Changing Market The Business of Healthcare

More on Compensation Plans – Align Rewards With Required Efforts


Physicians may trust their colleagues in the sense of their professional relationships, but when it comes to business relationships within a medical group, especially those relating to money, trust is a rare commodity.

In fact, in connection with money matters, most group members tend to have an “eat what I kill” mentality, seeking to maximize their own compensation.

Groups can harness their physicians’ drive to self-maximize through a production-based compensation model, but those efforts generally fall short in the greater scope of advancing the group’s overall business success.

That’s because focusing solely on incentivizing personal productivity serves to disincentivize participation in efforts requiring teamwork and interferes with the group’s ability to direct its physicians to address issues beyond the ones that generate immediate income for that individual.

For example, paying $X per unit incentivizes the generation of units; it does nothing to incentivize (and therefore disincentivizes) cooperating with other members of the team on initiatives directed towards referring physicians.

A more effective approach is to design a compensation plan that contains both individual incentives and rewards for group efforts, such as leadership, overall group or practice section profits, or the group’s achievement of specific business targets. And, to engender trust, the rules governing how the compensation formula works must be clearly understood so that the resulting compensation can be proven.

Note that I do not mean that there cannot be subjective factors – in fact, there must be subjective factors. However, the way in which those subjective factors are applied must be contained within overall group beliefs (for example, measured consistent with an overriding principle that the group always responds to hospital needs) or within specific parameters (for example, measured by participation on group committees or in mentoring new group members).

If your group truly is a group (see my post The Four Circles™ for the answer to that question) then you must align your compensation plan to best assure your group’s success.

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