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September 7, 2022

The future of physician compensation

Daily Briefing

    Amid high demand for physicians, many organizations are adjusting their compensation structures, including moving toward value-based care or offering new incentives, to better attract and retain new workers, Ginger Christ writes for Modern Healthcare.

    5 best practices in physician and APP compensation redesign

    Demand for physicians continues to grow

    According to Tom Florence, president of physician permanent placement for Merritt Hawkins/AMN Healthcare, the number of hospitals and medical groups searching for physicians hit a record high in the fourth quarter of 2021, and this high demand has continued into the first half of 2022.

    "Even during COVID, none of the underlying factors driving the physician shortage went away," he said. In particular, Florence notes that many patients delayed care during the pandemic, and the United States population is growing older, leading to a greater need for doctors to handle increasingly complex cases.

    In 2021, the Association of American Medical Colleges estimated that the U.S. will require between 37,800 and 124,000 additional physicians by 2034. "The volume is back. We're adding physicians," Florence said. "We're not laying anyone off or downsizing. We need to grow."

    While physician compensation has been increasing along with demand, it hasn't increased enough to outpace inflation, Christ reports.

    Organizations change their compensation structures to recruit and retain physicians

    Now, many organizations are reevaluating their physician payment structures, including moving to value-based payments, offering salary floors to protect doctors from unexpected drops in patient loads, and other incentives, to better recruit and retain new workers.

    For example, Matt McKinney, director of provider recruitment at Geisinger Health, said the health system "leaves no stone unturned" when it comes to recruiting physicians in high-demand specialties, including primary care, psychiatry, and anesthesiology.

    Since 2017, Geisinger has paid its physicians straight salaries instead of attaching compensation to productivity. It has also offered doctors more flexible hours or part-time positions, opportunities for remote work through telehealth, and researching and teaching activities.

    In addition, Geisinger has made efforts to improve its primary care space, including creating care teams of advanced practitioners, case managers, and behavioral health workers to support primary care physicians. The health system has also capped the number of patients assigned to each physician at 450. According to Christ, these changes helped Geisinger recruit 30 new doctors last year, growing its primary care physician team to 186.

    "We really have to have something that differentiates us in the market beyond just compensation," McKinney said.

    Lehigh Valley Health Network has also changed its physician payment structure to attract more doctors, moving to a salary-based model focused on value rather than productivity. It has also offered physicians more support for administrative activities, including employing scribes for primary care doctors.

    "The RVU [work relative value units] model was not getting to the ends that we really wanted it to," said Joseph DeFulvio, CMO of regional campuses and integration for Lehigh Valley Physician Group.

    "We're trying to take compensation as a barrier off the table to do this more global work," he added. "The compensation structure is designed to pay you well for the primary care-based work you're going to do with patients that encompasses possibly some nontraditional things."

    In addition, Jennifer Stephens, chief value and ambulatory care officer for Lehigh Valley, said the health system is working to make it easier for doctors to join the organization. So far, the health system has added support for its credentialing process, created a week dedicated to onboarding, and provides regular check-ins during a physician's first year.

    "It's one thing to recruit. It's another to onboard and retain them," Stephens said.

    According to Florence, regardless of the payment structures organizations have, employers will need to be competitive about physicians' salaries and sign-on bonuses, as well as "softer" incentives like increased schedule flexibility, telehealth options, and more, to attract new workers going forward.

    "If they feel like their incentives are typically just driven on patient volume only, that might not be as appealing to some folks," Florence said. "It's really being more flexible with the physician than in the past."

    Overall, "[i]t's going to be a turbulent period over the next few years," said Josh Halverson, partner and division leader of provider financial services at ECG Management Consultants. "Until that shakes out, organizations are going to have to adjust." (Christ, Modern Healthcare, 9/6)

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