program directors and recruiters alike refer to this phenomenon as wage compression, and many complain that it prevents them from finding new ways to better reward top-performing physicians. But some hospitalist programs are bucking the trend toward homogenized wages and coming up with some creative ways to pay physicians.

At a panel presentation at this year’s Society of Hospital Medicine annual meeting, representatives from several groups outlined strategies they’ve used to spice up their compensation. Getting creative with physician income has allowed those groups to reward retention, straighten out scheduling problems or simply encourage doctors to “say yes” to new patients.

Linking pay and schedules
According to the 2009 Today’s Hospitalist Compensation & Career Survey, most hospitalists ” more than 70% “receive some sort of bonus or incentive, but the dollar amounts aren’t very impressive. Only 10.9% of respondents, for example, said they derived more than 20% of their income from some incentive plan.

Some groups, however, have decided to link significantly more pay to productivity. An example is Northern Colorado Hospitalists, which a few years ago moved away from a combination of salary and 20% productivity bonus. Physicians now have 10% of their income pegged to their performance on quarterly quality bonuses, which rewards efforts like committee work and protocol development.

But for the other 90% of their income, the Fort Collins, Colo.-based group pays its 13 physicians on productivity.

Why the drastic switch? According to medical director Christine Lum Lung, MD, the group needed to change its approach to scheduling. The problem with paying everyone the same, Dr. Lum Lung explained, is that everyone needs to work the same amount. “That’s something we found was nearly impossible to do.”

One problem was that the group’s physicians work at two sites that have different staffing requirements ” and night shifts that need to be distributed. At the same time, some doctors preferred to work less while others wanted more patients.

By assigning dollar amounts to RVUs, plus creating a complicated shift differential system “a model that took more than a year to develop, tweak and pilot “Dr. Lum Lung said the group’s compensation now allows for maximum scheduling flexibility.

“It eliminates the need for pay-it-forward or pay-it-backwards scenarios,” she explained. “When our doctors want to take time off, they don’t have to work extra shifts beforehand or afterwards.” Physicians, including those who want to spend more time with their families, choose how many and what type of shifts they want to work.

Steps to success
Giving physicians that flexibility hasn’t meant that they all opt to work part-time. “We found that once physicians saw how intimately their salary was linked to their workload,” said Dr. Lum Lung, “we had more requests for shifts than we had shifts available.”

The key to succeeding with a productivity plan, she added, is to first go slow and gain physician buy-in, particularly because most hospitalists are used to the security of a fixed salary.

It’s also critical to make sure that the administration of a productivity plan is impeccable.

“Any time there is an error generating a physician’s income,” Dr. Lum Lung cautioned, “it can lead to a significant lack of trust in the program, which can be difficult to overcome.”

Rewarding retention
Ideally, said panelist Vikas Parekh, MD, associate director of the hospitalist program at the University of Michigan Health System in Ann Arbor, the amount of potential annual income tied to a performance incentive would be larger than the 10% his group members can earn based on productivity. “Maybe 20% would be better,” Dr. Parekh said, “if you want to incentivize behavior.”

But putting even a small amount of pay at risk has helped with staffing, he explained. Hospitalists can earn more if they work less desirable shifts, such as nights and weekends, or pick up extra shifts if other doctors are ill.

Dr. Parekh’s group has had to get even more creative with how to pay the many physicians in his academic hospitalist service who want to work only a year or two between residency and fellowship. The group pays a below-market entry salary, then bumps income up significantly for people who stay a few years or longer.

“Our goal is that in six to eight years, you will be making the community median for a hospitalist,” Dr. Parekh said. While entry level salaries are low compared to community hospitalist programs, they are comparable, he explained, to other academic programs “and come with many academic pluses, including time to teach and do research.

And while some benefits, like a generous retirement- plan match, kick in after only one year, others are geared to career hospitalists. An example is the loan forgiveness program that pays up to $50,000 in loans over five years of service.

Becoming a partner, owner
At the Tacoma, Wash.-based Sound Physicians, compensation is also geared in part to reward longevity and commitment to the group, explained Robert Bessler, MD, president and CEO of the national hospital medicine group.

Sound’s practices feature a bonus pool that includes pay for RVUs produced per shift above a certain monthly threshold, as well as money for quality that’s provided by the hospital or payer. But there are extra payments for becoming a “partner” after two years, and still later an “owner,” Dr. Bessler said.

“Becoming a partner is about demonstrating behaviors and contributing at a higher level,” Dr. Bessler said, not just about time served. “To drive value, we have to reward high performance.” Physicians become eligible for partnership by leading committees, for example, or heading up site recruitment efforts. (Physicians qualify for ownership by heading up larger initiatives.) About one-quarter of Sound’s physicians are partners, he said.

“In the ideal world, we would love to have base compensation at 70% and put the rest at risk,” Dr. Bessler said. “But the reality is there is a huge salary compression among hospitalists because of supply and demand.”

At Sound, he noted, the average physician has a bonus of between 10% and 15% based on quality and productivity.

Capitating admissions
Then there’s a type of compensation that ties income to productivity “but doesn’t reward doctors when patients stay longer in the hospital, which can theoretically be a risk with work RVU-based compensation.

Called a “case rate plan,” that system pays hospitalists a fixed amount for each new patient seen, whether that patient stays one or 10 days. Such a plan is typically combined with a fixed salary component.

Hospitals might like the fact that physicians earn what is essentially a form of capitation for each admission, said John Nelson, MD, of Overlake Hospital Medical Center in Bellevue, Wash., and a consultant with Nelson Flores Hospital Medicine Consultants. That’s because the plan rewards physicians financially no matter how long patients stay in the hospital. While Dr. Nelson wasn’t suggesting that hospitalists keep patients in longer to be able to charge more visits, he pointed out that some hospital executives do worry about that possibility.

Dr. Nelson also said that case rate payment isn’t his personal preference and he rarely recommends it to hospitalist groups. (Compensation in his own group, he noted, combines base salary with productivity based on work RVUs.)

But it’s something groups might want to consider as a reasonable option. Another benefit of the case rate system, besides aligning incentives with hospitals for lower lengths of stay, “is that it rewards hospitalists for what is often the hardest thing to do “say ‘yes’ to the next referral,” Dr. Nelson said. “When you are paid a case rate, accepting a new patient into your practice is the only way to see your income go up.”

Deborah Gesensway is a freelance writer based in Toronto who reports on U.S. health care.

Taking a new approach to quality incentives

LAST YEAR, THE MERCY INPATIENT MEDICINE SERVICE in Springfield, Mass., decided to ditch its seven-year-old quality incentive system and replace it with a “citizenship” incentive instead.

The old quality bonus package basically rewarded doctors for their performance on Medicare core measures, according to Win Whitcomb, MD, a hospitalist since the 1990s. Dr. Whitcomb, who is now medicine director for health care quality at Baystate Medical Center in Springfield, worked with the Mercy group until last year.

The problem was that the old quality incentive system seemed “maxed out,” he told a group at this year’s Society of Hospital Medicine meeting. “We had squeezed as much out of it as we could.” While the hospitalists are expected to continue to have excellent core-measure performance, the 17-member group is now being incentivized to get busy with quality improvement projects.

The group put only 4.4% of each hospitalist’s base pay at risk for this incentive, but in its first year “2009 ” “the relatively small dollar amount worked,” Dr. Whitcomb reported. Nearly two-thirds of the group ended up receiving 100% of the payout amount because they fulfilled all requirements.

Those requirements included attending 80% of a QI team’s meetings, serving as a “physician champion” and giving a presentation (that included “slides and graphs”) on that team’s work at a hospitalist staff meeting every six months.

Another third earned a partial payout for attending half a team’s meetings and reporting on their QI project, but not giving a full-fledged presentation.

“I think it has made people feel that they are not just attending meetings,” Dr. Whitcomb said.