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Q&A: What is the most common hospitalist compensation model?

Hospitalist Leadership Connection, September 14, 2010

A: Currently, the most common method of compensating hospitalists is by combining fixed and variable components. The fixed component, usually called based salary, provides security for the physician. The variable component is designed to encourage and recognize good performance.

Many groups that use this method of compensation previously had a straight salary and simply added an incentive component. In many cases, the incentive component is too small or too easy (occasionally too difficult) to reach, and it fails to motivate or meaningfully reward physician performance. To be effective, the variable component should be about 20-25% of a hospitalist’s annual income. And it should be connected to metrics that require the hospitalist to stretch to achieve, but that are not so unreasonably difficult to achieve that he physician ignores the incentives.

Incentives based on production (e.g., wRVUs, encounters, new patients) are more popular, with quality metrics (e.g., Centers for Medicare & Medicaid Services core measures, patient satisfaction) close behind. Incentives can be based on other metrics, such as committee or project work, teaching, or other activities that are especially important for a given practice.

Keep in mind that incentives such as production are best paid based on each hospitalist’s individual performance, whereas others such as core measure performance usually lend themselves to payment on a group basis because it can be difficult to attribute performance to one physician (e.g., which hospitalist gets credit or blame for a patient getting or not getting a Pneumovax).

The best performance metrics to use are the ones already being tracked by the hospitalist group and/or hospital. It is important that all parties have reasonable confidence in the data. Avoid basing incentives on measures that are difficult to measure and which there is likely to be significant doubt about the accuracy.

The above excerpt is adapted from The Hospitalist Program Management Guide, Second Edition, published by HCPro, Inc. Download a sample chapter online by clicking on the “Browse the book” icon.

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