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April 8, 2015

The doctors who get paid more than their hospital's CEO

Daily Briefing

High-performing physicians who are productive and bring in large amounts of revenue for hospital systems receive high compensation—sometimes even surpassing that of the hospital's CEO, Modern Healthcare's Michael Sandler reports.

A Modern Healthcare analysis of Internal Revenue Service Form 990s found that 476 physicians at not-for-profit hospitals—about 6.6% of all doctors employed by not-for-profit entities—received compensation of more than $1 million in fiscal year 2012.

However, just 10 of the top 25 high-earning doctors at hospitals were CEOs; the remaining doctors were practitioners. For example, Modern Healthcare notes that an orthopedic surgeon at one Ohio health system made $2.8 million in 2012, while the system's CEO made $921,205.

Modern Healthcare ranks the highest-paid physician specialties

According to Modern Healthcare, physicians with a busy surgical schedule or medical practice and those who help guide organizations through changing business models and regulatory codes are usually the most valued within the organization. Travis Singleton—SVP at Merritt Hawkins, a physician staffing firm—says, "Those who can do this… are worth their weight in gold."

More broadly, Singleton notes that most physicians are paid based in part on their productivity, and those who are more productive tend to make more.

Experts predict that salaries for certain non-CEO physicians will continue to rise as hospitals strive to transition from fee-for-service care models to high-quality integrated delivery systems. "Hospitals need physicians, physicians don't need hospitals" says Gary Cook, executive vice president at physician staffing firm Pacific Cos (Sandler, Modern Healthcare, 4/4 [subscription required]).

The takeaway: Some physicians are being compensated more highly than hospital and health system CEOs, as high-performing, productive doctors become increasingly valuable in the changing health care landscape.

The problem with physician compensation

The conventional wisdom on physician compensation states that an organization should outline its strategic goals and objectives, link physician compensation accordingly, and that physician engagement and the desired results will naturally follow.

But what if it turns out that this model is backward? What if the science of motivation told us that compensation can act as a barrier to physician engagement and subsequent positive outcomes? What if in our quest for improvement, we might actually be pulling levers that are hurting the engagement and hindering the performance of our best physicians?

So, how should you be thinking about compensation? Our Medical Group Strategy Council has the answer.


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