If you work for a large medical group or hospital system, you may be involved with recruiting physicians or negotiating employment agreements. It’s a set of skills worth learning because so many systems are on a recruiting binge. Salary levels have consistently grown at single digit rates for years. But the type and size of physician recruiting incentives have been more variable.
With the recent release of the Merritt Hawkins 2017 Review of Physicians and Advanced Practitioner Recruiting Incentives, I thought you might like a deeper review of that topic.
When recruiting physicians and advanced practitioners (physician assistants and nurse practitioners), the primary determinant of success in attracting good candidates depends on:
- Compensation offered;
- Quality of life (location, hours, cultural fit, etc.); and,
- Other recruiting incentives.
But it is equally important to understand recruiting incentives that might be offered and how they have evolved in recent years.
Physician Recruiting Incentives May Determine the Outcome
Each physician candidate is generally concerned with a handful of issues when seeking a position.
It might be primarily salary, location and loan repayment. For some, it is signing bonus and salary. For others, it might be opportunity for advancement and retirement plan options.
I once spent over a year in the recruitment of a urologist. He was very meticulous and somewhat demanding, but always cordial during our conversations. He was pleased with the basic components of our offer, which included a standard set of perquisites.
Other issues that concerned him were his involvement in setting up the office, interviewing his prospective staff, and helping to create protocols to be used in the office. As a surgeon, he was interested in rapidly building his practice. He wanted assurance that referrals would allow him to perform sufficient surgeries to maintain his skills and prepare for board certification.
We addressed all of these issues during interviews, on site visits, and numerous phone conversations. With urologists being very difficult to recruit, we included a generous signing bonus as part of our offer of employment. Our usual practice was to pay such a bonus when the physician started seeing patients.
In this case, however, we agreed to pay part of the bonus when the employment agreement was executed, many months before he was to start seeing patients. He would receive the second installment when he had successfully been credentialed by our hospital medical staff. We would make the final signing bonus payment once he started seeing patients.
It was this flexibility in structuring payment of the signing bonus that ultimately enticed him to accept our offer.
Let’s take a quick look at the current status of incentives being offered by the almost 3,300 physicians and advanced practitioners that are described in Merritt Hawkins’ review.
Current State of Physician Recruiting Incentives
In spite of efforts to encourage the use of quality or value metrics, the approach to bonus is still heavily productivity based.
Seventy-two per cent of offers included some kind of bonus in addition to a guaranteed salary. Of those offers that included potential bonus payments, 52% were based on RVUs, 28% on net collections, 14% on patient encounters, and 6% on gross billings.
Quality incentives were incorporated into 39% of offers. When used, the quality-based bonuses averaged 20% of the total potential bonus.
Other, very common incentives (over 95% of searches) include:
- Relocation Allowance (averaging about $10,000)
- CME Expenses (average amount $3600 per year, with a range of $500 – $30,000)
- Health Insurance
- Retirement Benefits
Disability insurance was also offered most (91%) of the time.
Merritt Hawkins included liability insurance as a benefit. But I consider it to be a business expense, as I wrote about in Why Demoralize Your Employed Physicians Over Tail Coverage?.
The review did not list “tail coverage” (extended reporting endorsement) as a specific type of bonus. However, it is commonly disputed in negotiations and should be addressed in future studies, in my opinion.
Signing Bonus and Loan Forgiveness
Signing bonuses were common but not universal (offered 76% of the time). When offered, the average signing bonus was $32,600. However, the range was zero to $275,000. I suspect that last figure was an outlier due to some very unique circumstances.
I was surprised to see that for the MH searches, only 25% included an offer of loan forgiveness, or what we called loan repayment. This is something that is quite common for hospitals in the midwest to offer.
When included, however, the amounts varied substantially. In this report, the amount forgiven or paid was distributed over one to three years, and ranged from $10,000 to $260,000, with an average of $81,000. It’s important to remember that most organization will cap this figure. And the need for loan forgiveness will vary greatly between candidates.
So, that’s the snapshot of physician recruitment incentives based on the most recent MH survey. You can find the complete summary at Merritt Hawkins 2017 Review of Physicians and Advanced Practitioner Recruiting Incentives.
It all seems pretty consistent to what I have personally found to be true:
- Salaries continue to climb for almost every specialty.
- Bonuses are generally based on productivity, mostly using worked RVUs to track it.
- Quality bonuses are becoming more common, but only account for about 20% of the total annual bonus offered.
- Relocation expenses, CME allowance, health insurance, and retirement savings options are common and expected by most physicians.
I was surprised that loan forgiveness was offered in only one-quarter of assignments. I expect that percentage to rise as medical school loan amounts continue to increase.
Cost Considerations for Employers
Physician leaders working in hospitals and medical groups should understand these incentives, and their cumulative costs. With signing bonuses, relocation expenses and loan forgiveness, the first year total compensation costs will be 140% or more of the base salary.
For example, if a family physician or hospitalist is offered a salary of $230,000 to $260,000, he is likely to be provided:
- $10,000 in relocation expense,
- $32,000 in signing bonuses,
- $12,000 in health and disability insurance,
- $3,600 in CME expenses,
- $7500 in matching 401(k) or 403(b) deposits, and
- $25,000 in loan forgiveness.
This will bring the total expense to $320,000 to $350,000 for the first year.
For organizations that are heavily recruiting new physicians, those figures can quickly run into the millions of dollars in costs that will not be recouped for years.
There are some IRS issues that these incentives create. If you pay a signing bonus to a resident before she has officially started, do you report that as 1099 or W-2 income? And physicians being recruited need to understand that all of those bonuses will be treated as income by the IRS and that the amounts actually received may be smaller, due to withholding by the employer.
Please add you’re thoughts and questions in the Comments. I will respond to them all.
Thanks for joining me.
Until next time.