Compensation teams, like human resources, tend to be tucked away in back hallways and basements that most hospital employees don’t even know exist, where we can pretend that these functions, while necessary, are ancillary to the life-saving work happening around them. What we haven’t acknowledged (until very recently, perhaps) is that the decisions made in these spaces are actually primary influences in clinicians’ professional and personal lives.
These days, the average physician graduates with over $200,000 in medical school debt[1]. (More if you’re counting undergrad.) They’ve spent years working at what equates to below minimum wage in residency and fellowship, and generally don’t start earning a “real” salary until their late 30s or early 40s – around the same time that their peers are having children, buying a house, and of course, paying back all those loans.
Unfortunately, their 6+ years of clinical training generally doesn’t include any financial literacy education or introduction to clinical contracts. Many clinicians sign contracts that incorporate a guarantee or cliff, without understanding that their compensation is protected as they ramp up a practice, and after just a couple years are surprised to find themselves earning less than their perceived salary.
A more influential decision in compensation management isn’t necessarily the total earnings paid to a clinician, but the method and timing of that payment. Most employed clinicians receive a set amount in base pay, and variable payments for productivity, quality, citizenship, and other work efforts on top of that. These payments may be monthly, quarterly, or annual, and can be wildly variable and unpredictable. In many cases, if a clinician underperforms compared to budget or historical earnings, they may also be subject to a clawback of previously paid dollars or a withhold on future earnings.
Compensation isn’t hidden away in a corner of clinicians’ lives – it’s front and center in their minds as they make professional decisions, including whether to stay employed in your organization. Here are 7 ways to improve clinician retention through your compensation:
- Understand your true cost.
This isn’t a simple question of revenue (or receipts) and expenses; take a step back and quantify the cost of a clinician leaving your organization due to frustrations with the way they are compensated. Whether the resignation is related to stress, lack of stability, or future earning potential, the end result is the same – it costs a provider organization $500k-$1M to replace a departing physician[2].
- Consider your culture.
Each organization, specialty, and team has their own culture and goals. Depending on the membership of your team, their prior experience in compensation models, and goals for their own clinical careers, you may find that an RVU-based model, a receipts-based model, or a hybrid model that is only partially based on productivity is right for your group. Learn what is important for your team: Is it control over their schedule? Balancing clinical and research time? Optimizing for earnings? Align your base model with team culture to ensure everyone is rowing in the same direction.
- Control for the uncontrollables.
Most of us would be dissatisfied if we were paid based on processes or results outside of our control. Tying clinician earnings to receipts, or on-time starts, or other metrics that are primarily driven by others can be frustrating for both parties, and worse, demoralizing enough to compromise performance. Remove those factors outside the clinician’s scope from the equation of their pay and replace them with an adjacent metric, or a quality/value metric aligned with the team’s goals. From receipts, maybe it becomes RVUs. From on-time starts, identify reasons for delays in on-time starts with the team and create a shared value metric.
- Incentivize precisely.
Incentives can be wonderfully effective and enticing to clinicians, but only when those incentives are thoughtfully and judiciously applied. No mere mortal can achieve 50 different incentivized metrics at once. Pick the top few things that matter to the organization and are controllable by the clinician, and set measurable, achievable goals around them.
- Be transparent.
A fantastic compensation model will still alienate clinicians if they don’t understand it, or how it affects them. Document the model in detail, share examples and models based on past performance, and have an open door policy for questions. Proactively communicate around potential implications of personal matters such as parental leave, part-time employment, and family benefits, to name a few.
- Provide stability.
No one wants to play Russian roulette with their ability to make the mortgage payment. If a clinician’s earnings are stable, tuck the bulk of their earnings into a base. Then, bonus out the rest on a quarterly or semi-annual basis. This smooths the monthly paycheck to account for seasonality or unexpected earnings dips and reduces the angst around a bad month impacting their financial security.
- Communicate for financial literacy.
Most medical schools don’t provide financial literacy education (although some are starting to!)[3]. Just as clinicians won’t expect us to know how to perform cardiac surgery, we can’t expect them to understand the incredibly (and inanely) complex financials of a healthcare organization. Every communication is an opportunity to educate for financial literacy. Because when we know better, we do better.
[1] https://www.bankrate.com/loans/student-loans/average-medical-school-debt/
[2] https://www.medicaleconomics.com/view/calculating-financial-costs-physician-burnout
[3] https://www.aamc.org/news-insights/7-ways-reduce-medical-school-debt
