Healthcare organizations link physician pay to performance

Annual performance-based incentive plans are on the rise for physicians in both presence and scale, according to Hay Group's 2010 Physician Compensation Survey. Most (92 percent) group-based organizations offer incentive plans to their physicians, up from 75 percent in 2009. Physician incentive plans are also being offered by 63 percent of hospitals this year, as opposed to 51 percent in 2009. The percentage of integrated health systems (IHS) offering physician incentive plans remained steady between 2009 and 2010 at 67 percent. Of the 28 organizations that responded that they had no physician incentive plans, 39 percent said they were considering them.

“No one should be surprised that healthcare organizations are moving to link pay to performance”

"There is safety in numbers, and it has never been truer in healthcare than it is now," says CJ Bolster, national director for Hay Group's healthcare practice. "Integrated health systems have scale and they can offer job security in lieu of having to offer higher incentives. Group practices that are not directly tied to a hospital or system will traverse a bumpier road in the post-reform era, but they will continue to attract physicians with an entrepreneurial drive and an acceptance of risk."

These incentive plans are also increasingly tied to performance metrics, with 'patient satisfaction' and 'quality' being the leading factors for all surveyed organizations. Half (50 percent) of group-based practices tie incentives to patient satisfaction and quality; that percentage is slightly lower for hospital-based (43 percent) and IHS-based (46 percent) organizations.

"No one should be surprised that healthcare organizations are moving to link pay to performance," says Ron Seifert, executive compensation practice leader for Hay Group's healthcare practice. "Hospitals will increasingly be rated on performance metrics such as patient satisfaction, readmissions and clinical outcomes, and reimbursements are likely to be linked to these as well. Financially, it's in an organization's best interest to embrace these changes now, rather than waiting for all the reform dust to settle. Communally, a hospital focusing on the needs and health of patients is good for everyone."

Incentive plans, commonly called 'bonuses,' are typically a supplement to base salary. Base salary increases are remaining virtually flat in hospital-based organizations, with 2.8 percent increases in 2009-2010, and 2.9 percent planned increases for 2010-2011. Group-based physician practices offer higher salary increases (4.8 percent granted in 2009-2010), but the planned base salary increases for 2010-2011 dropped to 3.3 percent.

Salary structures and salary planning for physicians remain flexible in 2010, respondents show. Half of hospitals and IHS', and 54 percent of group-based physician practices, say that their process is 'independent,' meaning that they have a philosophy and structure, but that positions, specialties, departments and specific doctors are reviewed individually for their salary potential and subsequent increases.