By Wendy Abdo, Staff Writer of Pinnacle Health Group
Much is said about what should be included in physician compensation plans, but not much about what should be avoided. Below we have pointed out some common physician compensation blunders that recruiting medical organizations and physician candidates should stay away from.
- Don’t use a buy-in when the situation doesn’t warrant it.
Michael Broxterman, COO of Pinnacle Health Group, explains, “We had a potential client who was in a good location and had a nice setup. Each group member was making a total of $500,000 – $550,000 annually.” This particular group wanted to hire a new physician for $160,000 salary plus a $25,000 production bonus—only a third of the compensation each group member was making. They thought it was a fair deal since the new physician would become part of the group without paying a buy-in after “doing time” for one year.
What led them to believe it was a good plan? Earlier they had hired three other physicians who were willing to accept this proposition. Yet, the situation wasn’t as it outwardly appeared—two of the physicians were residents who wanted to live in the area. The third physician had an academic background and also wanted to move there to be close to family. The group failed to see location as the motivating factor and incorrectly decided their compensation plan was a good one.
“Their philosophy was that the new physician would basically work for them the first year since there was no buy-in, and after a year, earn a salary comparable to what the others were making,” relates Broxterman.
However, only in rare instances can a buy-in be successfully used this way. “Buy-ins usually don’t apply well when there’s high demand for a specialty and a lot of opportunities,” says Broxterman. In addition, he goes on to say that buy-ins are not extensively used as a benefit these days. Broxterman continues by saying, “It’s not a good idea to pay the newest physician the lowest pay.” You shouldn’t expect to get that person for nothing. “Always remember that you are competing nationally with others for that physician,” Broxterman concludes.
- Don’t low-ball or change the offer at the last minute.
One example Craig Fowler, Director of Training and Business Development, remembers was with a specialty group who offered an interested physician a starting salary of $40,000 less than what was presented to her initially.
“Their reasoning was that she was not Fellowship-trained as the other members of the group were,” relates Fowler, “so she was offered less.” Craig Fowler explains, “The lack of Fellowship training would be a logical reason for offering a lower salary, except the candidate was initially offered a higher salary.” Further, what this group didn’t know was that the candidate was considering offers elsewhere with starting incomes $20,000 greater than the group’s original offer making it a huge $60,000 difference! “This scenario may still work out, but it will be a much higher hill to climb than it could have been if they had made the offer that was originally presented to the candidate,” says Fowler.
He advises, “Always start near your best offer. The other practices that you are competing with will be putting their best foot forward and lowballing in such a competitive environment is only going to send a message that you are not interested in them.” In order to give the best offer, be sure to know the marketplace and what others are offering.
- Income guarantees, bonus structures, and contract faux pas
While underpaying a physician candidate is bad, “you don’t want to overpay on income guarantees,” says Rob Rector, Senior Vice President of Recruiting. For instance, a candidate may be brought in on an income guarantee of $150,000. However, when the guarantee expires, the physician actually makes only $110,000 a year. Offering an over-inflated income guarantee is one of the fastest ways to increase physician turnover.
Not setting up a fair bonus structure can also have disastrous effects. After a physician’s salary and overhead have been paid, how do you divide what’s left? According to Rob Rector, at least 50% of the profits should be given to the physician, if not more. He adds, “when the physician will be a partner, it’s normally an ‘eat-what-you-kill’ set-up in which the partner gets 100% of what s/he earns after overhead expenses.
Lastly, a complex contract is a definite no-no. Rob Rector gives the scenario of a large multi-specialty group of 65 doctors. They had an intricate 50-page agreement that included hard-to-understand bonus structures, buy-ins, and salary formulations. In fact it was so complex, many initially excited physician candidates lost interest along the way. A word to the wise—if your contract talks about RVU’s and starts to resemble a managed care document, simplify the contract before candidates are lost.