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Employed Doctors Enjoy Several Compensation Options
By Dr. David Edward Marcinko; MBA, CMP™
According to corporate medical recruiter Kris Barlow RN MBA, physicians can select from various employment models that may include fringe benefit packages (life, health, dental, disability insurance; medical society and hospital dues, journals, vacations, auto, and CEUs, etc.) equal to 25-40% of salary [personal communication].
And, this medical business model is fast growing as the various types below demonstrate.
Independent Contractor or Employee
A payer has the right to control or direct only the result of the work done by an independent contractor, and not the means or methods of accomplishing the result.
By contrast, anyone who performs services for another is an employee if he or she can control what will be done and how it will be done. Employed physicians are usually not compensated as independent contractors.
New Practitioner Salaries:
Published annually for new practitioners by The Health Care Group®, the Physician Starting Salary Survey collects and collates nationwide data on new physician employment compensation.
The guide reports first, second and third year of starting physicians’ salary and incentives, but with large high-low spreads. It also includes information about co-ownership provisions, benefits and restrictive covenants.
The survey is categorized by specialty and results are based on information provided by medical practices, health care advisors, physicians, and health care consultants across the country. The figures represent basic elements of the bid/ask process for establishing optimal salary and benefit amounts for new physicians entering private practice.
Available for no charge from the Health Care Group (800.473.0030 or www.HealthCareGroup.com)
Public Equity Relationships
The public equity roll-up model of medical partnerships in the late 1990s offered employed physicians experience within a large group whose decisions were made by managers. Compensation was controlled and replaced with the stress of investor expectations, as Physician Practice Management Corporations (PPMCs) needed to grow revenues by 10-15% annually to maintain price-to-earnings ratios. If stock was held in a growing PPMC, physician employees shared in both practice and corporate compensation.
But, by 2007, a survey of the Cain Brothers Physician Practice Management Corporation Index of public PPMCs, revealed a market capitalization loss of more than 95% since inception.
Newer Healthcare Delivery and Physician Compensation Models
Today, whether independent or employed, physicians can pursue several creative compensation models not available a decade ago:
MSO Contracting:
According to consultant Jeffrey Peters, physicians maintain private practice in this model, but contract with a management services organization to relieve administrative burdens. Physicians maintain control with less stress, but, as MSO contracts are expensive (18-45% revenue), compensation diminishes, and rests on MSO competence.
Locum Tenens Practitioner:
Locum Tenens (LT) is an alternative to full-time employment for most specialties. Some younger physicians enjoy the travel, while mature physicians like to practice at their leisure.
Employment factors to consider include: firm reputation, malpractice insurance, credentialing, travel and relocation expenses (which are negotiable). However, a LT firm typically will not cover taxes.
Cash Based Compensation:
A Cash Based Compensation (CBC) model attracts patients who pay cash for desirable services, such as surgeons who dispense scar reducers or in areas such as pain relief, weight loss, aesthetic procedures, and natural health.
Any well-rounded CBC program should include: patient demand; low entry cost; little marketing costs; existing employees to administer the program; and an operational plan. With time and effort, profit for physician compensation may increase 10-20% annually.
Values Based Health Insurance Model:
According to some pundits,instead of the one size fits all approach of traditional health insurance, a “clinically-sensitive” cost-sharing system that supports co-payments related to evidence-based value for targeted patients seems plausible.
In this model, out-of-pocket costs are based on price and a cost/quality tradeoff in clinical circumstances: low co-payments for interventions of highest value, and higher co-payments for interventions with little proven health benefit. Smarter benefit packages are designed to combine disease management with cost sharing to address spending growth.
Global Healthcare Model:
American businesses are extending their cost-cutting initiatives to include offshore employee medical benefits, and facilities like the Bumrungrad Hospital in Bangkok, Thailand (cosmetic surgery), the Apollo Hospital in New Delhi, India (cardiac and orthopedic surgery) are premier examples for surgical care. Both are internationally recognized institutions that resemble five-star hotels equipped with the latest medical technology.
Countries such as Finland, England and Canada are also catering to the English-speaking crowd, while dentistry is especially popular in Mexico and Costa Rica. Although this is still considered “medical tourism,” Mercer Health and Benefits was recently retained by three Fortune 500 companies interested in contracting with offshore hospitals and JCAHO has accredited 88 foreign hospitals through a joint international commission.
To be sure, when India can discount costs up to 80%, the effects on domestic hospital reimbursement and physician compensation may be assumed to increase downward compensation pressures.
Conclusion
Regardless of the salaried compensation model, its review and understanding is vital for long-term success.
How have the above compensation models affected your medical practice business model, and salary, if any?
Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com
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Filed under: "Doctors Only", Career Development, Touring with Marcinko | Tagged: busines model, Career Development, employed physicians, Marcinko, physician business model |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Laboring under a Misconception
As an increasing number of physicians choose to work as employees, rather than independent practitioners, the number of physicians eligible to join unions is increasing.
Do you think there will be a rise in the number of unionized doctors?
Temo
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Temo
More on Medical Unions.
I just don’t see it happening, even with more physicians becoming employees of healthcare systems, organizations or corporations. Medical unions were first largely organized a decade ago and failed. And, times have changed since then with technology and Health 2.0.
So, it’s just not going to happen. We need brain power and innovation; not “masses of asses.”
Doctor Kirkland
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Employed Doctors – The Stunning Shift
http://thehealthcareblog.com/blog/2011/06/13/the-stunning-shift-toward-employed-physicians/
Gracie
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Physician employment by hospitals expected to accelerate
The changing healthcare landscape and the increased need for hospital-physician alignment will lead to an acceleration of physicians leaving private practice in favor of hospital-based employment, according to two recent market reports.
http://www.healthcarefinancenews.com/news/physician-employment-hospitals-expected-accelerate
Fran
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On Wage Garnishments
Of interest to hospitalists and employed doctors?
http://plexuspayroll.com/welcome/garnishments/
Perry Dalesandro CPA
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Complaints by Employed Physicians
Perry – This is one of my hot buttons.
Why? We docs, who are so fiercely independent in the beginning of our career – are not suited IMHO, to be employees or follow the company line or culture like a unionized worker-bee.
IOW: The transition of physicians from private practice to hospital employment can be quite rocky. The biggest challenge is the loss of autonomy that many physicians experience when they become employed.
And, physicians are being increasingly targeted when they get in the way of a hospital’s agenda. Think PHOs; most just want your patients.
Always remember, the power who gave you the job – has the power to take it away!
Dr. David Edward Marcinko MBA
http://www.CertifiedMedicalPlanner.org
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Dr. Marcinko
I agree with you. As long as you work for someone else, you are beholden to them and under their control.
Being your own boss means being free. Colleagues, don’t give up your freedom.
Dr. P. Smith
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Doctors Bail Out On Their Practices
Doctors who own private practices are looking for a way out. Fed up with their rising business expenses and shrinking payouts from insurers, many are selling their practices to hospitals. Experts say the number of physicians unloading their practices to hospitals has risen to 40% in the last five years. Doctors who sell typically become employees of the hospital, as do the people who work for them.
The reasons for the trend vary. Doctors are tired of the hassle of filing insurance claims and collecting payments from patients and want to only focus on medicine again, said Tony Stajduhar, president at Jackson & Coker, a physician recruitment firm. Obamacare has also created more fear of the unknown. Doctors are worried that new regulations will add to their administrative work and require them to pour more money into their businesses, Stajduhar said.
Source: Parija Kavilanz, CNN Money [7/16/13]
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42% of Hospitals Employed Their Physician Workforce in 2012
The Annals of Internal Medicine recently published a study on physician-hospital employment relationships. Here are some key findings from the report:
• In 2003, 29% of hospitals employed members of their physician workforce.
• 42% of hospitals employed members of their physician workforce by 2012.
• Switching hospitals were more likely to be large (11.6% vs. 7.1%).
• 7.5% of major teaching hospitals switched to physician employment integration.
• Switching hospitals were less likely to be for-profit (8.8% vs. 19.9%).
• No association was found between switching to an employment model and quality.
Source: Annals of Internal Medicine, September 20, 2016
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1 in 4 Physicians Was Self-Employed in 2015
JAMA recently published an analysis of the earnings difference between self-employed and organization-employed physicians and dentists. Here are some key findings from the report:
• 35.2% of physicians were self-employed in 2005 versus 24.7% in 2015.
• 3 in 4 (73%) of dentists were self-employed in 2005 versus 65.1% in 2015.
• The earnings gap for physicians reversed from $19,679 in 2005 to −$10,623 in 2015.
• Among dentists, the earnings gap narrowed from $30,448 in 2005 to $21,291 in 2015.
Source: JAMA, June 29, 2018
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Close to Half of Last-Year Residents Would Prefer Hospital Employment: Survey
Forty-three percent of final-year medical residents said they would prefer being employed by a hospital over any other practice option, according to a survey from healthcare consulting firm Merritt Hawkins. The 2019 Survey of final-year medical residents consisted of an emailed questionnaire that gauged the demand of final-year medical students. About 400 final-year residents responded to the survey.
When considering an employment opportunity, geographic location was cited as a top priority for final-year residents. A good financial package and availability of personal time were second and third, respectively. Just 2 percent of last-year residents said they would consider opening their own practice. If offered a do-over, nearly 20 percent of residents said they wouldn’t choose medicine as a career.
Source: Morgan Haefner, Becker’s Hospital Review [5/20/19] via Dr. Joseph Borreggine
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Health Employment Trends Q1 2021
• Health care added 11,500 jobs in March 2021 and 25,000 jobs in February; however, a drop of more than 80,000 jobs in January
• Hospital employment fell only slightly in March (-600 jobs) but has now fallen in each of the past three months and closes Q1 2021 down 37,000 jobs compared to the end of 2020
• Ambulatory care settings added 15,300 jobs in March and have added a net 31,000 jobs in Q1 2021.
• Nursing and residential care employment fell by 3,200 jobs in March.
Source: Altarum, Health Sector Economic Indicators, April 16, 2021
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