10 Common Physician Compensation Mistakes

October 9, 2017
Dylan Fisher

Looking at a profit and loss statement shouldn't ruin your day. Here are some common mistakes to avoid at your practice.

If you're familiar with the beloved sitcom “Seinfeld,” then you have probably seen "The Opposite," an episode where George Costanza takes it upon himself to do the complete opposite of what he believes is right. The episode serves as the inspiration for Craig Pederson's presentation, “Physician Compensation: 10 Common Mistakes (and Four Solutions),” at the Medical Group Management Association (MGMA) Annual Conference in Anaheim, Calif.

"I am going to go through case studies and specific examples of financial train wrecks. I'm not trying to tell people what to do, I'm telling them what to avoid. Case studies allow examples to become a lot more real," says Pederson, a principle consultant at Insight Health Partners based in Minneapolis, Minn.

Physicians Practice recently spoke with Pederson about the importance of good compensation practices in today's healthcare landscape.

Physicians Practice:Why is physician compensation such a hot topic in healthcare today?

Craig Pederson: Today, more physicians are employed by health systems. Almost 100 percent of which are losing significant money. If you look at a profit and loss statement on a physician enterprise, it's the first number that jumps out to you. If you do [the P&L statement] wrong, nothing else matters. When the hospital side of the business starts performing poorly, the losses on the physician side cannot be hidden anymore. It used to be that someone would come in and work just on the physician enterprise side of the business. Now what we're seeing in a lot of health systems is that is no longer the case. If you do physician compensation poorly, you lose key physicians and down-stream revenue to the health system. 

PP: Does the current physician shortage impact physician compensation?

Pederson: It does. If you come in and say, 'I've got too many physicians given the work effort I see going on here, we need to downsize 10 percent,' that is the exact response of the health system. But, when you go from organization to organization, the number one problem plaguing them is productivity that does not match the provider capacity at the health system.

There are a lot of employed primary care physicians producing well below the national median for relative value units. Now, I go out and hire a bunch of mid-level providers because I have to for value-based care and to provide increased access to the system. Providing an adequate level of access is the responsibility of the organization. This responsibility can lead to desperation, which can sometimes lead to overpaying a key surgeon or medical specialist. That becomes a mission cost to provide the service for the community.

PP: What should attendees take away from your session?

Pederson: I hope with all those cases we go through, some of the lessons will be directly applicable to the audience. This is not limited to employed physician groups. The presentation can apply to everyone. I sure hope people think that my presentation is different and that it's fun.

Pederson's presentation is scheduled for Monday October 9, from 1 to 2 p.m. Pacific.