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KEY STRATEGIES FOR COMPENSATING PHYSICIAN ADMINISTRATIVE POSITIONS

JANUARY 2016

HOSTED BY ALLISON PULLINS, CMO, MD RANGER

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Outline: •  Address hurdles to determining administrative

compensation •  Discuss appropriate market data use •  Share successful organizational policies and tips •  Outline best strategies for setting rates

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ABOUT US

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Our database and subscribers

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MD Ranger includes: •  Benchmarks, available as reports and online queries, with market data for call,

medical direction, administrative services, leadership positions, hospital-based services, uncompensated care, clinics and diagnostic testing services

•  A secure, web-based Contract Data Tool to collect and organize contract data (uploads via Excel available)

•  Analytic Tools to benchmark internal contracts and total expenditures, identify compliance issues, compare facilities and analyze expenditures

•  Cost and compliance reports, including an annual Executive Report, comparing your contracts to MD Ranger benchmarks

•  Resources and research to support compliance efforts •  Customer support by experts in physician compensation, FMV documentation,

and compliance

Your speaker

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•  Nine years experience in healthcare consulting and technology; specializing in physician marketing, recruitment, engagement, compensation, negotiations

•  Helps MD Ranger subscribers leverage data, analyze internal costs and structure physician contract compliance programs

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COMMON CHALLENGES DETERMINING ADMINISTRATIVE

COMPENSATION

Why it’s difficult…the backstory

Attitude shifts for coverage and leadership duties •  Pressures on physician incomes •  Shortage of providers (willing to do administrative duties) •  Stark, Anti-Kickback laws

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There’s a lot to consider before you pay: •  Is the position necessary (commercially reasonable)? •  Should you factor opportunity cost, especially on

more highly-compensated specialties? Does the position significantly reduce a physician’s potential compensation related to her practice?

•  What current hospital policies could complicate setting physician administrative rates?

•  Where on the market range should you pay? Is this payment “exceptional”?

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Determining need/commercial reasonableness

•  Use market benchmarks to learn how often hospitals pay for the service

•  Identify and document unique factors that affect your situation, e.g. quality initiatives, adverse payer mix, burdensome schedule, unique qualifications to support that paying is reasonable

•  Strategic tip: use market benchmarks to learn how your hospital compares to similar hospitals in terms of total number of medical directors, total hours of services and total dollars—additional positions may be unreasonable to compensate

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Compensating non-traditional directorship payments

•  Do you pay for physicians to chair committees? Attend meetings?

•  How do you pay physician leaders like •  Directors of EHR/IT •  Peer review •  Quality initiatives •  Teaching and research

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Considering opportunity cost

Definition: The cost of an activity measured in terms of the value of the next best alternative, i.e. the one that is not chosen. •  Single-specialty requirement or flexible? •  Situation-specific? •  Alternatives? •  Note that OIG says: opportunity cost can matter, but

it can also disguise unwarranted payments

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Where on the market range should you pay?

•  Generally, rates below the 75th percentile are most likely compliant.

•  However, many organizations choose to pay at the median.

•  Need to pay a rate above the 75th percentile? Make sure to fully justify and document your reason and need for higher payments.

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Current policies?

•  How does your organization approach medical director rates?

•  Why was this policy implemented? •  Is it appropriate to make an exception to the rule for a

particular position? Is there a process to handle exceptions?

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LEVERAGING MARKET DATA EFFECTIVELY

Attributes of high-quality data

•  Sample size •  Participant characteristics •  Who reports the compensation data •  Consistent, comprehensive collection method •  Thorough and transparent auditing processes •  “Apples to apples” match with job description

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What does market data reveal?

•  What similar hospitals pay •  How rates are distributed •  25th, median, 75th and 90th percentiles

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Vital statistics

•  Hours per month •  Annual payments •  Hourly rates •  Number of positions per service/service line

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Top five highest compensated medical directorships—annual payments

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$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Cardiology - Heart Center

Pathology/Clinical Laboratory

Pediatric Surgery Trauma Surgery Vasuclar Surgery

Ann

ual R

ate

Service

Highest annual hours reported by service for administrative positions

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0

100

200

300

400

500

600

Ambulatory Services

Trauma Surgery Pathology/Clinical Laboratory

Vascular Surgery Pediatric Surgery

Ann

ual H

ours

Service

Highest compensated specialties: hourly rates

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$0

$50

$100

$150

$200

$250

$300

Bariatric Surgery General Surgery Urology Neurosurgery Orthopedic Surgery

Hou

rly R

ate

Service

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SUCCESSFUL ORGANIZATIONAL POLICIES

Pressure from all sides

•  Consistent internal policies •  Cost considerations •  Honoring the physician’s perspective, requirements •  Compliance/external validation

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Finding a balance between forces

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Key strategies

•  Consistent method to benchmark performance •  Deliberate and careful cost analysis •  Context, context, context •  Principles, guidelines, and procedures defined at the

executive level to steer policy

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SETTING RATES: OUR BEST TIPS

1) Determine commercial reasonableness

•  Is it reasonable to pay for this position in the first place?

•  What’s our business case for paying?

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2) Use high-quality data and analyze the market ranges

•  Make only apples to apples comparisons •  Consider sample size •  Focus on similar organizations •  Be consistent

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3) Carefully outline expectations and duties of the role

•  Consider job description •  What’s the scope? •  How many hours per month? •  How are hours reported and tracked?

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4) Determine if the role is truly specialty-specific

•  Could this role be filled by a physician with a different specialty?

•  How will the answer to this question affect the rate?

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5) Determine that the paid hours per month and rate paid are within reason

•  Is the role a typical directorship role, or are there “above and beyond” duties like starting a clinical program or service line from scratch?

•  Beware of hidden compliance risks in number of hours per month or number of positions per service

•  Take a second look at low or average rates—they could hide compliance risks

•  Always coordinate with AP on physician payments!

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6) Consider your organization’s policies and strategic goals

•  Does this position help achieve overall goals? •  Does your organization have strict rules regarding

medical director and administrative compensation? If so, are there creative approaches?

•  Should you build in incentive payment terms to achieve organizational objectives?

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We want to hear from you!

Allison Pullins Chief Marketing Officer

apullins@mdranger.com 650-692-8873

www.mdranger.com

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