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Should you be rewarded for your years on the job?

May 2011

Published in the May 2011 issue of Today’s Hospitalist

Should a hospitalist with five years of experience be paid more than a physician straight out of residency? For hospitalist groups that are busy recruiting, answering that question can be tricky. In programs where hospitalists see patients full time, many young physicians expect to be paid the same as older colleagues. If everyone sees the same number of patients, the thinking goes, why shouldn’t they earn the same money?

In red-hot job markets where hospitalists seeking jobs have the upper hand, many or most programs agree and pay all doctors the same salary, regardless of experience. With the specialty still so young, rewarding experience hasn’t been priority No. 1 for many programs.

But as hospital medicine matures, some groups are finding ways to reward senior hospitalists. Those programs may be in the minority, but they are using strategies like tiered payment systems and retention bonuses to favor physicians with more experience or years on the job.

Even in groups dabbling with ways to reward experience, physicians hardly have to wait 10 years before their efforts are recognized. Many retention bonuses are being handed out to hospitalists for staying only a year or two on the job. And with many programs only a few years old, the question of whether (or how) to reward doctors who stick with a program for five years or more is still a long way off.

Experience pays off
For Bryce Gartland, MD, associate director for the section of hospital medicine at Atlanta’s Emory University, the issue of whether or not to reward experience depends on the setting and job expectations.

“Within a community-based practice, the physicians know they’re there to generate clinical coverage,” he says. “They say, ‘If we’re all generating 6,000 RVUs, why should there be a pay differential?’ ”

In academic practices like Emory’s, by comparison, patient care is only one part of the overall mission. Experienced hospitalists with proven longevity in academics, Dr. Gartland points out, are often better educators and researchers “and should be paid more. (See “Earning more for the academic mission” on page 42.)

But even in nonacademic settings where clinical coverage is king, some groups are taking a new view of the value of veteran physicians.

“More experienced hospitalists bring more to the table,” says Nathan Ker, DO, hospitalist director with Wyoming Health Medical Group, which serves Wyoming Medical Center in Casper, Wyo. “They’re more efficient in the hospital setting and can see more patients. They understand more about quality incentives and quality management issues.”

How much is physician experience worth? “If we teach someone who’s never had any training to bill and code accurately, we can see $100,000 more in gross revenues for more efficient billing,” he says. “It’s easier to justify paying them a higher base salary.”

But Dr. Ker’s group “with 10 physicians and two NPs “has physicians work only one year before they’re eligible for what amounts to a retention bonus. Hospitalists with the group for a year, for example, can receive up to $25,000 in additional base salary; those who work two years get a base-salary bump of $15,000. Hospitalists after one year also qualify for productivity and quality bonuses that aren’t available to physicians in their first year, when their productivity is lower.

Any resentment from physicians just joining the group? Dr. Ker says that there’s been little pushback. That’s because the group has a rich package for new physicians, including signing bonuses of between $20,000 and $30,000, which doctors receive in full as soon as they start. In addition, the group may also offer loan forgiveness, and a monthly stipend program for residents in their last year of training who commit to joining the program.

By having separate packages for both experienced and brand new physicians, Dr. Ker points out, neither group feels slighted. “We also don’t want experienced physicians to look at their young colleague who got a loan repayment package and wonder, ‘How come this was not considered in my compensation?’ ”

Keeping pace with rising salaries
The hospitalist program at Good Samaritan Regional Medical Center in Corvallis, Ore., adopted a similar approach in an effort to retain experienced hospitalists.

“We talked about how much compensation should change based on years of experience or how long you’ve been in the group,” says Barry Smith, MD, who directs the hospitalist program, which has nearly 13 FTEs. “Do you reward someone who’s been with the group five years or 10?”

Dr. Smith says that more experienced hospitalists don’t necessarily offer any advantages when it comes to patient care. “It takes hospitalists only six months to know 90% of what they need to know to be efficient,” he explains. “By two years, they’re almost as savvy as someone who has been here 10 years.”

So why offer senior hospitalists more money? “The advantage is not efficiency,” Dr. Smith says. “It’s building relation ships. You have a reputation, you’ve sat on a number of committees ” things that are external to patient care but so important to hospitalist care.”

Just a few years ago, the group was looking at regional jumps taking place in hospitalist salaries, which seemed to be going up $10,000 every six months.

To reward retention in that environment, the group decided to give hospitalists both a bonus and a raise after being with the group for two years and again after four years of service. At two years, the retention bonus equals about 10% of hospitalists’ total compensation, while the raise likewise equals 10%.

At four years, Dr. Smith explains, the retention bonus hospitalists receive is about 5% of their total compensation, while their raise equals about 10%.

“You get a lump sum at two and four years saying, ‘Thanks for sticking with us,’ ” Dr. Smith says.

How do physicians just joining the hospitalist group feel about that? Because hospitalists receive the bonuses relatively soon after signing on, Dr. Smith says he hasn’t heard any complaints.

More comfortable taking risk
James Leyhane, MD, hospitalist director at Auburn Memorial Hospital in Auburn, N.Y., has seen a number of groups experiment with how to reward experience.

At one practice he interviewed with years ago, for instance, physicians received an additional $2,000 of base pay for every year they’d practiced as a hospitalist through years three or four. After that, he recalls, physicians with additional experience received an automatic $1,000 a year raise, through 10 years of service.

His group, however, takes a different tack, one that apparently favors more experience but isn’t expressly designed to reward more years on the job. Physicians in his group can choose from three compensation plans, all of which have a productivity bonus at varying degrees of risk. The most aggressive plan rewards physicians the most for making productivity goals, but penalizes them if they miss those goals. The most conservative plan puts the least amount at risk, but gives physicians fewer chances to boost their income.

According to Dr. Leyhane, more experienced hospitalists have embraced the most aggressive plan because they have a track record and can fairly easily predict their productivity. The higher-paying plans are less risky for veteran hospitalists than those just joining the group.

“One physician who hasn’t been here that long chose the conservative plan,” Dr. Leyhane notes. “He has the potential to make much less, but there’s essentially no risk involved.”

Partner status
Sound Physicians, a national hospitalist organization based in Tacoma, Wash., takes a slightly different approach. The group doesn’t automatically pay experienced hospitalists more, but it gives them plenty of chances to boost their pay “if they put their experience to work.

Sound Physicians’ president and CEO Robert Bessler, MD, explains that physicians have several opportunities to earn bonuses based on their efforts, and that many of those reward more veteran physicians.

A Path to Partnership track, for example, allows hospitalists to become a partner after two years. “They are rewarded after demonstrating leadership that helps drive performance and improve outcomes for patients,” says Dr. Bessler, who estimates that about 36% of Sound Physicians’ hospitalists are partners.

Physicians can earn partner status by supporting the organization’s values of teamwork, quality and innovation; such efforts could include taking the lead on recruiting efforts, serving as liaison with community-based physicians, or being chief of staff at a hospital, among others. Prospective partners need to be recommended by their program director, a regional chief medical officer of the organization and other partners at the site.

“Hospitals are expecting a lot of leadership from us, and not just from our medical directors,” Dr. Bessler explains. “If you try to build a hospitalist program on the back of one medical director, you’ll bury that person. We aim to have multiple people on each team stepping up to take on leadership activities.”

How does Sound Physicians reward this additional effort? Partners earn an additional incentive pay, depending on their specific accomplishments. Physicians can also dial back their partnership activities (and bonus) if they want to devote more time, for instance, to a young family.

A new concept: serious tenure
What’s the future of experience-based pay for hospitalists? Dr. Leyhane thinks that retention bonuses “which he sees as a symptom of a sellers’ market that favors physicians, not groups “may go by the wayside if and when the hospitalist job market settles down a bit. In part, that’s because he sees salary becoming a smaller portion in hospitalists’ overall pay structure. Incentives for productivity, documentation and quality, he says, will become an increasingly bigger slice of physician income.

Then there’s the question of how far out to give physicians bonuses for experience, if at all. Even programs like Wyoming Health and Good Samaritan don’t reward physicians with the most experience “five or more years, for example.

While Dr. Ker’s group rewards one- and two-year veterans, it hasn’t planned other bonuses further out. The group, which will be six years old this fall and is indirectly owned by the hospital, has talked about paying “loyalty bonuses” to more senior hospitalists, but there are concerns.

“It’s more difficult for employed models to pay these kinds of bonuses because there’s more scrutiny about whether this could potentially violate the Stark law,” Dr. Ker explains.

And Dr. Smith’s group in Oregon similarly hasn’t yet considered addressing hospitalists with serious tenure, a rarity in hospital medicine. “The question arises when the group is nine or 10 years old,” he explains. “Should we have some sort of bonus for physicians who have been with us for eight years?”

Edward Doyle is Editor of Today’s Hospitalist.

Hospital medicine: Does experience mean more value?

WHILE SOME THINK IT’S FAIR to pay more to hospitalists with more experience, not everyone agrees. Young hospitalists often protest that they should earn the same as their colleagues for seeing the same number of patients. It turns out that young hospitalists have an ally in one of hospital medicine’s most veteran physicians

John Nelson, MD, a consultant with Nelson Flores, cofounder of the Society of Hospital Medicine and director of the hospitalist program at Overlake Hospital in Bellevue, Wash., says that providing an automatic financial reward based on experience may not always make sense for several reasons. It may make recruiting difficult, he says, and it might be unfair to younger physicians.

Dr. Nelson admits there’s a good case for paying professionals like lawyers and even surgeons more for years of experience. Their connections bring business and revenue to the practice, and their in-depth knowledge makes them valuable.

The problem is that veteran hospitalists don’t necessarily bring that same level of value to groups. “Hospitalist practice isn’t that complicated,” Dr. Nelson explains. “How much you know and can get things done in your hospital count for something, but probably less in hospital medicine than other settings.”

If a senior hospitalist left her group, for example, what would happen? “All the doctors would keep referring to the hospitalists, just like they always have,” Dr. Nelson says. That’s a far cry from law firms where senior attorneys’ connections make referrals happen.

But Dr. Nelson’s bigger concern is that experience-based compensation effectively withholds pay from younger hospitalists. “Within a few months, new hospitalists are worth the same as hospitalists who’ve been in a group for seven years,” he says, citing one hospitalist group he knows that has a seven-year pay ladder.

If new hospitalists at that group provide the same value as other physicians after one year, he explains, they’re giving up as much as $100,000 over the six additional years they have to wait to be paid as much as the older physicians.

“If bonuses or pay increases based on experience are coming at the expense of the more junior doctors in the practice,” Dr. Nelson says, “then these plans are really just a salary penalty or withhold that they’re gradually let out of.”

None of this, he is quick to say, is to discount the value of hospitalists staying with a group for many years or even their whole career. But, Dr. Nelson says, practices need to make sure that staying is an attractive proposition for all the doctors, not just senior ones. They should reward performance, not simply tenure.

Earning more for the academic mission

BECAUSE ATLANTA’S EMORY UNIVERSITY has an academic mission, it has a little more flexibility in how it structures physician compensation. While many community-based hospitalist programs in the Atlanta market have a one-size-fits-all compensation, Emory for the last decade has used a tiered system that rewards experience.

Daniel Owens, MBA, senior administrator for Emory’s hospitalist group, says that the group’s compensation model recognizes hospitalists for both their clinical and nonclinical experience, not just their years at Emory. He explains that physicians see their incomes rise “a significant amount” each year to reward their experience with the program.

According to Bryce Gartland, MD, associate director for the hospital medicine section, that system works because most hospitalists are not expected to do patient care exclusively. Each individual’s commitment to being an academic hospitalist, as reflected by his or her years of service, is often commensurate, he says, with how much they contribute to education, research, administration and leadership.

One challenge that Emory faces, however, is balancing a tiered reimbursement system across diverse hospitals that range from quaternary care to community-based ” with an equal range of diversity in hospitalist responsibilities and roles. Dr. Gartland says that Emory’s group is trying to achieve this by tailoring individual incentives to site-level expectations.

Why do nonacademic hospitalists accept tiered reimbursement, which works better for academic colleagues? A big reason, says Dr. Gartland, is that Emory is one of the most stable hospitalist groups in the area, with less than 3% turnover among its more than 115 faculty members.

“Historically, many hospitalist programs have been on an every three year kind of collapse and rebuild cycle,” he says. “There’s a lot of security that comes with being part of a larger program.”