Physician Compensation Planning

While an increasing number of health care organizations may be waking up to the importance of compensation in supporting their change initiatives, many are still uncertain about which approach to use. There are, after all, a number of highly effective strategies making the rounds. All are perfectly good strategies, if used in the right setting. Then the key issue of designing an effective compensation program, given the variety of pay strategies, becomes one of alignment.

To be effective, pay programs must be tailored to, and support, the organization's business strategy and work cultures. Our approach focuses on the organization's agreed upon business strategy and incorporates the work culture. We utilize a two-phase approach outlined below.

Phase I: Development of the Compensation Philosophy and Architecture

Phase I is designed around interviews, data gathering, and two interactive meetings with the compensation design committee. This initial phase becomes the foundation for designing a new compensation plan. Steps in Phase I include:

• Conduct interviews of all physicians
• Review a summary of issues
• Affirm compensation philosophy and architecture
• Confirm market position
• Assess readiness for incentive compensation
• Identify legal and regulatory issues.

Phase II: Physician Compensation Plan Design

Phase II focuses on designing the components within the compensation plan that aligns physician's compensation with the organization's philosophy. We will meet with the compensation committee to review design options and initiate testing of models utilizing historical information. The outcome of Phase II will be:

An updated physician compensation plan for your physicians, including:

• Linkages to the overall pay plan economic and operational model
• Pay plan components (fixed and variable, as appropriate) and linkages to performance measures and standards
• Administrative guidelines, computational formulae and communications materials
• Definition of a Core Role including work standards and performance (productivity and other factors) expectations for all physicians