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Getting smart about comp plans

Practices want to right-size compensation to actual work

January 2019
hospitalist compensation models

IT USED TO BE that most hospitalists shared a pretty standard compensation formula: a high guaranteed salary with a small incentive component and an extra shift rate thrown in for doctors hungry for work.

That familiar model certainly hasn’t died off. But many groups are now taking a more nuanced view of physicians’ work, trying to better match compensation to actual workload. Instead of offering guaranteed salaries, more groups are slicing and dicing their compensation into a series of shift rates that—for larger groups, at least—go beyond just offering separate rates for day and night shifts. They are attaching higher rates to shifts and service lines that are tough to work (think busy admitting shifts or unpopular weekends) or ones that are habitually slammed with high volume or patient complexity.

Why are some groups moving away from a guaranteed salary? One factor may be what John Nelson, MD, says is “some pushback on increasing hospitalist pay” on the part of hospitalist administrators. While hospitalist compensation continues to rise, that has set off alarm bells in some C-suites.

“In our model, our compensation adjusts to the pain of our work.”

~ Stephen Behnke, MD, MBA
MedOne Hospital Physicians

Dr. Nelson, a hospitalist at Overlake Medical Center in Bellevue, Wash., and a principal with Nelson Flores Hospital Medicine Consultants, points out that administrators now are much more serious about “trying to control overall program costs by looking carefully at staffing levels and staffing mix. They want to incentivize hospitalists to do the right amount of work.”

An even bigger driver of changes in comp models may be the issue of fairness. “You want to titrate comp to the complexity of the work load,” says Stephen Behnke, MD, MBA, CEO of MedOne Hospital Physicians, a private group based in Columbus, Ohio. “In our model, our compensation adjusts to the pain of our work.”

Staying competitive
According to Dr. Nelson, most groups stay competitive in terms of the dollar amounts they’re paying hospitalists. What often becomes outdated, however, are the elements that make up a comp plan.

“Time passes,” Dr. Nelson says, “and no one really thinks about whether the formula needs to be adjusted. But even if the amount is still OK, the way it is calculated may be out of step with the cur rent practice.”

That was what James Leyhane, MD, found when he became director of the hospitalist program at Crouse Hospital in Syracuse, N.Y., in 2017. The employed hospitalists there had a compensation plan that featured what he thought was an out-of-date set of comp tiers tied to seniority. (See “Seniority: Should it pay?“) He also found that overall hospitalist compensation needed to be adjusted upward.

“The upside of taking on new services goes directly to our physicians doing the work.”

~ Denise Brown, MD

Dr. Leyhane’s group still relies on a high guaranteed base salary that he says makes up more than 80% of members’ income. But hospitalists in the group can choose between two different base salaries: A higher one for nocturnists and a lower one for doctors who want to work only days.

In return for that lower base, day physicians never have to rotate through nights. In addition, neither the nocturnists nor the day doctors need to rotate through the swing shifts (unless they want to). Doctors who work those swing shifts are paid a per diem rate.

“We’ve been very successful at recruiting,” says Dr. Leyhane. “Giving doctors the ability to work only days has made an impact.”

Rewards for heavy workdays
Martin Buser, MPH, founding partner of Hospitalist Management Resources LLC, a national hospitalist consulting firm, is frequently called in to assess the comp plans of hospitalist groups. He starts by surveying group members about their job satisfaction—and the biggest complaints he hears are about heavy workdays.

To address those concerns, Mr. Buser recommends that groups give physicians a bonus for taking on more than 17 billable encounters a day. “You bonus physicians for doing an additional admission, discharge or rounding,” Mr. Buser explains, adding that those bonuses should be included in doctors’ next paychecks, not some thing they have to wait six months to receive. Programs should build such customizable indicators into their comp plans “to take the pressure off doctors when they have to work harder.”

“While you need generalized compensation principles, you have to figure out how to tailor those principles to the practice on individual units.”

~ Catherine Raver, MD
Baylor Scott & White Health

Mr. Buser also continues to be a fan of what he calls “a healthy base” because low income guarantees scare off many young hospitalists. “Young doctors just can’t wrap their heads around a low base,” he says. “Plus, they need to get a loan for a new mortgage.”

In Michigan, James Levy, PAC, managing partner of iNDIGO Health Partners, a private group with hospitalist programs at 10 sites throughout the state, has seen the same thing. While his group revisits its overall comp amounts every year, members had to overhaul their comp model almost 10 years ago because prospective recruits had issues with the low base the group offered.

“We started out with a low salary guarantee and an aggressive productivity incentive above that, and most of our people made a pretty good market salary,” Mr. Levy says. But once he tried recruiting to that model, “we found it was a challenge,” he recalls. “The minimum rate was so low that people would not consider it, so that model was clearly superseded by the market.”

Compensation flexibility
At Ohio’s MedOne Hospital Physicians, which covers four hospitals and a growing number of post-acute facilities, physicians likewise scrapped their original comp plan, one that Dr. Behnke describes as “eat-what-you-kill.” That model left doctors not earning much when their census was low.

However, he and his colleagues didn’t opt for a high guaranteed base. Instead, they chose a shift-based model that gives doctors some dollar-per-hour coverage, even with low volume. But the bulk of the current plan remains productivity-based—and not every piece of work is equal in value.

“We try to match compensation to the complexity of the work,” Dr. Behnke says. The plan relies on a series of what he calls “stipends”—think “differentials,” not the stipends hospitals pay for hospitalist coverage—that kick in for different shifts and for varying shift volumes.

Night shifts come with higher stipends, as do holidays, weekends and evenings. Stipends are also adjusted so they have “almost an hourly component,” he points out.

In addition, providers’ productivity on each shift is calculated according to an RVU-type formula that weights the difficulty of the work performed. Doctors make, for instance, about 50% more for a discharge than for a subsequent visit, while productivity for admissions (and corresponding compensation) is also higher.

Physicians are paid a combination of both the shift rate and their productivity totals for each shift. “To make sure we are meeting the market,” says Dr. Behnke, “we do have an underlying guaranteed minimum to ensure that providers reach that threshold once those two comp elements are combined.”

He admits the plan is complex. And when it comes to recruiting, “it takes a little bit more explanation upfront.”

But “the more complex the comp model, the more effective it can be because physicians end up with the ideal compensation for their work,” he argues. “And compensation and incentives are tremendous drivers of behavior.” Further, his group’s comp plan has what salary models don’t: the flexibility to ad just to a given shift and census.

“If the shift is pretty light, our compensation
isn’t as high, but the shift wasn’t nearly as painful,” Dr. Behnke notes. To make sure compensation keeps pace with shift volume, his group adjusts stipends “any time we sense that a shift dynamic has massively changed, starting earlier or later or when shift volume begins to vary.”

Setting shift rates
Building flexibility into compensation is also the philosophy at Vituity, a physician-owned and -led multispecialty that has more than 50 hospitalist groups nationwide.

Hospitalist Denise Brown, MD, Vituity’s chief strategy officer, says her company dumped an employment model with a high base salary back in 2013. Instead, it adopted a private practice comp model in which all the doctors are partners and share in the profits at the end of each year.

Further, the doctors at each Vituity site get to decide how to weight their own compensation rates, not only for different types of shifts—nights, weekends, holidays, remote call, telemedicine— but for staffing different service lines that pro gram members are encouraged to pursue. Dr. Brown argues that one major problem she has with a big salary guarantee is that it doesn’t keep comp current with the expanding services that are a fact of life for hospitalists everywhere. Those include new comanagement agreements or covering SNFs and assisted-living facilities.

Because the organization has different rates for specific shifts and service lines, she says, “the of taking on new services goes directly to our physicians doing the work. There is a real advantage for our physicians to go after new business.” That flexibility is becoming even more important now, Dr. Brown adds, as the client base for Vituity’s hospitalists expands beyond hospitals to include SNFs, insurers and employers.

In addition, the company’s sites are “very heavily involved” with the Bundled Payments for Care Improvement (BPCI) initiative. Dr. Brown sees the expansion of bundled payments as “an opportunity for hospitalists to be rewarded for their work”—and another reason why comp plans need more flexibility beyond salaries. “We think the doctors should be reimbursed for those cost savings, not just hospitals or medical groups.”

Factoring in individual units
The employed hospitalist practice at Baylor University Medical Center, which is part of Baylor Scott & White Health, changed its comp model a few years ago. Instead of receiving a guaranteed base salary, more than 70% of practice members’ compensation now is shift-based

“We transitioned away from a fee-for-service, RVU incentive,” says Catherine Raver, MD, codirector of the practice that has 65 physicians and 23 advanced practice providers. In her practice, rightsizing physician compensation to work means sorting out not only the differences among different shifts, but among individual units covered.

Some units, for instance, require a 12-hour night shift, while others may need night coverage only nine hours; the physicians staffing those separate night shifts are paid differently. Or due to the size and patient volume of some units, the providers covering them may be both admitting and rounding on the same day.

“Their compensation needs to be different than in units where providers are solely admitting or rounding,” she points out. “While you need generalized compensation principles across the board, you have to figure out how to tailor those principles to the practice on individual units.”

For that tailoring to be effective, the hospitalists at Baylor Scott & White—like in Dr. Behnke’s group—pay close attention to how shift hours and volumes are changing.

“The bigger issues become: Do we have the right number of providers to meet the patient need at any given time, and do we have to adjust our shift hours?” Dr. Raver says. When shift and/or unit demand changes, practice leaders first assess whether those changes are short or long term. When they are long term, she adds, “we need to adjust our compensation model.”

A tough balancing act
Amit Vashist, MD, MBA, is system chair of the hospitalist division for Ballad Health, with hospitalist programs at 13 hospitals in Tennessee and Virginia. He is now integrating legacy compensation plans of two employed physician groups that merged last year—and phasing out the comp plan of one of those groups, which consisted of a large guaranteed salary.

As head of the hospitalist division of the other former employed group, Dr. Vashist adopted a new compensation plan a year or two before the merger. As with Dr. Raver’s program, Dr. Vashist’s new comp model moved away from tracking RVUs into shift-based pay as its base.

Further, his group maintains two separate comp plans: one for more urban groups, another for rural ones. “Our rural doctors have a higher per shift rate because they may be doing wound care, reading stress tests, teaching residents, doing procedures and not relying on a lot of consultants,” he says.

At the same time, “we added more meat to our quality performance bonus to make that much more meaningful,” says Dr. Vashist, tying about 15% of the base to a performance and quality bonus. That bonus covers a host of factors including clinical documentation, antibiotic stewardship, reducing hospital-acquired infections and Choosing Wisely goals.

At the same time, he points out that designing the right compensation plan remains a tough balancing act. That’s because Appalachia, which his group serves, is seeing lower inpatient volumes, population decline and a poor payer mix, with many self pay patients. In addition, Tennessee never expanded Medicaid, and Virginia joined that expansion only this year.

Boosting the quality performance piece of the comp plan helps convince hospital administrators in a very tight reimbursement environment to maintain competitive compensation for their hospitalists. “We are trying,” Dr. Vashist says, “to demonstrate to our administrators unrealized benefits around clinical engagement and to show that those efforts pay for themselves.”

Phyllis Maguire is Executive Editor of Today’s Hospitalist.

Seniority: Should it pay?
WHEN JAMES LEYHANE, MD, came on board in 2017 as hospitalist director at Crouse Hospital in Syracuse, N.Y., the comp plan included what he thought was an outdated ladder of base-salary tiers tied to seniority. The first tier of that plan kicked in only after three years of experience, and physicians didn’t earn full seniority until they had worked for the group 12 years.

Dr. Leyhane decided to keep the seniority tiers but compress that structure. Doctors now receive their first seniority bump-up after two years, and they hit the top tier after seven years, not 12. “I didn’t really see any reason why doctors should wait that long,” he explains.

In Michigan, James Levy, PAC, managing partner of iNDIGO Health Partners, a private group with hospitalist programs at 10 sites throughout the state, says his group maintains an aggressive three-tiered compensation plan for its NPs and PAs based on their experience.

“It’s still a buyers’ market, and we want to make sure our hospitalists don’t jump ship.”

~ Amit Vashist, MD, MBA
Ballad Health

“Most NPs and PAs reach the top tier within three or four years,” Mr. Levy says. But the group doesn’t offer tiered compensation tied to experience for its doctors for one simple reason: “We stay on top of current market conditions, so we’ve never needed to.”

While Baylor Scott & White Medicine-Dallas doesn’t build a seniority component into its comp model, it offers other perks for seniority. Catherine Raver, MD, codirector of the hospitalist program, says the practice allows physicians who’ve worked there 10 years to opt out of nights. “That’s a luxury that people value,” Dr. Raver says.

But Ballad Health, with hospitalist programs throughout Tennessee and Virginia, realized recently that it needed to add a seniority differential to its comp plan. It created differentials that kick in after two years of experience, then between two to four years, and after more than four years.

“We need to retain our people,” says Amit Vashist, MD, MBA, system chair of Ballad’s hospitalist division. The doctors who work with his group could easily pack up and go to Knoxville, Richmond or Atlanta, he points out. “It’s still a buyers’ market, and we want to make sure our hospitalists, as they gain experience, stay with us and don’t jump ship.”

Who gets annual raises?
DIVE INTO the 2018 Today’s Hospitalist Career & Compensation survey, and one thing becomes clear: Groups take different approaches to giving their physicians an annual raise. While about half—48.1%—of all respondents say they get an annual raise, that varies by region and employer.

Two-thirds (67.6%) of those in a multispecialty/primary care group, for instance, receive a yearly increase, but that’s true for less than one-third (28.4%) of those working for national management groups. Further, while 60.3% of hospitalists in the Northeast say they see a bump up each year, that’s true for only 36.6% of those in the South.

Published in the January 2019 issue of Today’s Hospitalist

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