The number of healthcare facilities offering signing bonuses to attract physicians jumped substantially last year, according to a new report.
The report, prepared by the Detroit office of William M. Mercer, a national benefits consulting firm, is based on a fall 1994 survey of 191 healthcare organizations. Some 121, or 63%, of the survey respondents were hospitals.
Information in the report is based on data from 9,733 staff physicians employed by the surveyed organizations.
A copy of the survey was obtained by MODERN HEALTHCARE. Mercer is expected to make the report public this week.
In addition to documenting physician compensation data, the survey uncovered a dramatic increase in the percentage of healthcare organizations offering signing bonuses to entice physicians to work at their facilities.
Some 37% of the surveyed organizations said they use signing bonuses, compared with 27% of the organizations that responded to Mercer's survey in 1993 (Jan. 24, 1994, p. 38).
Group practices and HMOs were far more likely than hospitals to use signing bonuses, the latest survey found. Some 54% of the group practices and 50% of the HMOs offered bonuses to physicians last year, compared with just 30% of the hospitals.
Commenting on the increase in the use of bonuses, Mercer said: "Our experience indicates that signing bonuses are being used as a method to deal with supply/demand imbalances in certain specialty areas."
Other physician compensation experts interviewed by MODERN HEALTHCARE said bonuses are being used more frequently to attract physicians whose future productivity is unknown.
Rather than paying inflated salaries to physicians and then being stuck for those salaries for years, organizations are limiting their future financial risk by paying one-time bonuses to certain physicians and then adjusting their compensation accordingly once their level of performance is evaluated, the experts said.
The average signing bonus paid by the surveyed organizations last year was $8,167, or an average of 5.6% of a physician's base salary. The average bonus of the organizations surveyed in 1993 was $6,215, Mercer said.
The use of incentive compensation programs for physicians also is on the rise, the Mercer survey found.
Some 61% of the survey respondents said employed staff physicians were eligible for incentive pay last year, compared with 55% of the organizations that participated in the 1993 survey.
Again, group practices and HMOs were more likely than hospitals to offer employed physicians incentive pay. Some 71% of the group practices and 70% of the HMOs had incentive plans last year, compared with 54% of the hospital respondents.
Although the use of signing bonuses and incentive pay went up last year, the average total cash compensation paid to an employed physician went down, according to the new report.
Although variations in the yearly surveys may be attributable to different respondents each year, it's the first time that the average physician compensation data dropped in the six years that Mercer has been doing the survey.
The average total cash compensation paid to employed staff physicians was $145,005 last year, down 2.3% from the average of $148,424 in 1993.
Regardless of the apparent decline, the survey again documented the ongoing physician compensation disparity among hospitals, group practices and HMOs.
Group practices pay employed physicians the most, with hospitals second and HMOs last. That relationship has been consistent throughout the six years of the Mercer survey.
Last year, group practices paid employed staff physicians an average of $155,889, compared with $146,631 paid by hospitals and $118,067 paid by HMOs, the survey found.
Physician compensation experts say group practices are the most generous because most are for-profit corporations, which tend to pay better than not-for-profits. Another possible explanation is that group practices are run by doctors (Feb. 15, 1993, p. 65).
But if you were a primary-care physician last year, it didn't matter where or for whom you worked.
The median salaries paid to family practitioners and internists, for example, rose 4.9% and 4.5%, respectively, last year. That's higher than the 3% increase experienced by a matched set of physicians in all specialties in both the 1993 and 1994 surveys. It's also higher than most medical specialties, which didn't see any pay increases last year.
"The tremendous growth of managed-care programs has certainly been a factor in elevating the stature as well as the paychecks of primary-care professionals," said David Fletcher, a Mercer principal based in Detroit.
The median total cash compensation paid to employed staff internists rose to $115,000 last year from $110,000 in 1993, Mercer said. The median total cash compensation paid to family practitioners rose to $114,800 last year from $109,400 in 1993.