Physician Compensation Considerations Amidst the COVID-19 Pandemic
As the COVID-19 pandemic grows in its severity and impact, there is rising urgency to address imbalances between physician compensation and their current work demands.
Some physicians — including intensivists, emergency medicine doctors and hospitalists — are now working in extreme conditions, with longer hours and extra shifts, all of which add to the stress and intensity of the current COVID-19 crisis. Other physicians may have been reassigned to new roles with entirely new responsibilities, such as anesthesiologists, for which different compensation is appropriate. Finally, some physicians, such as orthopedists and gastroenterologists, are experiencing significantly reduced volumes due to cancellation or delays of elective or non-emergent cases and procedures. Regardless of an individual provider’s compensation structure, there are risks of under- and over-compensation and, at best, a misalignment of compensation with productivity, worked hours and clinical and personal burdens.
In the moment of pandemic crisis, it is unwise to implement fundamental changes to physician compensation models. However, some considerations and short-term actions are warranted and necessary. Given the likely duration of the pandemic, the impact on healthcare revenues, expected significant deterioration in health system and medical groups’ financial performance, and the significant alterations likely to take place in physician practices, it seems untenable that physicians can categorically be “kept whole.” Health systems, medical groups and faculty practices should consider the following steps.
Review pertinent physician employment contracts to understand obligations, commitments and due process.
Determine a strategy with legal guidance to engage in collaborative actions/discussions with physicians where the current compensation model is fully contractual.
If determined to be “at will” status, ensure and communicate the short-term strategy is consistent with those actions being implemented for health system senior executives (other highly compensated employee categories).
Communicate to all physician constituents an awareness of potential compensation issues and the intention to address them both in the present and upcoming months as the pandemic experience is fully realized. Key messages to all physicians are:
There is a desire to keep compensation fair, reasonable and consistent with dynamics across regional markets.
There is a need to make immediate, short-term adjustments to compensation that support health system needs while addressing physicians’ personal stability, to the degree possible.
The current situation is not isolated. Many health systems and medical groups are facing these issues and the organization will maintain awareness of actions and trends locally, regionally and nationally.
The goal is for compensation to be thoughtfully and transparently managed throughout the acute pandemic phase, during an unknown but potentially lingering period of impact on healthcare providers, and eventually to settle as revenues and clinical volumes stabilize.
Address each unique situation with a consistent set of guiding principles. Key questions to be answered that will inform an organization’s guiding principles include the following. Is it best to have specific compensation reductions or merely deferral pending future return of clinical volumes? What is the timing for restoring compensation based on predetermined thresholds in production or clinical volumes? Is there value in a staged or sequenced restoration based on achieving specific benchmarked metrics? How should these thresholds relate to pre-COVID-19 activity, particularly if the COVID-19 impact is lingering? If relying on a true-up of salary or monthly draw at a future date, what must be taken into consideration now and later? Informed by guiding principles, attend to each of the following situations, which may have implications for compensation but not necessarily require action:
Providers who have been redeployed to a role that differs from their usual area of practice;
Providers working excessive hours due to demands of the pandemic;
Providers delivering services remotely via telehealth;
Providers who are working, but not achieving historical production levels and are, therefore, experiencing lost income;
Providers in specialties currently experiencing low demand; and
Providers who are near retirement or otherwise in a position to take unpaid time off.
Take proactive and decisive action to address the need. Develop guidelines that can be consistently applied and sustained for many months until the pandemic stabilizes. For example:
Define a process to equitably determine monthly base salary for both salaried and incentive-based physicians.
Consider a modest reduction from historical compensation trends that can be trued up as the pandemic subsides or at year’s end.
Temporarily suspend all incentive bonuses, value-based care payments and other bonus arrangements.
As immediate, short-term changes in compensation are made, keep the following considerations in mind:
Be mindful of the impact COVID-19 is having on physicians’ behavioral health, resilience and professional commitment to remaining engaged; be thoughtful about all present and future provider workforce concerns.
Define the criteria for when to move back to original compensation models.
Acknowledge the need to develop new longer-term models — this is a valuable period of learning about approaches to physician compensation, how they need to align with both medical group and health system performance requirements, and how they are best used to help drive robust alignment.
Be attentive to contract terms, fair market value (FMV) and legal review.
Be consistent with how other highly compensated earners in the health system are being managed.
Communicate and engage with physician leaders and physicians overall about compensation and how it is properly a tool of alignment and shared success. Resist seeing compensation as a “third rail” to be avoided, as addressing physician compensation will be a necessary aspect of ongoing financial performance improvement for both the medical group and health system.
Realize that the impact of our collective COVID-19 experience will endure and that much of healthcare, and physician practice in particular, may be fundamentally different as we go forward. Even prior to COVID-19, there was a strong emerging awareness that compensation models based on productivity and net collections were increasingly mis-aligned with health system goals and becoming unsustainable. It is likely that post-COVID-19 physician compensation will need a fresh look and new approaches that ensure synergy, alignment and accountability.