6 key points on physician bonuses & whether they are attainable

Practice Management

John E. Hill, a partner at Louisville, Ky.-based HSG, a firm that helps healthcare organizations devise compensation formulas, and other industry leaders delved into the nature of physician bonuses and why hospitals may make them unattainable, Medscape reported.

Here are six key thoughts:


1. Hospitals suffering financial losses totaling millions of dollars may then likely set an unattainable bonus. Mr. Hill said hospitals hope earnings will reach sustainable levels one day, but don't want to give out money until then. However, Mr. Hill noted small or medium sized groups often provide attainable bonus as they aim for physicians to make partner at some point in time.


2. If a bonus is deemed attainable, the bonus will act as a motivator for physicians. Organizations should set a bonus that allows hardworking, efficient physicians to meet that threshold. Those who don't have a desire to work hard will likely not meet the threshold. Mr. Hill said employers want nearly 75 percent of physicians who have been employed for at least three years to four years to achieve the bonus.


3. Of a physician's total possible compensation, a bonus should comprise between 20 percent and 25 percent, Mr. Hill noted. Some reports find a popular bonus compensation formula that organization use is based off of relative value units, which many organizations consider fair as it doesn't take collections, claims or payer mix into consideration.


4. The downside to using relative value units model is it creates an environment in which physicians act in their own best interests, rather than for the organization as a whole. Physicians who lack an adequate number of patients or referral sources may not benefit from such a compensation formula. However, collection-based incentives are quickly becoming a thing of the past, despite some private practices utilizing such a model.


5. Although rare, some hospitals base a bonus on the collections subtracted from the hospital's expenses for each specific provider. If collections surpassed expenses, then providers will receive a bonus. Organizations are increasingly moving away from productivity models and using formulas similar to value-based reimbursement. Under quality measures, providers are typically rated on patient satisfaction, attending committee meeting and process and outcome measures.


6. Providers are also encouraged to examine an employment contract to better understand their bonus structure prior to accepting a job.


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