Productivity-based radiologist compensation: setting the baseline

May 28, 2010

The first article in this series discussed why productivity-based compensation is controversial based on the various production levels in the group: the racehorses, plowhorses, and plodders. Once productivity-based compensation has passed the conceptual stage, the real work begins. And this phase, due to its potential complexity and the reality of potential salary adjustments, often represents the point at which the wheels fall off.

 

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The first article in this series discussed why productivity-based compensation is controversial based on the various production levels in the group: the racehorses, plowhorses, and plodders. Once productivity-based compensation has passed the conceptual stage, the real work begins. And this phase, due to its potential complexity and the reality of potential salary adjustments, often represents the point at which the wheels fall off.

The first step is to calculate what it takes each partner to “pay for him/herself” (covering salary and benefits). It is useful to calculate this several different ways.

First, what was actually credited to each physician in terms of revenue for the past 12 months? (This data should be available from the practice’s billing system). This should provide a “first cut” review of those who do or don’t pay for themselves.

Then complete cross-checks to validate information and instincts:

  • Using the average (total practice) collections per procedure, calculate how each physician fares based on total procedures read for the past 12 months.

  • Complete the same calculation based on collections per RVU and each physician’s annual RVU production.

There should be a reasonable cross-correlation between the various revenue perspectives. Using the combination of calculations to establish a baseline expectation will hopefully be viewed as “fair” among members of the group. That doesn’t mean they will be pleased with the results, but the methodology is defensible.

Question 1: Are all physicians (including the plodders) at least paying for themselves, in terms of base salary and benefits? If not, what is the gap? Would everyone meet a baseline of 70% of the minimum number of procedures and/or RVUs it would take to cover an individual salary? In other words, if the requirement was that everyone must meet a minimum goal to cover 70% of their costs, would that be a realistic expectation?

Question 2: What is the gap between the “pay for yourself” level and the average partner salary, including bonus distributions?

Normally a physician who generates barely enough to cover his/her salary would take a tremendous income hit if paid only the baseline. This is the greatest barrier to moving forward with a productivity-based compensation model, since that person is likely to carry personal debt obligations commensurate with income and a large income reduction could be catastrophic.

Question 3: Is it possible to increase the base salary to a level that might be more acceptable to the lowest producer and still have it make sense in terms of overall profitability and the remaining bonus pool? This dilutes the potential bonus pool but may be a necessary interim step.

It should be noted that even radiologists will demonstrate the “Hawthorne Effect,” whereby productivity increases only because it is being studied. In other words, productivity per physician is likely to increase incrementally without additional incentive. So if the gap between the lowest producer and covering compensation is low, the hurdle will be less.

Question 4: Are there built-in barriers to productivity, whether administrative demands, coverage of a low-volume facility, or a seat responsible for a high volume of low-value procedures (plain films out of the ER, or perhaps women’s imaging)?

In fairness to a general radiologist with a less than favorable slot-but who plays an essential role in the service delivery of the practice-how could this discrepancy be resolved? As another example, while the physicians with the most administrative responsibility are often also among the most productive, is it possible an adjustment may be in order to compensate for administrative time? Can the group establish an equitable payment for necessary variances in practice patterns? Could there be a set stipend for additional duties? Developing a complex RVU-type “value” for them, which is another option, has often proven to be the stumbling block in this type of compensation model. If general radiologists are reading all modalities, this should be less of an issue and the limiting factor will be the abilities and/or speed of reading the more complex cases. This would not logically warrant a payment adjustment, since it represents the heart of the productivity issue.

Question 5: Are there other “yes, but” objections likely to arise? Anticipating them in advance and coming up with a suitable response will help move the project along.

Once this analysis is complete, it can be presented to the shareholders, assuming a majority or super-majority vote may be required in order to change the compensation model. At this point, the goal is not to seek final approval of changing to a productivity-based compensation model but to begin to set the stage, identify further objections, and provide objective analysis for review. The desired vote in terms of moving to the next level of analysis would be “yes.”


Ms. Kroken is a consultant and principal in Healthcare Resource Providers. She can be reached by e-mail at pkroken@comcast.net.

Next installment: a sample performance-based model