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Physician Executive Compensation: Clinical Expertise and Business Acumen Are Valued

By Lois Dister

skd187720sdcPhysician executive compensation rose by an average of 12% on data collected in 2007 and 2009, according to the 2009 Physician Executive Compensation Survey conducted by the American College of Physician Executives (ACPE) and Cejka Search, a nationwide healthcare executive and physician search firm.  The survey is the seventh of its kind to be conducted every two years by ACPE and Cejka Search, and this year’s survey is based on responses from 2,131 ACPE members.  Questions in the survey covered various categories, including compensation by organization type, group size, time allocated to administrative duties, geographic area, organization location, scope of operations, revenue, years of experience, scope of responsibilities, executive bonus percent, medical specialty, and post-graduate business degrees.

A number of factors can greatly influence compensation levels: the specific healthcare sector, the organization’s size and scope, as well as the organizational context in which the leaders find themselves.  “Organizations seeking to establish and develop top-performing executive physician leadership should have clearly defined clinical and business objectives, an honest assessment of their organization’s culture, and a system to ensure physician executive compensation is fair, equitable, and correlate to the results achieved,” explains Lori Schutte, President of Cejka Search.  “Those are the healthcare organizations that will attract and leverage the talents of the best physician executives.”

Post-graduate business degrees have a positive impact on compensation

Signaling this increased value placed on top performing physician executive leadership, the attainment of a post-graduate business degree can garner a greater salary, and be a significant door-opener for increased professional opportunity for physicians in administrative roles.  “Healthcare organizations are now mandating advanced business degrees in conjunction with strong clinical expertise for their physicians in executive leadership positions,” explains Lois Dister, Executive Vice President and Managing Director with Cejka Search’s Executive Search Division.  “At the senior leadership table, physician leaders with business expertise are valued for their unique combination of clinical and business training, which results in better outcomes for patients and performance for the organization.”

Physician executives earn on average a 10% greater salary with the attainment of the following post-graduate business degrees: 11% more with a Master of Business Administration (MBA), 8% more with a Master of Medical Management (MMM), and 10% more with a Master of Health Administration (MHA) compared with those without a post-graduate business degree.  The survey further found that the type of degree the physician executive holds makes an even more significant difference within a particular executive role.  Comparing physician executive counterparts with and without a post-graduate business management degree, the following reported the largest differentials:
o    Chief Executive Officers/Presidents earn 22% more with an MBA.
o    Department Chair/Chiefs earn 25% more with an MMM.
o    Medical Directors earn 18% more with an MHA.

Financial performance and clinical quality are drivers for executive bonus distribution

While a mix of organizational and personal goals still influence executive bonus distribution overall, it is financial performance, clinical quality and satisfaction levels of patients, physicians and employees that are the true drivers of executive bonuses.

Given the effects of the economy, it is not surprising that two-thirds (62%) of survey participants cite financial performance, including cost containment and organization profit, as a component of their bonus, which is a 60% increase in frequency from the 2007 survey when only 39% mentioned this as a determinant of their executive bonus.  More than half (53%) cite clinical quality, including outcome measurements, safety and process, as a bonus component, a 67% increase in frequency as compared to 32% in 2007.  Forty-four (44%) cited satisfaction among patients, physicians and employees as a component of their bonus – more than double the 20% frequency reported in 2007.

“Clinical quality is the fastest growing bonus component.  In an era influenced heavily by Institute of Medicine and national quality organizations, these overarching goals are synonymous with the rankings of top hospitals,” says Deedra Hartung, Executive Vice President and Managing Director with Cejka Search’s Executive Search Division.  “But it is also evident, that responsibility for financial performance and stakeholder satisfaction also are determinants in compensation for many if not most physician executives throughout the organization.”

Conclusion

The 2009 Physician Executive Compensation survey findings are consistent with the leadership trends seen in the marketplace today.  In today’s era of healthcare reform, it is evident that organizations nationwide are experiencing a growing need for physicians who are as effective as leaders as they are as clinicians, says Schutte.  “Organizations increasingly are recognizing the essential role that physician executives who have complemented their clinical training with business education and leadership development can play to ensure their organization’s balance of priorities, including quality and financial performance.”

“Physician executives are being rewarded for measurable improvements that enhance organizational and clinical effectiveness and ultimately fiscal gains.  Given today’s economy, it is not surprising to see more emphasis being placed on financial performance, advanced clinical outcomes and patient satisfaction,” states Lois Dister, Executive Vice President and Managing Director with Cejka Search’s Executive Search Division.  “More and more, physician executives are eagerly embracing accountability for their leadership in these areas and are relied upon by their organizations to move forward the strategic direction necessary for success.”

Lois Dister is Executive Vice President, Managing Director of Cejka Search, Executive Search Division (www.cejkasearch.com/acpe).

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