AUGUST 13, 2017

Welcome to the Health Care Compensation Update eNewsletter
Editor: Benjamin R. Grant

The Sky-High Pay of Health Care CEOs
The CEOs of 70 of the largest U.S. health care companies cumulatively have earned $9.8 billion in the seven years since the Affordable Care Act was passed, and their earnings have grown faster than most Americans' during that time, according to an Axios analysis of federal financial documents. Total earnings amount to an average of $20 million (median of $11 million) per CEO per year. A vast majority of pay came in the form of vested stock. John Martin, former CEO of the pharmaceutical company Gilead Sciences, made $863 million in the ACA era -- the most of any health care CEO. Health care inflation continues to blow away general economic inflation, and a big reason why is because health care executives are not paid to slow spending.

Key Trends in Physician Compensation and Practice Acquisition
Practice acquisitions are becoming increasingly complex as the remaining independent practices tend to be larger (greater number of full time employees) with stronger financial fundamentals. Practice leaders that solicit input from physicians and actively incorporate that input into their compensation model for newly acquired practices are more effective in fostering a greater sense of transparency and collective strategy throughout the practice. In conjunction with regular compensation assessments and comparisons to prevailing market benchmarks and trends, an evolving practice must create a flexible incentive structure that promotes common organizational objectives in quality and efficiency and also rewards outstanding individual efforts. Post-acquisition, physicians often lose their autonomy to make certain decisions and may feel disconnected with the new compensation philosophy. It is important for hospitals and health systems to have open communication with members of the acquired practice and provide a platform for physician input on compensation structure and goals.

7 Statistics on Physician Compensation -- Average Sign on Bonus is $18k

  1. Nearly 40 percent of physicians report their compensation was the same in 2016 as it was in 2015; 9.1 percent said their income decreased by 8 percent or more and 11.5 percent said their income increased 8 percent or more.
  2. Some physicians received a sign-on bonus for their current roles, with the average bonus being $18,137. Physician compensation plus their annual bonus by specialty includes: Cardiology: $364,169; Urology: $357,398; Emergency medicine: $306,389; Pulmonology: $281,519; Family medicine: $210,112; Pediatrics: $194,915; Endocrinology: $190,081
  3. The average physician attended two medical conferences last year.
  4. Around half -- 45 percent -- of physicians report being satisfied with their income; 9.7 percent were extremely satisfied and 20.7 percent were very satisfied. Just under 20 percent were very dissatisfied and 5.1 percent were extremely dissatisfied.
  5. Twenty-nine percent of physicians reported outstanding student loan balances and 9 percent said they received student loan assistance in 2016.
  6. Two-thirds of the physicians reported no contact with medical recruiters to find their current position.
  7. Most physicians reported job satisfaction in 2016: Satisfied: 40.5 percent; Very satisfied: 34.5 percent; Extremely satisfied: 13.1 percent; 11 percent reported being dissatisfied.

Stark Law Update: Physician Compensation Scrutiny Continues in Recent FCA Settlement
On May 18, 2017, DOJ announced a settlement agreement for $34 million to resolve claims related to alleged violations of the Stark Law with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The complaint's allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B drug pricing program, substantially reducing the cost of chemotherapy drugs. The complaint alleges that the physicians "expressed concern about losing a substantial portion of the income they had received under the collection compensation model as a result of the loss of ownership of the Infusion Center." In response, the Hospital allegedly assured them that they would be "made whole" for any such losses. While it doesn't provide precise details, the complaint alleges that the Hospital addressed the shortfall by establishing a new work Relative Value Unit (wRVU) for drug administration in the infusion center, which now operated as part of the Hospital. The value of this new wRVU was allegedly calculated by "solving for" the amount of the physician's loss and "working backwards from a desired level of overall compensation." Physicians were able to earn the wRVU for the patients they referred to the infusion center. The complaint alleges that the drug administration wRVU rate was 500 percent of the comparable wRVU for in-clinic work. In its announcement of the settlement agreement, DOJ characterized the compensation arrangement as being "based in part on a formula that improperly took into account the value of [the physicians'] referrals of patients to the infusion center operated by [the Hospital]." In addition to the monetary settlement payment, the Hospital and Clinic have entered into a five-year corporate integrity agreement (CIA) with the Office of Inspector General (OIG). Neither the settlement nor the CIA constitutes a determination of actual liability or wrong-doing by the Hospital.

Plan Sponsor Health Care Reform Update: Planning for 2018
Plan sponsors of employer health plans are fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) and as such, should undertake the following actions to satisfy fiduciary duties: Plan Document Compliance. Plan sponsors should continue to ensure that plan documents are up to date with current law. Evaluating Reasonableness of Service Arrangements. Vendor relationships, such as those with third-party administrators or consultants, should be evaluated. Impact of DOL Fiduciary Rule. Plan sponsors should consider the impact of the Department of Labor fiduciary rule on health savings accounts (HSAs). Ongoing Plan Compliance Employer sponsors of group health plans should continue to ensure plan operations remain compliant. Plan sponsors and plan administrators should consider conducting routine self-audits to make sure the plan is operated in accordance with its terms. In particular, plan sponsors should focus on the following: Plan sponsors that are applicable large employers should make certain that full-time employees (those working an average of at least 30 hours per week) are properly identified and offered coverage meeting ACA standards. Plan sponsors should confirm that wellness programs meet final rules on nondiscrimination requirements, issued by the Equal Employment Opportunity Commission and effective January 1, 2017. With the onset of Phase 2 of the HIPAA audit program conducted by the Office of Civil Rights to assess HIPAA controls and procedures of covered entities and business associates, plan sponsors should complete a compliance review and ensure group health plans' HIPAA privacy and security policies and procedures are up to date. Plan sponsors should make certain that plan documentation and administration are compliant with mental health parity requirements. These rules generally require that group health plans providing mental health or substance use disorder benefits offer them with no greater restrictions than those placed on medical or surgical benefits (such as those that apply to financial requirements or treatment limitations).



    Activity Directors, Nurse Aides See Biggest SNF Pay Bumps in 2017
    Activity directors and non-certified nurse aides enjoyed the largest pay raises -- on a percentage basis -- of all skilled nursing employees between 2016 and 2017, according to the latest data set from the Hospital & Healthcare Compensation Service. Among salaried employees, activity directors took the crown with a bump of 3.44%, or a rise from $39,520 to $40,878. Nurse aides saw the biggest increase of any hourly employees, with wages rising from $10.53 to $10.90 per hour, or 3.50%. Staff registered nurses had a bump of 3.33%, for comparison, while certified nurse aides only took home 1.47% more in hourly wages.

Mercer and PayScale Announce Strategic Alliance for Compensation Data and Software Solutions

PayScale, the leading provider of compensation management software and real-time salary data, and Mercer, a global consulting leader in advancing health, wealth, and careers, and a wholly-owned subsidiary of Marsh & McLennan Companies, have formed a strategic alliance to bring together Mercer's expertise in compensation consulting and information products with PayScale's strength in technology and data science to advance compensation data and software solutions for clients and the future workforce. In connection with this alliance, Mercer will secure an equity stake in PayScale, which has built the world's largest crowdsourced database of salary profiles utilizing big data technologies. This investment builds upon the firm's leading position in reward consulting and information and its recent launch of Mercer Digital to support clients as they transition to new models of work that are enabled by digital technologies. For PayScale, this relationship enhances the company's portfolio and product capabilities with deeper consulting and data expertise to tailor solutions to customers' needs. As Mercer will provide a global channel for distributing PayScale's products, PayScale will provide a channel for Mercer's products. Together, they will collaborate to develop new, innovative compensation and workforce data products and solutions.

For a complimentary PayScale benchmark analysis for a position of your choice, please email BenG@payscale.com.

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Benjamin R. Grant