Get a Handle on Your Physician Agreements

Professional Services Agreements. Call Coverage Agreements. Medical Directorships. Employment Agreements. Co-Management Agreements. If you’re having trouble keeping track of all your physician arrangements, you’re not alone.

HSG has worked with multiple hospitals and health systems that retained us to help them “get a handle” on all their physician contracts. The first thing they needed was a master list/inventory of all their employed and independent physician compensation arrangements. Next, and most importantly, they needed a review process that would assure the contracts were:

  • Producing the results they were intended to achieve;
  • In compliance with Stark and Anti-Kickback laws in terms of fair market value and commercial reasonableness; and
  • Aligned with their strategic goals and objectives.

The First Step: Pulling the Master List Together

  1. Assign a group, individual, or outside consultant to take charge of developing a “Physician Compensation Agreement Matrix (or Master List).”
  2. Develop the list in a matrix format. (Note: Many clients prefer developing two matrices: one for independent physician agreements and one for employed physicians agreements.) Items and issues normally included in the matrix are provided in the list below. The matrix should highlight the critical points of each agreement: effective and term dates, termination notice, non-compete clauses, etc.

Potential Components of a Physician Compensation Agreement Matrix

  • (First/Last Name, Credentials, Specialty & Practice Location)
  • Contract Effective Date
  • Contract Termination Date
  • Initial Term
  • Renewal Term
  • Termination Notice Requirements (i.e. 180 days)
  • Non-Compete (Y/N)
  • Base Salary Amount
  • wRVU Target
  • wRVU Conversion (Bonus Factor)
  • Quality Bonus Amount
  • Sign-on Bonus Amount
  • Medical Director Compensation

Step Two: Complete Compensation Benchmarking

1.  Select comparable benchmark data. Depending on the type of arrangement being assessed, HSG typically utilizes the following survey sources:

    • Medical Group Management Association (MGMA) Physician Compensation and Production Survey;
    • Medical Group Management Association (MGMA) Medical Directorship and On-Call Compensation Survey;
    • American Medical Group Association (AMGA) Medical Group Compensation and Financial Survey;
    • American College of Physician Executives (ACPE) and Cejka Executive Search Physician Executive Compensation Survey;
    • Sullivan Cotter and Associates Physician On-Call Pay Survey Report;
    • Sullivan Cotter and Associates Advanced Practice Clinical Compensation and Pay Practices Survey; &
    • Sullivan Cotter and Associates Physician Compensation and Productivity Survey Report.

2.  Complete benchmarking of relevant components of the compensation variables and any available historical outcomes. For example, with employed physician agreements, you should benchmark base salary, Work Relative Value Unit (wRVU) targets, bonus compensation per wRVU, quality incentives, etc.

3.  Incorporate the benchmarking results into your matrix.

Step Three: Gather Intelligence

  1. Interview, or assign a team member to interview, relevant stakeholders – practice managers, Chief Medical Officers, Chief Nursing Officers, Chief Operating Officers, surgery department directors and directors of other departments and service lines. We recommend developing a standard questionnaire or interview guide to keep the line of questioning consistent. The focus of these interviews is to determine if “people in the know” believe the agreements are effective in helping the hospital accomplish the intended objective. If not, why? Are the incentives misaligned? What problems need to be addressed? Could they be addressed through better incentives? Are the physicians doing the work and putting in the time required?
  2. Summarize the findings by agreement and look for trends among the individuals questioned.
  3. Revisit your hospital’s strategic plan. Start thinking about each agreement in the context of furthering the hospital’s strategy and mission.

Step Four: Develop Action Plans

  1. Start by labeling each agreement in your matrix as “Strategic,” “Tactical,” or “Unnecessary.” “Unnecessary” agreements that are no longer relevant should be terminated as soon as contractually possible.
  2. Strategic agreements are strategically important agreements. These are agreements in strategically important specialties and services and are necessary to the hospital’s strategy and success.
  3. Tactical agreements may support Strategic agreements in some manner or may further the hospital’s charitable mission. These agreements could also be political in nature. Tactical agreements may be a financial burden, but may be necessary for charity, supportive, or political reasons. Hopefully, there aren’t many on your matrix.
  4. Develop Action Plans for improving each agreement. Agreements that are functioning as desired don’t need an action plan for change and improvement, but should continue to be monitored as circumstances change.