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Components of a good compensation plan

Hospitalist Leadership Connection, November 16, 2010

You can judge a proposed compensation plan based on the following questions:

1. Is the plan easy to understand?
It should be easy for the hospitalists and administrators connected to the practice to describe how the compensation system works and the rationale behind it.

2. Is the plan easy to defend in public?
A good compensation plan should not embarrass or worry hospital personnel, patients, or a malpractice jury if they learn how the compensation system works. For example, most hospitalists would be uncomfortable with a malpractice jury knowing that they are paid a bonus for decreasing length of stay if a patient brought suit because of problems associated with early discharge.

3. Does the plan comply with laws and regulations?
The compensation plan must be within fair market value, as well as meet other standards. Legal personnel might want to review compliance.

4. Can the plan be modified over time?
A practice should anticipate that, over time, the schedule and the way work is distributed among providers may change significantly. It is best if a compensation plan does not need to be rewritten every time there is a change. Does the plan continue to work if the practice adds more providers or if it implements a schedule that is significantly different from the current schedule?

5. Does the plan reward good work?
Ideally, the compensation methodology should support the practice’s goals and encourage hospitalists to think of themselves as owners of the practice, even if they are contractors. Any variable or incentive component of compensation should be large enough to influence behavior, and incentive targets should be set so that they are not too easy or unreasonably difficult to achieve.

The above excerpt is adapted from The Hospitalist Program Management Guide, Second edition, published by HCPro, Inc.

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