The number one section physicians refer to when receiving their contract is Compensation. We know our worth and we want to ensure that we are paid fairly. But how do we really know what’s fair? The answer is rather obtuse, yet important to understand as you enter your negotiations. We will try to define some of the most important terms and reports for you here so you can feel confident in achieving your highest possible compensation.
We negotiate with our employers regarding compensation, but did you know our compensation is actually highly regulated by the federal government? We are a transaction and federal agencies regulate this transaction with certain laws. You’re likely to have heard of Stark Laws and Anti-Kickback Statutes. These can lead to criminal penalties if we as physicians violate these laws, even if it was out of ignorance and/or without intent. Mistakes can cost employers billions of dollars, and physicians can be directly financially liable as well. Understandably, there can be challenges to negotiating compensation when employers fear non-compliance, especially if the organization you are working for does not have a strong definition of FMV with strict protocols and they haven’t analyzed the compliance factors. Going into your compensation negotiations with a solid understanding of where your employer is coming from can help you to optimize your outcomes financially.
So what is fair market value (FMV)?
FMV is driven by the Center for Medicare and Medicaid, CMS. Essentially, this is referencing the negotiated compensation between the employer and the physician that is determined in a manner not taking into account the volume or value of referrals generated by the physician. For a physician working within a larger corporation, where you are likely required to refer within your own system, your salary cannot depend on how many referrals you make or what additional income those referrals generate. As a result, many of you are paid on a wRVU basis, ie a production based model, directly reflective of the work that you as a physician do. This term is less pertinent to physician-owned practices as compensation in these practices is generally tied to cash remaining after other expenses have been paid.
CMS offers examples around how to define fair market value, suggesting that outlying factors are appropriate to use in this calculation. For example, a physician working in a higher cost of living area with a strong payer mix or a highly sub specialized and sought after physician may be situations in which a higher compensation is justified.
What does the Stark Law and Anti-Kickback Statute have to do with Fair Market Value?
Two terms to be familiar with, also defined by CMS, are the Physician Self-Referral Law (more commonly known as the Stark Law) and the Anti-Kickback Statute. Although these do not seem to have anything to do with FMV based on their most basic definition, they actually do! The Stark Law prohibits a physician from referring a patient to an entity or “designated health services” if the physician has a financial relationship with this agency (with some exceptions). Several points within the Stark Law that are clearly linked to FMV compliance include that physician compensation should be consistent with productivity (although CMS does state that both market data and physician-specific data should be factors) and compensation should be related to the services the physician provides; ie if you have APPs working within your clinic, your compensation cannot be tied to services provided by the APP and then applied to you. The Anti-Kickback Statute (AKS) relates to referrals for healthcare items and services. As a physician we are not allowed to receive remuneration from an item or service that may cause us to refer our patients to that medication, medical supply, or other health service. The terms of AKS are similar to the Stark Law, the volume or value of referrals cannot be a factor when determining compensation consistent with FMV.
How does an employer determine fair market value for their physicians?
Employers will generally create a team or hire a team specifically dedicated to the task of determining how they will comply with these laws – this may include lawyers, financial personnel, a CMO or CEO, or HR representatives. They will review their specific institutional data points (exs. payor mix, cost of living, patient acuity, etc) and determine a number (or a range that includes a floor and a ceiling) that they can offer physicians as compensation in each specialty. Previously, organizations believed that if they offered compensation at or below the 75th percentile of the MGMA provider compensation survey dataset, they would be compliant, however, CMS has specifically stated that compensations lower than the 75th percentile is not necessarily compliant, and higher than the 75th percentile is not necessarily non-compliant and suspect.
Overall, CMS is encouraging employers to set physician compensation in a mindful manner. While many employers will continue to use survey data sets to understand national compensation trends, with CMS’ definition of FMV they appear to hope that employers will be mindful of the nuances of their practice, their patients, and the community when determining appropriate compensation rates.
As a physician, what can you do?
For one, understand what the employer is referring to when they state Fair Market Value. Know this is not a number you can search and find online – the employers are individually defining and reinforcing these rates. Two, you can ask more questions to better understand your employer’s perspective: how do you set your compensation? How often is this re-evaluated? What survey data sets do you reference, if any? How do you see compensation change for physicians over the years they practice at this organization? Three, you can understand the differences between the various physician compensation survey data reports when your employer references which they are utilizing in their calculations. Below is a summary of the main survey data sets as well as some additional data sets you may come across in your searches. There are many others you can find if you spend enough time on your search engine, however highlighted here are the most commonly referenced.
I list the Medical Group Management Association (MGMA) as first as this is the most commonly utilized data set by organizations. It is released annually, typically in early to late spring. In May 2022 they released their 2022 survey which references rates from 2021. The survey respondents are mostly mid-sized groups (6-30 physicians) and some single specialty associations, and most are MGMA members. Overall this survey is sent to a large number of groups and generally yields 1000-2000 responses each year, 5 to 10 times as many as AMGA which is listed below, yet only 10% of their total survey recipients.
This report includes a wide variety of physician specialties and includes numerous additional benchmarks such as compensation, productivity, and benefit metrics. MGMA reports first year salary as well as multi-year salary and includes data by region and newly in 2022 by state. This is a very comprehensive survey set and overall is the most commonly used and referenced.
This generally has the highest listed compensation of all of the surveys and given its higher response rate is one of the more reliable methods.
Because many of these survey data sets are prohibitively expensive for individual physicians to purchase, we here at Contract Diagnostics purchase this data on your behalf every year. Our Compensation Rx product is available to you at a fraction of the cost and can provide comprehensive data specific to your individual situation, including both MGMA data and our real-time internal data from physicians we have worked with recently, including this month! Having this knowledge allows you to come to the table educated and empowered with an effective and well founded negotiation strategy.
The Association of American Medical Colleges (AAMC) releases several reports. One is the Physician Specialty Data Report which is released every other year and reports both resident and fellow salaries as well as salaries of academic providers in practice. The AAMC Faculty Salary Report is released yearly and provides compensation for full-time medical school faculty. They provide a fairly comprehensive and specific report, including info regarding rank, degree, department/specialty, school ownership, and region. For those who work in an academic center, you may be able to find this information at the University library. Keep in mind salaries at academic institutions are published online, so you can also research what your partners or future partners are generating as a reference point. Look up the football coach while you are at it! Yikes.
The Sullivan, Cotter, and Associates (SCA) report is released annually. Survey respondents are mostly hospital employed physicians and some community-based teaching hospitals, as well as a smattering of HMOs and mid to larger groups of 20+ physicians. SCA sends their survey out widely however receives only about 200 responses (about 1.5% of their survey recipients), a much smaller study and sample size. This overall has one of the lowest reported compensation values by specialty.
The American Medical Group Association (AMGA) releases their report annually. Survey respondents are AMGA and AMA members from large multi-specialty groups. Given their small sample size, they also tend to have fewer respondents, in the 200’s-300’s, about 10% of the survey recipients.
Rates tend to be lower than MGMA and some other survey reports and generally this is regarded as a less reliable source.
Doximity is a social media platform for physicians, essentially an online directory of providers. They include medical news and telehealth tools and in 2020 and 2021 published free physician compensation reports. They have now switched to a “Salary Map” which physicians can access once they input their own salary data. Assuming providers enter their data honestly and accurately, this could develop into a useful tool for physicians to use when browsing for a job and compensation, however it is unlikely hospitals will reference this data when setting a compensation plan since it is all self-reported and lacks detail about job specifics.
Medscape is an online resource for medical education and news. This report is generated from a survey of physicians who are Medscape members. They reported in 2022 receiving 13,000 replies. Again, this is useful information for physicians who are browsing, but is self-reported and lacks specific details, making it more difficult to apply to your specific position.
MD Ranger is an organization primarily designed to support the healthcare systems, i.e. the employer. According to their website, they generate a physician compensation report annually that identifies benchmarks derived from a database of contracts from over 45,000 contracts from over 225 facilities. Their report is meant to help facilities achieve and document fair market value. They do make some of their data available to physicians at a hefty price tag.
Some other surveys found include
- Salary.com, which offers calculators to estimate salary by region and specialty and includes a personalized salary report, cost of living, and provides job listings. A fun site to browse as you info-gather, but unlikely to have utility in your negotiations.
- OfferDx is a website started by a fellow physician to gather self-submitted reports and summarize numbers from the aforementioned reports (no breakdown by region or further benchmarks).
- Pinnacle Health Group is a health care advisory resource and reports first year salaries.
- Hay Group and Hospital and Healthcare Compensation Services reports from large multi-specialty groups, hospitals, and HMOs.
- Merritt Hawkins is a physician recruitment firm whose compensation data is based on posted job openings and their advertised salary.
You can find numerous other resources when you search online, which can be interesting as you research, but generally lack utility in your negotiations as they are not widely known and respected. Overall, note that even the most prominent of these studies (i.e. MGMA) only has up to 10% of their survey recipients responding. For reference, there are reported to be over 126,000 physician groups in the country, ranging from solo practitioners to large multi-specialty organizations, and over one million licensed physicians in the US. We know the recipients of the surveys only represent a miniscule fraction the facilities and groups in the country. So while these numbers provide a reference, they are minimally representative of any physician’s specific specialty (even the largest MGMA study is reporting on less than 1% of the country’s physicians!), never mind the numerous other factors that go into a job and compensation consideration. Additionally, who knows what exactly prompts these groups to reply to the survey in the first place – there is some inherent bias even to these groups responding, just as there is to the individual physicians who respond to the physician driven, self-reported studies. On top of all of this, since most of these sets are reporting last year’s data in April or May of the current year, using these as a compensation reference is already one to two years out of date. For example, if you are applying to a job in spring 2023 as we are in right now, and the employer happens to be using the most up-to-date MGMA 2022 data, they are offering you a 2021 salary, which we know was likely to be impacted by COVID and certainly does not represent the dramatic inflation rates we have seen over the past few years. In summary, these survey data sets are one of the few resources we as physicians have as data and leverage, yet it is important to note their flaws and remember the importance of taking the full picture into consideration.
There are numerous areas to consider when negotiating your compensation: your story matters, the facility’s story matters, the community’s story matters, the position’s story matters, and so do the federal laws. When it comes time for you to review, understand, and negotiate your contract, contact a physician contract review specialist like Contract Diagnostics so we can help guide you through the steps you can take to optimize your contract and your compensation in light of these federal rules and the overall story.
*Of note, this document is not meant to be interpreted as legal advice; this is a fellow physician’s summary and understanding of the laws and reports and how they apply to her fellow physicians and their contracts.
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