Establishing rates for medical directorships has hidden challenges and risks. Even the most sophisticated market data benchmarks should be thoroughly examined and utilized properly. In addition to analyzing market data correctly, there’s an art to establishing rates policies for your organization. This webinar addresses challenges to determining appropriate rates and shares successful organizational policies.

1. 1
Key Strategies for
Compensating Physician
Administrative Positions
September 19, 2013
Allison Pullins,
Director

2. 2
Outline:
• Common challenges determining administrative
compensation
• Leveraging market data effectively
• Successful strategies for organization-wide policy
• Top five tips for establishing payment rates

3. Introducing MD Ranger
• Provides market data benchmarks for broad range of
administrative services
• Helps to negotiate competitive contracts
• Documents compliance and uncovers potential risks
• Identifies opportunities for cost reduction
• Provides tools to compare a hospital’s internal data to
benchmarks, tools for budgeting
• Generates contract-specific reports for compliance
documentation
3

4. Our Benchmarks:
• 65 medical directorships: hours, hourly, and annual
rates
• Committee and meeting attendance
• Quality initiatives
• EHR and IT initiatives
• Department chairs and section chiefs
• Medical staff officers and leadership
• Diagnostic and testing services
4

5. Introducing Allison
5
• Director at MD Ranger, Inc
• Background in physician
marketing, recruitment,
engagement, compensation,
negotiations
• Helps MD Ranger subscribers
leverage the data, analyze
internal costs

6. Introducing Michael
• 32 years experience in
healthcare as administrator
and consultant
• Founded two firms:
HealthWorks, Inc and MD
Ranger, Inc
• Areas of expertise include:
strategic planning,
operations improvement,
physician contracting, and
medical staff development
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7. Background
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8. A Perfect Storm…
• Attitude shifts for coverage and leadership duties
• Pressures on physician incomes
• Shortage of providers
• Two forces leading to increased need for defined levels of
physician leadership and coverage:
• EMS agency driven specialized emergency oriented services (trauma
centers, STEMI centers, stroke centers, pediatric emergency centers, etc.)
• Hospital business development in those emergency-oriented services plus
other specialized centers (neurosciences, cardiac, PICU, NICU, high risk
OB, etc.)
• Stark, Anti-Kickback laws
• Hospital pressures to reduce costs
8

9. Physician Costs on the Rise
9
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Physician Costs
Call Coverage, Medical Directors, Hospital Based Groups
Source: California Public Data
Southern California (112 Trauma & Non-Trauma Hospitals)
Northern California (46 Non Trauma)

10. Common Challenges
Determining Administrative
Compensation
10

11. There’s a Lot to Consider:
• Is the position necessary?
• If so, should you factor opportunity cost, especially on
more highly-compensated specialties?
• What current hospital policies could complicate
setting physician administrative rates?
• Should the amount of hours required for the position
impact the hourly rate?
• Does the position significantly reduce a physician’s
potential compensation related to her practice?
11

12. Ways to Determine the Need for a Particular
Position
• Use benchmarks to learn how often similar hospitals
engage such as position (and how many hours they
pay for)
• Use benchmarks to learn how your hospital
compares to similar hospitals in terms of total number
of medical directors, total hours of services and total
dollars of cost
• Identify unique factors that affect your situation, e.g.
quality initiatives, adverse payer mix, burdensome
call schedule, unique qualifications
12

13. Considering Opportunity Cost
• Definition: The cost of an activity measured in terms
of the value of the next best alternative, i.e. the one
that is not chosen.
For physicians, this generally means could they see more patients if
they were not doing this job
• Single-specialty requirement or flexible?
• Situation-specific?
• Alternatives?
13

14. OIG Advisory
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“Moreover, depending on the circumstances,
problematic compensation structures that might
disguise kickback payments could include, by
way of example: (i) ‘lost opportunity’ or similarly
designed payments that do not reflect bona fide
lost income…”

15. What if Policy Stands in the Way?
• How does your organization approach medical
director rates?
• Why was this policy implemented?
• Is it appropriate to make an exception to the rule for a
particular position?
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16. Leveraging Market Data
Effectively
16

17. Attributes of High-Quality Data
• Sample size
• Participant characteristics
• Consistent, comprehensive collection method
• Thorough and transparent auditing processes
• Specificity and ‘match’ of job description
17

18. What Does Market Data Reveal?
• What similar hospitals pay
• How rates are distributed
• Hours per month
• Annual payments
• Hourly rates
• Number of positions per service
18

19. The Experiment
Are opportunity costs for higher compensated specialty
physicians reflected in market data?
• Looked at 154 contracts from MD Ranger’s 2012-13 Report on
Medical Directorships
• Data taken from from administrative/directorship contracts
• Divided 11 specialties into two groups: lower compensation and
higher compensation specialties
19

20. The Analysis
High-paying specialties
include:
• Interventional cardiology
• Emergency medicine
• Electrophysiology
• Cardiovascular surgery
• Trauma surgery
• Orthopedic surgery
• Neurosurgery
20
Low-paying specialties
include:
• Internal medicine
• Internal medicine hospitalist
• Family practice
• Pediatrics

21. Data Supports Influence of Opportunity
Costs for Higher Paid Specialties
• Analysis reveals that on average, medical
administrative agreements reflect a premium for the
higher compensation specialties (39%)
• This occurs about half the time in higher paid
specialties (see chart on following slide)
• The degree of variability relative to average pay rate
are significantly greater for the higher-compensated
specialties, reflecting the widespread influence of
both opportunity cost and normative pay policies.
21

22. Distribution of Hourly Rates
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0
5
10
15
20
25
30
35
40
$25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375
NumberofContracts
Hourly Rate
Low-paying Services
High-Paying Services

23. Top Five Highest Compensated
Specialties for Medical Directorships
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$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
MedianTotalAnnualPayment

24. Highest Number of Hours for Top Five
Compensated Specialties for Medical
Directorships
24
0
100
200
300
400
500
600
AnnualHours

25. Top Five Highest Compensated Specialties
Hourly Rates for Medical Directorships
25

26. Strategies for Organizational
Policy
26

27. Pressure from All Sides
• Consistency with internal policies
• Cost considerations
• Honoring the physician’s perspective, requirements
• Compliance/external validation
27

28. Meeting in the Middle: Case Study
from Cardigan Health*
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Reluctant
Payer
Proactive
Buyer
Overall financial and service goals
that guide policies and procedures
Optimal Contract
Terms
185 separate agreements (involving approximately 650 physicians)
55 leadership; 65 medical directors; 51 emergency call coverage; 14 hospital-
based groups
*Pseudonym

29. What is Needed for this Approach?
• Consistent method to benchmark performance
• Deliberate and careful cost analysis
• Context, context, context
• Principles, guidelines, and procedures defined at the
executive level to steer policy
29

30. Five Practical Tips for
Establishing Rates
30

31. 1) Use high-quality data to analyze the
market
• Make only apples to apples comparisons
• Consider sample size
• Focus on similar organizations
• Be consistent in application of guidelines
31

32. 2) Carefully outline expectations and
duties of the role
• Consider job description
• Is the position truly necessary?
• Are efforts duplicated?
• What’s the scope? How many hours per month?
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33. 3) Determine if the role is truly
specialty specific
• Could this role be filled by a physician with a different
specialty?
• Effect on overall rate
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34. 4) Determine that the paid hours per
month and rate paid are within reason
• Is the role a typical directorship role, or are there
“above and beyond” duties like starting a clinical
program or service line from scratch?
• Beware of hidden compliance risks in number of
hours per month or number of positions per service
• Take a second look at low or average rates
34

35. 5) Consider your organization’s
policies and strategic goals
• Does this position help achieve overall goals?
• Does your organization have strict rules regarding
medical director and administrative compensation? If
so, are there creative approaches?
• Should you build in incentive payment terms to
achieve organizational objectives?
35

36. Questions?
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37. We want to hear from you!
Michael Heil
Founder
mheil@mdranger.com
650-692-8873
www.mdranger.com
37
Allison Pullins
Director
apullins@mdranger.com
650-692-8873