Physician Compensation 101: What Residency Didn’t Teach You

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Show me the money. While most physicians don’t go into medicine solely for the high compensation, the six-figure income doesn’t exactly hurt. That said, physician compensation can range significantly depending on a number of factors. A physician’s specialty obviously impacts income, as does geographical location, but what many residents don’t know is how the different types of physician compensation models can also influence income.

Residents spend years learning their profession, but when it comes to getting paid, many have no idea what to expect. Sure, they may have seen average salaries referenced online or heard their attendings talk about what they earn, but as for what part of the compensation is guaranteed versus what is based on production or a percentage of profits–these details aren’t typically shared.

The complexities of physician compensation models could be covered by a semester-long class in medical school. Instead, it is often left to physician recruiters to explain the various nuances of how a physician gets paid–perhaps while presenting a resident with their first offer of employment!

So, in an effort to introduce the concepts earlier in the physician job search process, we present to you this primer on the two primary physician compensation models.

Hospital Employed Physician Compensation Model

According to a 2021 report from consulting firm Avalere Health, 69% of working physicians are employed by hospitals or other corporate entities, a figure accelerating significantly as a result of the COVID-19 pandemic. These physicians, when first hired by a large healthcare organization or hospital group, typically receive a guaranteed base salary for a set time period (one or two years) and then, presumably after the physician has established enough patients to be productive, compensation shifts to a productivity-based model.

Productivity is measured using wRVUs (work Relative Value Units) which are accrued for every exam or procedure a physician performs. The Centers for Medicare and Medicaid Services assign an RVU for each Current Procedural Terminology (CPT) code. The more complex the procedure, the greater the corresponding wRVU.

Accrued wRVUs are multiplied by an established dollar amount to calculate how much a physician earns. Some compensation plans offer a sliding scale to incent physicians to accrue more RVUs, that is, to be more productive. For example, the first 4,000 wRVUs are paid at a conversion factor of $40 per RVU, and then, the next 4,001-8,000 wRVUs are paid at $42 per wRVU. The amount employers will pay per wRVU varies, however, Medicare sets the amount they will reimburse per total RVU (total RVU takes into consideration an organization’s expenses and insurance), which is typically lower than what is billed to private insurance. For 2022, the Medicare rate per total RVU is $33.59.

Are you starting to see why a course in med school might be necessary to fully understand physician compensation models? In lieu of that, you can find further details in this Definitive Guide to Physician RVU Compensation from the advisory group Physicians Thrive.

As most physicians are employed by large health systems or hospital groups, it is worth digging into the nuances of wRVU compensation models, but at a high level, here is what you need to know.

Pros

  • The salary guarantee offers stability for new physicians and alleviates the pressure to ramp up in an unreasonable amount of time.
  • Productivity-based compensation gives physicians a sense of control over their income. The harder they work, the more income they will receive.
  • RVU compensation is typically not impacted by how much or how little the organization is able to collect from patients or their insurance companies. The payer mix also does not impact the physician’s income.

Cons

  • wRVUs do not account for time spent on administrative work, meetings, mentoring other physicians, and other tasks without a CPT code.
  • RVU-based compensation can create a culture of competition that prevents physicians from collaborating and supporting each other.
  • Productivity-based physician compensation puts a physician’s focus on the quantity of procedures rather than the quality of care. Some reports suggest this type of compensation is at odds with the movement toward Value Based Care.

Questions to Ask

Is the salary guarantee a minimum base or is it also a cap? That is to say, if a physician exceeds wRVU expectations during the guarantee period, can they receive more than the base salary?

How many wRVUs do most physicians in this practice produce? How does the productivity of physicians here compare to national norms?  

Is there a cap on RVU bonuses? 

Private Practice Physician Compensation Model

“While the percentage of physicians in private practice is waning, it is still an attractive option for many residents, especially those with an interest in business or those who simply want more autonomy in their work,” says Director of Recruiting Katie Moeller. Like hospital-employed physicians, physicians hired by a private practice may also receive a salary guarantee, but the expectation is that the physician will eventually become a partner whose income will be largely tied to the performance of the overall practice. For this reason, physicians want to be sure they are joining a practice that is financially viable.

Private practices, like any business, calculate profitability by deducting expenses from revenue. Profits are then distributed among the partners, perhaps with some percentage paid as bonuses to non-partner physicians.

When interviewing for private practice physician jobs, physicians should look beyond the initial salary offered and focus on the specifics of the track to partnership and the details of how the practice is run, including its expenses. The efficiency of the practice has a direct impact on how much the partners earn, so it is important to ask questions.

Pros

  • Physicians in private practice have a clear view of the factors contributing to their income, that is, the revenue and expenses of the practice. Once a partner, the physician will have some role in influencing those factors in order to increase income.
  • Unlimited income potential. Employed physicians are limited to the hospital’s bonus structure, but as a practice owner, you have the ability to grow your business to the level you need to achieve the income you want.

Cons

  • Research shows that Medicare reimburses physician services billed by hospitals at a higher rate than those billed by independent practices. This is one of many reasons hospitals can afford to pay higher starting salaries.
  • Because Medicare reimburses at a lower rate than private insurers, the practice’s patient mix will impact its profits, and thus, partner income.
  • Practicing medicine is already a stressful job. Physician partners in private practice have the added stress of running a business.

Questions to Ask

As noted, physician compensation will be tied to how well the practice performs, so ask enough questions to gain a full understanding.

How busy is the practice? What is the patient mix?

How effective is the billing department in collecting payment?

What are the overhead costs? How are staff levels determined? What salaries are given to administrators? 

What can I expect to earn as a partner? Are there any opportunities for ancillary income, such as investing in an outpatient surgery center, real estate, or imaging? Is there a “buy-in” cost associated with becoming a partner?

Do all physician owners hold equal shares in the business?

Is there an accelerated track to partnership? 

Are the partners currently considering selling to a hospital or corporate entity? 

Why You Should Do Further Research on Physician Compensation Models 

As residents and fellows enter the physician job search, it is important to have an understanding of physician compensation models. You have invested considerably in training to become a physician, and now that your training is complete, you are more than ready to reap the rewards. However, it can be difficult to weigh employment offers if you don’t have a clear understanding of how physicians are compensated beyond those first years when a minimum is likely guaranteed.

A good physician recruiter has invaluable insight to share with you regarding physician compensation. Physician recruitment firms often have access to proprietary data about physician compensation, bonuses, production, benefits, and time off. They can help you interpret this data to better understand what you can expect depending on your specialty, location, and other circumstances. Physician recruiters can also share what trends they are seeing in the market that may not yet appear in the data.

A physician recruiter can provide a wealth of information to better set your expectations in the beginning and more effectively negotiate your physician contract as your search comes to a close. The more information you have, the more confident you will feel when ultimately making your decision.

If you are embarking on a physician job search, the team at Jackson Physician Search is eager to share our insight with you and ensure you are set up for success. Search physician jobs now or contact us today.

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Physician Compensation and Hiring Trends: What to Expect in 2022

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What a year…again. As healthcare professionals gear up to begin year three of a global pandemic, what can administrators expect in terms of demand for physician services and compensation for their unending efforts?

While no one can say exactly what 2022 will bring in terms of the pandemic, without a doubt, the need for healthcare providers will persist. Long before COVID, a looming physician shortage threatened access to care, and the pandemic only worsened the problem, increasing physician burnout and sending many marching toward early physician retirement. As a result, organizations around the country are ramping up physician recruitment efforts.

The basics of supply and demand suggest the members of a shrinking workforce can name their price. While there is some truth in this assumption, healthcare organizations simply can’t pay physicians more than they take in. Still, most employers are doing whatever possible to offer attractive compensation packages that will win the talent they so desperately need.

It doesn’t take a crystal ball to predict that healthcare hiring and compensation will continue to trend upward, but what else can administrators and physicians expect in the months ahead? We asked two Vice Presidents of Recruiting for Jackson Physician Search to tell us a little about what they are seeing and hearing from clients and candidates with respect to physician job openings and compensation. If you are actively recruiting physicians, you’ll want to take note of these physician hiring and compensation trends in 2022.

Increased Retirements and Turnover Causing Healthcare Organizations to Open More Searches

“We are seeing a record number of new organizations retaining us for recruitment support,” says Tara Osseck, Regional VP of Recruiting for Jackson Physician Search’s Midwest Division. “We also have longstanding clients opening up a higher volume of searches than in years past. Some are hiring with the expectation of growth, but also, of course, in response to provider attrition. We see a little bit of everything driving recruitment, so we are busier than ever.”

Osseck’s observation of increased business at Jackson Physician Search reflects the fact that healthcare organizations are hiring in record numbers. Back in March of 2021, an MGMA STAT poll reported 72% of medical practices were hiring physicians. Since then, an October of 2021 STAT poll found one in three medical practices saw a physician leave or retire early in 2021 due to burnout. These physicians must be replaced, and of course, any growth the organization expects must also be accounted for with additional hiring. Medical staff planning has never been more important – or more difficult. Organizations know they need to hire physicians, but the when and who can be overwhelming.

In a Tighter Market, Healthcare Organizations are Extending More Competitive Offers

The volume of physician job openings is increasing, and yet, the number of residents coming out of training remains similar to previous years. In order to win talent from this limited pool, organizations will be forced to make more competitive offers, especially as they increasingly feel the impact of the physician shortage.

“While compensation is dependent on specialty and location, we’re seeing some offers starting to outpace the industry benchmarks,” Osseck explains. ”It’s not always enough to be in line with the MGMA or Sullivan & Cotter data. Organizations often need to go beyond those figures in order to set their offers apart.”

Another MGMA STAT poll supports Osseck’s observation. In June of 2021, one in three practices reported adding or expanding bonuses as a means of attracting and retaining physicians. Inflation is also driving increases. In December of 2021, 50% of practices said they are budgeting more than usual for cost-of-living adjustments in 2022.

Regional challenges with the housing market are also impacting physician compensation. Helen Falkner, VP of Recruiting for the Western Division explains:

“As housing costs rise around the country – and housing availability becomes a challenge – some organizations are including a temporary housing stipend in the initial offer to ease the burden of relocation for new physicians. This is likely to become the standard – especially in areas with extreme housing challenges – until the housing market begins to reverse or at least stabilize.”

Increased Value of Work-life Balance

Increased salaries, bonuses, and cost-of-living adjustments are appreciated, but money isn’t the only thing physicians want. Following the 2020 spring shutdown, recruiters saw an increase in physicians prioritizing work-life balance and autonomy. In a JPS whitepaper covering the impact of COVID-19 on physician jobs, several VPs of Recruiting reported seeing physicians prioritizing quality of life, proximity to family, and better work-life balance. While money will always matter, this shift in priorities seems to be more than a passing trend.

Some organizations will be surprised to learn that the most competitive offer isn’t always the one with the biggest number. Benefits such as four-day workweeks, minimal or no call, or the ability to practice via telehealth are increasingly the deciding factors for physicians weighing offers. Organizations are getting creative with additional paid time off – offering scheduled sabbaticals or dedicated time for physicians to participate in medical missions, either local or abroad.

“In our efforts to find physicians, we have to constantly ask ourselves, ‘What is going to make a physician apply to this job over some other job? Why should they consider this location when they were dead set on something else?’” says Falkner. “Historically, the answer to that question is some sort of eye-catching compensation. So, we highlight the signing bonus or loan repayment in the job ad, but more and more, it’s also a shorter workweek or the opportunity to practice via telehealth that can make the difference.”

The job ad must catch attention, but when it comes time to craft an offer, both Falkner and Osseck discussed the importance of customizing it to meet the specific needs of the candidate. The physician interview process gives candidates the chance to be clear about their priorities. If an organization is listening, they will know what to offer to win the physician’s acceptance.

Rebalancing the Ratio of Compensation to Productivity and Its Importance

While trends from the previous year often inform compensation plans for the future, the circumstances of 2020 were cause for exception. For example, the MGMA data shows physician compensation was relatively flat in 2020, but the dip in productivity – forced by the lockdown and patient hesitancy to seek treatment – caused the ratio of compensation to wRVUs to appear much higher than years passed. Thus, organizations won’t likely use the 2020 ratios as a benchmark for future expectations.

That said, the circumstances of 2020 caused providers once happy to accept a productivity-based compensation model to rethink the security of those plans. The pandemic put physicians in a situation where they had very little control over their own productivity, causing many to feel productivity and wRVUs should carry less weight in the compensation plan. As physicians have increasing power in the job market, we may see less emphasis on wRVUs in physician compensation models.

“Most compensation plans specify a minimum salary regardless of productivity,” Falkner explains. “But of course, the expectation to see a certain number of patients is still there. Then, of course, there are bonus opportunities beyond that. Productivity bonuses are still common, but we are increasingly seeing bonuses for quality, retention, or even access to care.”

Begin to See the Impact of the Shift to Value-based Care

Also contributing to the declining importance of wRVUs is the increased attention on value-based care. Studies show this model benefits the provider, the patient, and the health of the overall population, and yet, moving from fee-for-service reimbursement to value-based care has proven to be complicated.

While both Helen and Tara said they are seeing more clients incorporating a quality component to compensation packages, productivity continues to be the most significant factor, in part because it is easiest to measure, but also because it continues to be the basis of how organizations are reimbursed.

The unique circumstances of the moment may provide some momentum for value-based care, however. An article from consulting firm Deloitte explores how fee-for-service reimbursement and productivity-based compensation are intertwined. The author proposes that shifting the focus to quality of care rather than quantity could not only improve patient outcomes but also bring more meaning to physicians’ work and help reduce burnout.

Better Times Ahead?

The pandemic has pushed physicians to their limits, and an increased number of them are seeking to improve their circumstances with new employers. Healthcare organizations are working with physician recruitment firms to attract these candidates with the promise of better employment opportunities. Of course, what constitutes “better” is relative. Organizations must customize offers to win talent, and more importantly, they must deliver on promises made if they hope to retain their physicians.

“There’s a sense among some of the physicians I speak to that they are just another cog in the wheel and their entire worth is based on how many patients they can see in a day,” explains Osseck. “Organizations are experimenting with compensation models to counter this mentality. Ultimately, though, physician job satisfaction comes down to more than the compensation package. It will require a well thought out physician retention program – something most organizations are still lacking.”

While no one can say for sure what lies ahead in terms of physician hiring and compensation, it’s safe to say that physicians have the upper hand in job negotiations.

If you are actively recruiting and finding candidate acquisition more challenging than in the past, reach out to Jackson Physician Search today.

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Physician Compensation: Ask the Right Questions at the Right Time

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When considering a new physician job opportunity, it’s natural to be curious about the physician compensation package. With location, practicing setting, and compensation among the top concerns for many physicians, it’s tempting to ask for details early.

As a best practice, we recommend that you resist the urge to bring up the physician compensation conversation until your on-site interview, often the time when you and your potential employer have the opportunity to establish strong, mutual interest. Discussing compensation is a strong indicator that you’re interested in the position. Asking too early could leave employers feeling that compensation is your most important consideration, when in reality, finding a position that matches your personal and professional goals is priority.

Knowing what to ask regarding the compensation model is just as important as knowing when to ask. Your physician recruiter will likely give you a high-level overview of the compensation package, but compensation models can be complicated and confusing. Understanding the specific physician compensation model being used by the hiring organization will give you a much more realistic view of your total earning potential, and it will enable you to negotiate a package that is fair and aligned with your priorities.

Next time you find yourself seriously evaluating a job opportunity, consider the points below regarding physician compensation:

Structure

  • Ask how the model works. Specifically, find out what production, quality, and patient satisfaction metrics you must achieve to earn an incentive bonus.
  • Factor in the value of benefits, such as health insurance, PTO, CME allowance, disability and life insurance, retirement benefits, dues and subscriptions, licensure fees, and other reimbursable expenses.
  • Understand the payor mix, which is important if your compensation will be based on charges, collections, or revenue.
  • Malpractice insurance is expensive, so explore that topic, too. Employment agreements should state whether coverage is provided and who is paying for it.

Incentives

  • Ask about first-year incentives, such as signing bonuses, student loan repayments, and reimbursement for relocation, licensing, and board certification.
  • Find out if there are bonuses related to achieving retention milestones or if ownership shares are an option down the road.
  • You may also be compensated with an hourly or daily stipend for taking call or serving in a medical director capacity.

Transparency

  • Your prospective employer should be able to explain how the compensation models work and provide a worst and best-case scenario for your first and subsequent years.
  • It is “fair game” to ask to review the practice’s financials. You may also ask how much current physicians are making and how long it took them to ramp-up to that level.
  • To ensure clear expectations, decisions related to compensation and benefits should be written into your employment agreement.

How Location Affects Physician Compensation

Geographic region and market size significantly influence compensation and how far your income will stretch. Adjust for the cost of living in dollars and assess the location with your lifestyle expectations in mind. Work schedules, after-hours activities, vacation coverage, and weekend shifts influence work/life balance. It’s important to know what a future employer expects, and how they assist physicians in managing stress, avoiding burnout, and cultivating career satisfaction.

With all of the complicating factors contributing to compensation, physicians must do their homework to determine which opportunity offers a fair package, a satisfying work environment, a strong cultural fit with the organization, and a happy life outside of work.

Physicians who are ready to find their best, next opportunity should turn to a trusted leader in physician recruitment and placement, Jackson Physician Search. Our team of experienced healthcare industry professionals has the network and tools to help you take your physician career to the next level. Contact us today and learn how.

Reputable Physician Compensation Data Sources

Physician compensation data can be derived from various sources, some being more accurate and reliable than others. Overwhelmingly, compensation data found through MGMA is considered the “gold standard” as a data source. Many healthcare administrators utilize the information published by MGMA as their benchmark for compensation data.

It is wise to pay attention to other sources for a complete picture, including the annual surveys conducted by American Medical Group Association (AMGA). To focus on compensation for a specific metro area or location, it is helpful to cross-reference salary data found at Doximity.com. Be aware that the data found at Doximity is self-reported and may or may not include benefits. Regardless, it can be useful in determining what you might expect in an offer within specific localities.

Five Resources for Physician Salary Data

Some of the resources listed above require you to purchase the data, while others are published free of charge. Another great tool is the Jackson Physician Search Salary Calculator, found here.

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Receive a Job Offer? Focus on These Six Aspects of the Physician Contract

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It is always exciting to receive a new job offer as a physician. It is also the time when you are presented with the all-important physician contract. To help you navigate and understand your physician contract, we are publishing a three-part series on the subject. This first installment will provide you with an overview of the components included within a typical physician contract. The second installment will alert you to the process of negotiating an agreement, and the third installment will shed light on common mistakes to avoid.

Because you went to medical school—not law school—you may wish to have a lawyer review the employment contract before you sign on the dotted line. Especially during the early years of your career, it is vital to ensure your interests are protected.

Components of a Physician Contract

All of the clauses included in the physician contract presented to you are there for a reason. Most employers have developed a “standard” contract that they use as a base for the initial offer to you. Let’s review.

1. Salary

If you are being honest with yourself, you will probably admit that salary is the first thing you think about when considering your physician contract. While important, it is not the only factor that you need to consider. But, since it is on top of your mind, we will review it first.

Your salary can include many variables, some of which is predicated on your specialty and geographic location. It can be a straight salary or a combination of performance and productivity-based incentives, and even mathematical formulas called Relative Value Units. RVUs account for your time, skill-level, effort, and other factors in providing a medical service to the patient. The various methods of deriving a physician’s salary all have their pros and cons, so it is essential to do your homework. When looking at the salary listed in your employment contract, make sure it is clearly outlined.

2. Benefits

One of the factors contributing to the overall value of your physician contract is the benefits package. This will include the obvious things like your vacation time, but also others that are not so obvious. Your benefits should describe whether or not your employer is providing malpractice and liability insurance, continuing education programs, relocation funds, and even time to pursue research opportunities. Depending on your family situation, understanding your health benefits package and whether they are offering retirement fund matching is critical. For many physicians, as they move on in their career, employment benefits often become a more important part of their contract than base salary.

3.  Term Length and Termination

Obviously, it is important to know when the contract starts, but more importantly, the length of the agreement. A typical time frame will be three years, but that varies depending on the practice setting and location. Some contracts, called evergreens, remain open-ended and are automatically renewed year after year. Within the term length clause, there should be language that describes mechanisms for terminating the agreement. Particularly, “termination for cause” should be articulated so you understand what reasons or occurrences would lead to a potential termination.

4. Covenants

While the contractual language that outlines restrictive covenants won’t be found in fine print, it will likely be spelled out in language that may be difficult to understand. Hence, this section is one you definitely want your attorney to review. Restrictive covenants typically spell out the terms that apply when or if you leave your position. This language may include non-compete clauses that restrict you from practicing in the same geographic location for a period of time. Going into a new job opportunity, when both sides are feeling positive about this new relationship, these types of clauses may seem unnecessary. But as we mentioned earlier, everything in your contract is there for a reason. The key is to understand the length of time the clause remains active, specific distances, and other factors that will impact what you can and can’t do without having to relocate.

5. Bonuses

Bonuses are typically included as part of your compensation language. But since they come in such great variety, they deserve to be considered independently. Bonuses that are available for you to earn or be given up front should be clearly identified in your contract. An extremely popular recruitment tool has been student loan forgiveness bonuses. These typically come with strings attached, such as staying in your position for a number of years. Similar to student loan forgiveness, because of the high cost of physician vacancies, many contracts now include retention bonuses to entice a physician to stay in a position for a pre-determined time. Other bonuses, such as those based on achieving quality targets, require you to clearly understand what is expected of you to earn them.

6. Career Advancement Opportunities

Depending on the practice setting or your specialty, your employment contract may spell out opportunities for you to advance your career or even gain ownership rights upon the completion of your initial term of employment. If you are interested in pursuing physician leadership opportunities, your contract may include language that helps you move in that direction. Typically, this will require achieving specific criteria over the life of your contract.

In our next installment, we will discuss how to negotiate your physician contract. Jackson Physician Search has decades of recruitment experience and offers a calculator on physician compensation. For personalized information about what we can do for your career, contact us today.

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Primary Care Slated for Potential Boost in 2021 Physician Compensation

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The Covid-19 pandemic of 2020 has proven to be the ultimate test of the strength and resilience of the American healthcare system, and the backbone of highly skilled physicians and clinicians upon which it is based. And when it comes to physician compensation, the challenges created by the pandemic may have many physicians wondering what to expect in 2021, when the global and local impact of the pandemic hopefully begins to wane. The social distancing, quarantining and telehealth precautions and procedures adopted almost instantaneously, nationwide, in March of 2020, meant that elective surgeries came to a standstill and office visits dwindled to a trickle.

As a result, American healthcare systems saw furloughs, layoffs and staff reductions to an extent we couldn’t have predicted. According to the American Hospital Association, health systems and facilities in the U.S. lost more than $200 billion in the first quarter of 2020; MGMA research suggests that physician-practice income fell by as much as 55%, as clinics closed or patients chose to delay their visits.

The pandemic has surfaced questions about the efficacy of some of the existing compensation models and their ability to react to major systemic disruptions, while still providing physicians with the income they have come to depend on.

Major Issues in Primary Care

Primary care providers – family medicine, internal medicine, pediatrics, and OB/GYN – were hit hard by 2020’s first round of clinic closures and service disruptions, especially those operating on a fee-for-service schedule.

A study conducted by Healthaffairs.org suggests that over the course of the year, primary care practices are expected to lose almost $68,000 in gross revenue, per provider, due to pandemic issues – leading to total systemic losses of more than $15 billion. And the number could be double that, they say, if CMS policies fast-tracking payment for telemedicine are only a short-lived fix.

Adding to the issues is the reality that primary care continues to experience a shortage of qualified physicians, for a variety of reasons. Even at the medical school level, some students are actively steered away from pursuing a career in primary care as medical specialists can and do, on average, earn twice as much as their primary care counterparts. And given the huge burden created by medical student loan debt, which has come to exceed $200,000 per physician on average, the incentive to pursue primary care after medical school has dwindled considerably.

According to Kaiser Health News, of 8,116 internal medicine residency positions offered to graduates in 2019, only 41.5% were filled by American medical students – and many of those may elect to ultimately pursue a fellowship in another specialty. As a result, the American Association of Medical Colleges predicts a shortage of 21,400 to 55,200 primary care practitioners by the year 2033.

CMS Proposes Long-due Changes that Increase Reimbursement for Primary Care

One particularly bright spot has appeared that might help to ease the financial burdens and ultimately entice more physicians to choose primary care. The 2021 Centers for Medicare and Medicaid Services Physician Fee Schedule, set to be finalized December 1 and put into effect in 2021, proposes an array of changes aimed at addressing primary care issues, including higher reimbursement rates for evaluation and management (E/M) services such as office visits and care management services, as well as a renewed emphasis on telehealth procedures.

Primary care procedures and treatments ranging from electronic home visits to outpatient or prolonged virtual office visits have all been permanently added to Medicare’s lists; rest home visits, emergency visits and even psychological testing are also covered during the duration of the Covid-19 public health emergency.

Further, streamlined EMR documentation requirements for primary care doctors also mean more face-to-face time with Medicare-covered patients, lightening the bureaucratic burden and upping patient numbers. According to the American Association of Family Physicians, the increase in total allowed charges for primary care doctors is now slated for 13%. Given that Medicare spending grew by 6.4% in 2018 to $750.2 billion and Medicaid also grew by 3.0% to $597.4 billion – some 37% of national health expenditures in the entire country – the CMS changes represent a significant reinvestment in primary care.

Admittedly, other specialty areas are less enthused by the CMS’s proposed changes in priority. In order to pay primary care providers more, cuts in payments to surgery and other specialists have been made, in an effort to maintain budget neutrality. The proposed ruling calls for a 9% cut to cardiac surgery, 7% to vascular surgery, 7% for general surgery and 6% to ophthalmology procedures, versus 2020 rates.

Organizations such as the American Medical Association are urging the CMS to treat all physicians fairly, and are upset that radiologists, pathologists and anesthesiologists could be impacted by the realignment of fees, with further delays in treatment, compounding the disruptions caused by the pandemic.

Other Compensation Trends in 2021

With so many specialists facing the reality of lower incomes in 2020 as a result of lower patient volumes, both physicians and facilities have also used this year’s rollercoaster ride to reexamine the fee-for-service model. According to the National Law Review, the long-term fallout of the Covid-19 pandemic is likely to prompt a greater move toward value-based metrics as part of physician compensation.

“The new approach to physician compensation will mimic what we have seen in recent Medicare models, such as accountable care organizations. Outcomes-based, quality-based and population-based compensation arrangements will become more common,” the magazine notes.

Other Financial Benefits and Perks are on the Table

Primary care physicians looking for a new practice opportunity should also keep in mind that salary is just one component of a larger compensation package, as employers look to remain competitive and build long-term relationships to encourage physician retention.

Add-on features ranging from student loan forgiveness and housing allowances to sign-on bonuses are now part of the perks offered to help attract and retain the right physician candidates. Low-interest loans, deferred compensation, personal financial advisors or even time for sabbaticals and research projects are all on the table, as healthcare employers seek to build a happier and more productive workplace for their physician employees.

The Only Thing That is Certain is Change

 2020 has definitely been a challenging year, in so many different ways. Doctors are not only saving the world, quite literally, but many are making less money as a result of the pandemic, and working incredibly long, stressful hours. At the end of the day, you have to decide what you want for yourself and your family. Does that require a relocation to be closer to loved ones? A move away from a role as a self-employed practitioner, or decision to strike out on your own or become a medical practice partner? Reimbursement rates and compensation models will continue to change as the industry searches for a solution to the financial complexities that is healthcare.

If you’re looking for a new position, things are picking up in terms of physician recruitment after a six-month lull in the market. This means you have more access to positions that are a better fit your career, and your lifestyle. To connect with a nationally recognized physician recruitment firm, reach out to the healthcare industry professionals at Jackson Physician Search today. You can also search our open positions here.

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Tony Stajduhar Published in MGMA Connection – Tight Physician Market in a Post-COVID-19 World Calls for Competitive Compensation

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The year 2020 has been a remarkably challenging period for the healthcare industry, with intense pressure on physicians during the COVID-19 pandemic. Doctors have learned to cope with new safety protocols, while much of the industry has absorbed the financial impact of reduced elective procedures and patient volumes. And those providers on the frontlines of acute care have worked tirelessly helping patients in need, risking their health in the process.

In an average year, approximately 6% to 7% of the physician workforce changes jobs or location, meaning approximately 50,000 physicians will accept new positions in 2020 alone.1 Even in today’s softer recruitment environment in which more doctors are temporarily available, hiring remains a sizeable investment — up to $250,000 for a single candidate when you factor marketing, sign-on bonus, relocation stipend and other expenses.2 Interview costs alone can total approximately $30,000 per candidate.3

It’s also a time-consuming ordeal, requiring 7.3 months on average to fill a family medicine role and 7.9 months for a surgical specialist such as a cardiologist, according to Jackson Physician Search’s Recruitment ROI Calculator. Respectively, those vacancies can lead to $503,000 and $1,607,000 in lost revenue for a medical group.

Demographic trends are contributing to a growing doctor shortage: Some estimates suggest that 30% of the physician population is at or near retirement age. Combine that with the prohibitively large costs involved in training to be a doctor and decades of student loan debt, and we are seeing an ever-increasing void in the specialist community.

As the business of healthcare returns to relative normal, it is the ideal time to resuscitate your physician recruitment process. Searches have decreased as much as 25% to 50% for some healthcare organizations and medical groups. Operational cutbacks and mandates to cancel or delay elective surgeries have meant that overall revenues are down, making recruiting of non-essential employees a lower priority. But essential physicians remain in high demand.

(cont. on MGMA.com)

Read the Entire Article on MGMA.com

Need Help Recruiting Physicians, Physician Leaders, and Advanced Practice Providers? Learn about Jackson Physician Search’s Executive Partnership with MGMA.

Jackson Physician Search is an established industry leader in physician recruitment and pioneered the recruitment methodologies standard in the industry today. The firm specializes in the permanent recruitment of physicians, physician leaders and advanced practice providers for hospitals, health systems, academic medical centers and medical groups across the United States. Headquartered in Alpharetta, Ga., the company is recognized for its track record of results built on client trust and transparency of processes and fees. Jackson Physician Search is part of the Jackson Healthcare® family of companies. For more information, visit www.jacksonphysiciansearch.com.

Looking for Your Next Job? Understanding Physician Compensation, Benefits, and Bonuses

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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

Straight Salary

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.

Pay-for-Performance

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.

Value-based Measures

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.

RVUs

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.

Stacking

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.

Guaranteed Salary

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.

Common Bonuses

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.

Quality Bonuses

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.

Sign-on Bonus

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.

Retention Bonuses

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.

Benefits

Malpractice/Liability Insurance

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.

Relocation Stipend

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.

Miscellaneous Benefits

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.

Recruiter Help

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.

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Quick Look: Physician Retention Tips

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Each year, the Association of American Medical Colleges (AAMC) updates their report outlining projected Physician Supply and Demand for the United States.  The most recent report is projecting physician deficits between 42,600 and 121,300 by the year 2030.  As in years past, primary care physicians represent the largest shortfall with estimates as high as 49,300.  Surgical specialists are not far behind with a projected shortage of up to 30,500.

If nothing else, these projected physician shortages highlight the importance for healthcare administrators to ensure that their organizations are utilizing best practices in their physician recruitment and retention policies.  In today’s highly competitive physician recruitment environment, the best way to ensure that your organization avoids lengthy physician vacancies is to minimize turnover.

Here is an overview of eight retention strategies that every healthcare organization should be practicing now.

  1. Focus on Making Good Hires – One of the best ways to give your organization a better chance at retaining the physicians you have on staff is to make sure you are hiring for fit and not hiring to fill. Ensuring that your recruitment process targets individuals that are already aligned with your organizational values gives you the best opportunity to keep them engaged and not seeking greener pastures.
  2. Develop a Culture that Feeds Retention – By now, you should be well aware of the role that organizational culture plays in physician retention. Poor work environments and dysfunctional communication is the surest way to alienate the physicians you have on staff and will lead to a revolving door of vacancies.
  3. Help Your Physicians Stay Engaged – In any work environment, when staff is engaged they exhibit more loyalty to the organization, they are better at working through issues, and consistently put forth greater effort than employees who are not engaged. According to Gallup, fully engaged physicians generate more outpatient referrals and a whopping 51% more inpatient referrals than non-engaged physicians.
  4. Provide Personal Growth Opportunities – According to Medscape’s 2018 National Physician Burnout & Depression Report, 42% of physicians reporting feeling burned out while 15% admitted feeling varying levels of depression. Keep your physicians engaged by encouraging them to pursue the things they are passionate about.
  5. Allow for Career Advancement Opportunities – The Physicians on your staff have spent many years of schooling to reach their current position, and it is a mistake to think that they are now on cruise control. Collaborating on a plan that affords them the flexibility to pursue their career goals will benefit your organization and ultimately make them better doctors.
  6. Promote Work/Life Balance – Physician burnout is dominating the headlines on medical news outlets, and it is reasonable to assume your physicians are experiencing those same issues. It is critical for administrators to engage their physician staff to develop solutions. The Mayo Clinic developed a model to reduce burnout called the “Listen-Act-Develop” approach.
  7. Compensation – According to Kresser Institute, forty percent of medical school graduates finish with more than $200,000 in student loan debt. Organizations cannot ignore this intrinsic pressure on their physician staff and should explore creative ways to ensure that financial pressures are not contributing to physician burnout.
  8. Encourage Time Off/Family Time – When physicians are asked directly about what would help them the most in dealing with workplace pressures, most will respond that they need more time off and more manageable call schedules. A healthy family life can be a physician’s best defense against burnout and depression, and a supportive administration can help foster physician well-being.

As the physician shortage continues to impact healthcare organizations across the U.S., retaining the physicians you have on staff is going to be increasingly more critical to keeping up with the projected demand.  The question for healthcare executives is whether or not to spend the time, effort, and money on developing a successful retention program or on a continuous cycle of recruitment and hiring to fill avoidable physician vacancies.

How Millennial Doctors are Changing the Recruitment Landscape

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In the United States, it has been a long-held practice to attribute generational monikers to individuals based on the year of their birth.  If we look at that breakdown, it makes sense to see that the number of physicians is relative to the population of the generational mix.  For example, in the U.S., 76 million people were born between 1946 and 1964, these baby boomers also represent the largest numbers of practicing physicians.  Studies show that over 40% of the nation’s physicians are over age 56.  The second largest generational mix are the millennials, with 62 million born between 1981 and 1996.  As the Boomer generation ages and retires, the Millennials are increasingly representing a greater proportion of physicians in the U.S., and there is a good reason why that matters with regard to recruitment.  Let’s look at how recruiting millennial physicians is different than past generations.

Digital Recruitment is Key

Unlike other generations, millennials grew up in the technology boom.  Doctors born in the millennial era are going to be more reliant on and more accessible through technology than their Gen-x or Baby Boomer counterparts.  Because they are so connected through their smartphones, laptops, and other tech gadgetry, your utilization of a smart digital recruitment strategy will keep you ahead of the curve.

It’s Not Always About Money

Of course, millennials worked hard in school and want to be fairly compensated for the work they are doing, but recruiting them will not be solely based on a dollar amount in their paycheck.  While they are sometimes inaccurately maligned by older generations as not being committed, or lacking drive, the truth is the opposite.  According to Deloitte’s 2018 Millennial Survey, over 50% of the respondents placed greater or as great a value on quality of life issues over the highest salary. Millennials are looking for more flexible schedules, guaranteed time off, and less time on call.  To recruit the millennial generation, work/life balance should play a prominent role in any job offers.

Don’t Overlook Culture and Fit

Much like millennials seeking greater work/life balance over annual salary, they also have strong opinions about how important it is for them to feel connected to the culture and values of their workplace. Millennials were raised in the era of participation trophies where teamwork and affirmation were valued above individual success. They are looking for the same in their work environment.  Millennial physicians are comfortable with the trend toward team-based care and are drawn to organizations that are aligned with their own personal values.

Focus on Retention

Because culture and fit are such vital factors in the millennial physician’s job search, it is no surprise that it plays a significant role in physician retention. Older generations of physicians are prone to stay in a job for a decade or more, with little to no thought of leaving. The millennial generation of physicians will seek out new opportunities after only two or three years.  To combat this tendency, healthcare organizations are more focused on finding a physician that first fits their culture, and then they develop a strategic plan to retain them.  Successful retention strategies include affording them time to pursue research projects, or branch out into additional specialties, and pursue charitable endeavors.  They key is keeping your physicians excited and engaged and not giving them a reason to look for greener pastures.

If your organization needs to develop a digital recruitment and retention strategy, contact the industry experts at Jackson Physician Search today.

Guide to Strategic Digital Recruitment

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Understanding Physician Bonuses and Benefits

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Physician salaries continue to rise, although more modestly than in years past. You may find that hard to believe considering the 24-7 handwringing over the physician shortage, but have no doubt that physician compensation is still rising and becoming more complex.  After all, it is simple economics, as demand rises and supply stays the same or fails to rise commensurately, the cost (in this case salary) is going to rise.  For example, according to Medscape’s Physician Compensation Report 2018 average salaries for Primary Care and Specialties rose between 3 and 5% from 2017.  Hospitals and health systems are finding other ways to compensate physicians than base salary.  Many bonuses and benefits are not available everywhere but are often based on setting and geographic area.  Let’s try and make sense of some of the more popular physician bonuses and benefits.

Guaranteed Salary

This is one piece of your compensation package that is helpful to have your lawyer examine. Depending on your contract, this may be a 100% guarantee that you will earn X annually, or there may be a lower annual guarantee that includes incentive triggers that when met will increase your overall compensation. When incentives are involved, you will want to understand RVU’s and how they are tied to your salary.

Sign-On Bonus

The competition for physicians across the spectrum of care has led to an increase in the prevalence and amount of sign-on bonuses.  Depending on geographic location, physicians may be seeing signing bonuses up to $40,000. On the flip side of that, some regions are only offering bonuses up to $7,000.  Where you are willing to work can be financially beneficial.

Student Loan Forgiveness

An increasingly popular bonus being offered to new physicians is student loan forgiveness in return for a commitment to a contractual length of stay in the position. Once, a mainstay of rural and community health recruiting, the fierce competition for physician’s services have made student loan forgiveness a major attraction in the recruitment process.

Malpractice/Liability insurance

Insurance to protect physicians against malpractice claims is the most frequently provided benefit. This is another benefit that you should have your lawyer review to ensure that you understand coverage limits, statutes of limitations upon your leaving the position, and other details.

Relocation Stipend

Another popular benefit to consider is the relocation benefit.  Relocation stipends can generally be negotiated depending on the geographic area and individual circumstances. In these cases, it is important to fully understand what the requirements are to earn the stipend and how it will be paid out.

Retention Bonus

Because of the rising costs associated with physician vacancies and recruitment, retention bonuses are becoming a popular addition to the physician compensation package.  This bonus can be paid incrementally throughout the length of the employment contract or in some cases upon completion of the contract.

Other bonuses and stipends can be available but are less common.  In some geographic locations, physicians may be offered with a vehicle stipend, housing allowance, parking stipends, and more depending on specific challenges that one might find in a certain area.  These aren’t as common as some other incentives you can find, but if you are working with a good recruiter, they can alert you to many of the available perks.

To learn more about physician compensation or to work with a career partner who can assist you in finding the right opportunity to match your skills and career goals, contact Jackson Physician Search today.

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