It is closer than you think: It is time to get a job:

Compensation

Eric Horowitz, MD, RD, FAAPSection on Perinatal Pediatrics

enhorowitz@aap.net

v2010.7

How to use this presentation

• This is an outline and reference resource– To raise questions for you and for you to ask your future

employer/partners– To encourage you to do your own research– To generate discussions with your mentors, peers, and on-

line• Facebook.com – AAP Perinatal• Facebook.com – AAP Perinatal Trainees• LinkedIn – Neonatal-Perinatal Medicine• http://www.aap.org/sections/ypn/yp/ypconnectionhome.html

– To be a reference that you create by filling in the blanks that you find and are specific for you

– This is not a detailed reference

The Big Picture

• Neonatology careers are about far more than compensation, so to get a broader perspective on defining, finding, and developing a career in Neonatology, please see the AAP Perinatal Section’s Committee on Practice’s resource at:

http://www.aap.org/sections/perinatal/NeoPeriPractices.html

Time to Think About Compensation

• While many of us entered into pediatrics and neonatology to make a difference for those often at greatest risk, we also need to remember to take care of ourselves

• This presentation is to help you gain a rudimentary insight into how we obtain professional compensation for our care

Compensation: What is it

• Compensation is more than the paycheck• Compensation includes:

– Personal satisfaction– Time– Insurance– Perks– Financial rewards

Compensation: Personal Satisfaction

• While it may be one of the least tangible aspects of compensation, it is often one of the most meaningful and rewarding

• No matter the financial rewards, if you do not enjoy what you are doing, then you may wish to reconsider your options

Compensation: Time

• Aspects of compensation can include time– Time on service– Time in clinic– Protected time for non-clinical pursuits

• Research, Teaching, Projects, QI, Administration…– Time for CME or additional training– Vacation time/Family time– Maternity/Paternity leave– Call schedule

Compensation: Insurance

• Aspects of compensation can include current insurance and future assurances– Health, dental, vision, etc– Life insurance– Liability insurance +/- tail– Pension, 401K/403B, IRA match– Stock options– Tax shelters– Buy in/Buy out

Compensation: Perks

• Aspects of compensation can include perks– Tuition reimbursement for children– Office space and supplies– Administrative staff and administrative input– Professional support/memberships (Boards, AAP,

etc)– Start up funds for research or projects– CME, additional training (ie. MPH, PhD, etc)– Bonuses/profit sharing– Partnership/Faculty appointment/Administrative title

Compensation: Financial Rewards

• Aspects of compensation include salary• While this is what many focus on,

especially with one’s first job, a better understanding of NICU budgets may help you gain a greater appreciation and perspective of what is appropriate and possible

Resources that support the Compensation package:

Where do the resources come from ?• Financial support for professional

compensation comes from a few classic resources:– Coding/Billing/Reimbursement– Grants/Awards– Contributions/Gifts– Collections from other hospital specific lines

of funding/resources

Charge, Cost, Billing, and Reimbursement

• While many of us think that these 4 aspects of medical finance are interchangeable, it is upon their differences that a NICU’s viability may hinge

Charge, Cost, Billing, and Reimbursement

• Charge– Put simply: it is the ‘manufacturer’s suggested retail

price’ or MSRP– As with anything listed at ‘full-price’ the final ‘sale’

price paid may be very different– The charge covers all fixed expenses, as well as,

variable and ‘perceived’ expenses or value

Charge, Cost, Billing, and Reimbursement

• Cost– Put simply: what resources had to be utilized to

provide the service/care– If the costs are not covered, then either the service

needs to be subsidized by other resources, or the service will be in the ‘red’ and potentially unsustainable

Charge, Cost, Billing, and Reimbursement

• Billing– Put simply: the fee submitted for reimbursement– It is often a negotiated fee submitted to insurance or

patient– Ideally this will be greater than ‘cost’ – a win for the

practice; but less than the ‘charge’ – a win for the payor/payee (usually insurer or patient)

Charge, Cost, Billing, and Reimbursement

• Reimbursement– Put simply: the fee ultimately collected for the

care/service provided– This is the funding that comes back to the practice to

cover costs and contribute to any other funding lines– This is the revenue collected, but remember someone

needs to submit for it, potentially argue for it, and eventually collect it

• This usually means ~20-30% of reimbursement goes to supporting overhead

Billing and Reimbursement

• Professional services are compensated through professional billing

• These services can be reimbursed based on:– Capitation;– Fee for service;– Per diem; – Current Procedural Terminology (CPT) codes;– Negotiated arrangements with insurers/patients; or– Creative arrangements, that hopefully benefit all

involved

Billing and Reimbursement: Capitation

• Paid bulk sum to care for all included potential patients

• Under this system, the payor pays a lump sum to assure that all of their enrollees can be cared for by your services

• This system needs very accurate estimates of potential utilization of services

• If low demand for services, then higher profit, but also higher risk if higher demand

Billing and Reimbursement: Fee-For-Service (FFS)

• Can be based on procedural codes like CPT codes

• Under this system, the more work one does, the more revenue-value-units (RVUs) generated which in turn should translate into more reimbursement

• May be based on diagnosis, procedures, level of care, or some combination of these

Billing and Reimbursement: Per Diem

• A batched style of billing/reimbursement• Under this system, each patient-day has a

certain value, often based on initial presentation

• This requires detailed analysis of average costs for ‘typical’ patients and care

• If care costs less, then this is a win, if costs exceed expectations, then it is a loss

Billing and Reimbursement: CPT coding

• A modified version of fee-for-service that is commonly used by Medicare/Medicaid and many private insurers

• Under this system, patients are coded every day, and these codes determine reimbursement

• For more information:– http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-

your-practice/coding-billing-insurance/cpt/about-cpt.shtml– http://www.aap.org/Sections/perinatal/comm-coding.htm

CPT: Briefly

• Professional fees based on CMS billing codes for acuity and procedures– CPT codes rates: https://catalog.ama-assn.org/Catalog/cpt/cpt_search.jsp– AAP Perinatal Section Coding and Reimbursement Committee:

• http://www.aap.org/Sections/perinatal/comm-coding.htm

• For example (North Carolina Medicaid):– High acuity <28d (intubated 24 weeker)

• CPT: 99468; 18.46 RVUs = ~$842.68/day

– Non-critical care (former 33 weeker)• CPT: 99479; 2.5 RVUs = ~$117.03/day

– Some codes specific for procedures, others for diagnosis or criticality

Other Types Reimbursement• Whether reimbursement is based on fee for service, per

diem, or some other negotiated arrangements with insurers/patients, the collected fee is often based on the CPT standard

• By utilizing some of these other styles of billing, however, other costs can be minimized– They can reduce overhead: expense of billing personnel, cost of

resubmissions, cost of delayed reimbursement, etc– These reduced costs can benefit insurer, patient, and physician

alike

Billing/Coding: warning and ethics

• As proper coding for appropriate billing can be very tricky and with big consequences, it would be worth your time to befriend your local coding/billing people and ask them to review your charts for pointers

• In short, when in doubt, ask for help

Grants/Awards

• For academic positions, professional compensation often comes from a mixture of resources:– Clinical revenue

• Often directly proportional to time spent on service– Grants/Awards

• Related to type of grant, and awarded budget• For 75% protected time, often equals ~$100,000

– Department/Division funds • usually only as part of start-up package or for

bridging when between grant funding

Donations/Gifts

• From the generosity of our families and community, there may be funds available to help support our clinical and academic services

• Often these are in the form of a named position or designated to attract an individual to fulfill a specific role

Other Resources

• The ‘Robin Hood’ revenue stream– Utilize revenues from the ‘surplus’ of one

division to supplement/augment the ‘deficits’ of another division

– Neonatology is often contributing to the resources of other divisions

– Such relationships are often essential to make the provision of certain services viable

Salary

• So that is an overview of from where the money to pay compensation comes and why it may vary

• How much an individual gets compensated can also vary

Salary: Variation

• Salaries can vary for variety of reasons:– Fixed salary (contracted with hospital)– Grant funding (provides portion of salary)– Based on seniority– Influenced by clinical time– Subject to one’s billings

• Each of these have their own pros and cons

Salary

• There are many ways to estimate what compensation one might be offered from a potential employer:– Estimating reimbursement revenue– Salary lists– Peers/Colleagues– Estimating professional revenue from census

Salary Lists

• There are several published references for average salaries, based on:– Medical disciplines;– Geographic region;– Professional role (ie. clinical, research,

academic, administrative, etc)• Some of these resources include:

– Books– Internet

Salary - Books• Physician Salary Survey Report (www.hhcsinc.com)• Medical Group Management Association: Physician Compensation and

Productivity Survey (www.mgma.com)• Association of Administrators in Academic Pediatrics (AAAP) – Medical

School Pediatric Faculty Compensation and Productivity Survey (www.aaapeds.org)

• Sullivan, Cotter & Associates, Inc: Physician Compensation and Productivity Survey (http://www.sullivancotter.com)

• Hay Group: Physicians Compensation Survey (www.haygroup.com)• ECS Watson Wyatt: Hospital and Health Care Management

Compensation(www.watsonwyatt.com)• William M. Mercer, Inc.: Integrated Health Networks Compensation Survey

(www.mercerhr.com)• Merrit Hawkins (http://www.merritthawkins.com/compensation‐surveys.aspx)

• Physician Characteristics and Distribution in the U.S.• AMA Salary Survey Guidebook• AAMC Report on Faculty Salaries

Salary – Job types

• Academic/University Practice– $140,000 - $250,000

• Less negotiable, often grant/rank dependent

• Private Practice– $180,000 - $350,000+

• Negotiable, Influenced by billing and clinical time

• Locum tenens– $1500-$2500/shift

• varies on acuity and in/out of house call– Can be negotiated

Compensation and benefits

• Things to keep in mind:– Where does the practice in total get its

income? By whom are you employed?– First year employment

• Private group: usually salary as an employee• Academic: limited grant support, start-up funding

– Advancement status• Private group: becoming a shareholder• Academic: Tenure clock vs non-tenure track• Progression by seniority, length of service• Ultimate “equity” with others, and time to achieve

Taxes

• A few words on taxes– As an employee of group/university

• Typically, state and federal taxes are withheld– As an independent contractor/self-employee

• Typically, state and federal taxes are not withheld and one will have to make quarterly payments

• Plus, self-employment tax (2010):– Social Security, an extra 15.3% for the first $108,000 of

earned income– Medicare, an extra 2.9% for everything over $108,000

– It is not just about salary/compensation, it is also about your employment status

Thinking to the Future

• Advancement:– What is the salary structure of group – What aspects of the Practice’s work

generates income• Clinical – how are these revenues divided• Contracts – how are the proceeds applied/divided• Grant-supported – How are direct and indirect

funds allocated– How is practice work that does not garner

more financial gain valued by the group

Resources• Coding for Pediatrics. American Academy of Pediatrics. 15th ed.• Forbes, T. Revenue cycle Management. J Vasc Surg. 2009

Nov;50(5):1232-8. Epub 2009 Sep 26.• Martin and Molteni. Quick Reference Guide to Neonatal Coding and

Documentation. American Academy of Pediatrics. 2010• Richardson, et al. A critical review of cost reduction in Neonatal

Intensive Care. J. Perinatology. 2001; 21:107-115

• http://www.aap.org/sections/perinatal/NeoPeriPractices.html• http://www.ama-assn.org/ama/pub/physician-resources/solutions-

managing-your-practice/coding-billing-insurance/cpt/about-cpt.shtml• http://www.aap.org/Sections/perinatal/comm-coding.htm

Let the fun begin

• And always remember the wisdom of Confucius:

‘If you enjoy what you do, you will never work another day in your life’

Pay it forward…..

• Share your insights and wisdom:– Facebook:

• AAP Perinatal and AAP Perinatal Trainees groups• Neonatal review

– LinkedIn:• Neonatal-Perinatal Medicine

– AAP Young Physician Section• http://www.aap.org/sections/ypn/yp/ypconnectionhome.html

– AAP Perinatal Newsletter– AAP Young Physicians Newsletter– Journal of Perinatology Editorial/Commentary