“This is not your ma-and-pop’s medical system,” says MGMA COO explaining how increasing healthcare complexity drives national searches for top talent.

July 5—Hospital employment of physicians has been linked previously to an upward spike in compensation. Now there’s evidence that hospitals are pushing up pay levels for healthcare executives and administrators, too.

Median compensation for nonphysician CEOs at hospital-owned practices was around $305,000 in 2015, compared to about $242,000 for nonphysician CEOs at physician-owned practices, according to a recent survey of more than 67,000 managers and staff by the Englewood, Colo.-based Medical Group Management Association (MGMA).

Similarly, MGMA found that nonphysician administrators at hospital-owned practices earned median compensation of $141,400, compared to $100,600 for their counterparts at physician-owned practices.

Interestingly, the situation was reversed when the CEO was a physician. Physician CEOs leading physician-owned practices had median pay of about $350,000 compared to $300,000 for their peers at hospital-owned practices.

When it came to bonuses, however, the situation reverted back to the familiar pattern. Physician executives in hospital-owned practiced received a median of $70,000 in bonuses and incentive payments compared to physician leaders of physician-owned practices who received $36,000. Median bonus payments and incentives for nonphysician executives were about $24,000 compared to $10,000 at physician-owned practices.

“There has been a continued trend toward getting high-end talent to navigate the complexity of the healthcare system,” Todd Evenson, chief operating officer for MGMA, said in an interview. “It’s not your mom and pop’s medical system anymore.”

Sizeable Differences

Practice size made a big difference in executive compensation. Practice CEOs and executive directors at groups with at least 151 full-time employees had median compensation of about $430,000. This was well ahead of the $252,000 earned by their counterparts at practices with between 26 and 50 full-time employees, and the $181,000 for those at practices with 25 or fewer employees.

Geographically, Midwestern practice leaders had the highest compensation. Median pay at large practices was $447,500 and $234,000 in small practices in the Midwest last year, according to the MGMA.

Unlike other industries where hiring from outside the field can be seen as a way to bring fresh approaches to old problems, Evenson said healthcare’s complexity and government regulation tends to favor those with a healthcare insider’s special knowledge base. That said, he added that practice leaders have been open to using concepts from outside healthcare, such as Lean and Six Sigma, to foster innovation.

The required skillset for healthcare administrators can change from market to market, Evenson said. 

“Healthcare is local and each system or organization is unique as to what solutions are needed and who should be leading,” he said. “Sometimes, tremendous success can be had with organization leaders who have an MBA rather than an MD degree.”

Wider Recruitment Net Cast

Systems also are casting a wider recruitment net to attract both administrators and physicians.

“It is very evident that they are looking nationally to recruit and retain the best and the brightest,” Evenson said.

Dallas-based recruiter Medicus Firm released a report earlier this year which showed how urban healthcare organizations were making greater use of search firms to attract talent. In 2015, 36.76 percent of its placements were in urban areas compared to only 25 percent in 2013.

The recent MGMA survey of physician compensation, which included data from 80,000 providers, found that rural states dominated both the top and bottom of the pay scale.

It found the highest-paid primary care physicians in Alaska, Wisconsin and Arkansas and the lowest in Nevada, Maine and Maryland. Similarly, MGMA found the highest-paid specialists in Wisconsin, Nevada and Nebraska, and the least compensated in Maryland, Wyoming and Pennsylvania.

Overall, MGMA found primary care compensation up 4 percent in 2015 with median pay at more than $250,000. Median specialist compensation grew 3 percent to $425,000. Both reflect slower growth than rates recently found by Dallas-based recruiter Merritt Hawkins who reported gains in 19 of 20 specialties it tracks--with most of those gains in the double digits. Only emergency medicine compensation showed no growth in the Merritt Hawkins review of compensation for the physicians it found jobs for from April 1, 2015 to March 31, 2016.

The MGMA did find double-digit increases for both specialists and primary care physicians over a five-year period. Dollar amounts also were close for specific specialties. MGMA reported median compensation for OB-GYNs at $330,694. While Merritt Hawkins recorded their average compensation at about $321,000.

“There did not appear to be seismic shifts in individual specialty compensation,” Evenson said, adding that the gap between primary care and specialist compensation continues to slowly narrow.

Halee Fischer-Wright, MD, president and CEO at MGMA, agreed.

“Practices are giving primary care physicians significant new responsibility for coordinating care among specialists, managing patient medications, and helping patients and caregivers manage chronic conditions,” Fischer-Wright said in a news release.

Time and Money

Sign-on bonuses of all types are becoming increasingly popular recruitment tools, as Merritt Hawkins reported that 20 percent of its searches included some level of medical school debt repayment. MGMA reported that not all incentives are financial and included wide variation in work requirements between specialties.

Among the specialties MGMA tracked, anesthesiologists and invasive cardiologists worked a median of 43 weeks; pathologists (both anatomic and clinical) worked 44; gastroenterologists, 45; nephrologists, 50; and diagnostic radiologists worked 52.

System executives have to be careful of not violating anti-kickback regulations when structuring physician employment agreements, Denise Palencik, a senior associate at Philadelphia-based Veralon healthcare management consultants, wrote in a recent blog post. She noted how settlements in government legal actions illustrate how physician compensation must be based on fair-market value and must “make business sense” in support of an organization’s mission. Time worked is part of this equation.

“Some physicians do not want to take on or share in the burden of call coverage while others rely on the additional income that call coverage brings,” Palencik wrote. “If individual physicians are allowed to decline call coverage or take on additional hours of coverage, the physician’s base compensation should be adjusted accordingly.”

Boomers, Millennials Have Similar Goals

Evenson said that differences between older and younger physicians in terms of time worked and other values may be somewhat exaggerated.

“The goals of baby boomers and millennials are quite similar,” Evenson said. “The younger generation wants to be at the table making decisions and be engaged like the baby boomers. But they do have a drive for integration of work and life that does impact the environment they want to work within.”

The impact that millennials are having and the shift from fee-for-service volume- to value-based payments is real, Evenson said. But change is happening slowly.

“That migration won’t be overnight,” Evenson said. “To think that overnight we’ll be dominated by compensation plans that are (quality) incentive-based is a misnomer.”

Andis Robeznieks is a freelance writer based in Chicago. Follow Andis on Twitter at @AndisRobeznieks.

Publication Date: Tuesday, July 05, 2016