Armed with prime pay incentives, business-savvy physician executives prepare for a giant leap into healthcare's future.Leonard Wilkerson, M.D., first saw his future in medical management when he joined a managed-care company's board. The experience showed him he had more to learn about the business side of medicine and prompted him to make a career-altering decision -- he enrolled in the University of South Florida's MBA Program for Physicians.
"You start being transformed into a different person," says the Kissimmee, Fla., family practitioner. "It's like when you go to medical school; you begin to be transformed. And even when you graduate, although you're a doctor, you're not really a doctor. So even though I got that MBA, I hadn't really applied it the way I should (have). Nevertheless, it's a core knowledge, and you start changing."
Things moved quickly for Wilkerson after his graduation this May. An executive recruiter contacted him with a possible position. After extensive interviews and compensation negotiations that ultimately resulted in a guaranteed base salary, a signing bonus, stock options and a relocation package, he left the Center for Family Practice and Sports Medicine in August to become a medical director with Cigna HealthCare in Memphis, Tenn.
Wilkerson is an example of the new breed of physician executive. Far from the traditional physician managers in hospital administration who were more like figureheads, today's executives are grooming themselves to play strategic roles in the future of healthcare.
Wilkerson actually had been preparing for a move into medical management long before he signed up for MBA courses. In addition to his clinical work, he held medical directorships with several government agencies and remained active in the academic field. And to complement his MBA, Wilkerson now is working on a master's in public health.
"You've got to do other things, so when they look at you they say, 'You've got this advanced degree now, but you've been molding yourself over X years, plus you've remained academic and you have been using your administrative skills,' " he says.
Wilkerson carefully evaluated the field, narrowing his search to the geographic regions he and his family found desirable. His research also helped him understand the expectations of various organizations and gauge the fairness of the compensation packages they offered, based on past earnings and responsibilities.
Cigna, for example, offers medical directors a base salary range of $140,000 to $160,000. That base figure can be enhanced -- as Wilkerson's was -- but "they have a certain range that they're not going to go out of. . . . I personally should be able to move beyond what I could make as a family practitioner, but some think if they get an advanced degree someone will offer them a job at $300,000. It's not going to be that."
Wilkerson and other physician executives Modern Physician interviewed would not disclose specific financial terms of their compensation packages. Generally, executives who are clinicians are paid in one of three ways: a straight salary, salary plus incentives or salary plus consideration for clinical responsibilities.
Today's physician executives tend to have primary-care backgrounds, are in their early 40s to mid-50s and have consciously decided to make medical management a career. They take positions that allow them to gain hands-on administrative experience while still working, at least for a time, in clinical medicine. They also take advanced management courses or enroll in postgraduate business programs (see story on page 40).
The physicians who are part of this new breed are savvy negotiators. They understand the risks involved in leaving their clinical practice to take on the administrative functions in an organization, and they're asking for perks and protection to make that risk palatable.
"Physicians in these positions are looking for, and getting, deals which say . . . if something goes wrong, they're covered for six months to a year," says Stephen Schoen, executive director of MDR Associates, a Miami-based healthcare executive and professional search firm. "They recognize now that there are risks beyond their control. It's such a dynamically changing environment, and it's starting to look like corporate America. Management can change, and you're out of a job in six months; but it had nothing to do with you."
Adds Roger Rathert, M.D., director of St. Louis-based Cejka Healthcare Executive Search Services: "The latest wrinkle is the relocation package, which is not just moving expenses but one or two trips for finding a house, help with closing costs, etc. Actually, in some instances, rather than a relocation package, they'll negotiate a signing bonus."
Sweetened deals for experienced physician executives are signs of the times. Healthcare organizations no longer are willing to hire physicians with little or no hands-on administrative experience and give them the time and space to learn their new roles.
Says Carson Dye, a Cleveland-based partner with executive recruiting firm LAI Ward Howell: "We're at a pivotal time period where we're willing to pay more for leaders who just happen to be physicians and can bring a different element to the table than we are for physicians who are going to fill leadership positions. There is a difference."
The numbers game
But while organizations are willing to pay top dollar for experienced physician managers, the question is, for how much longer? A recent survey shows that after rising steadily for the past 10 years, annual compensation rates show signs of slowing.
Physician managers' compensation will "continue to rise up to a level that will then move with the remainder of hospital management compensation. You begin to look at what a position is worth," says David Kirschman, president of Physician Executive Management Center, a Tampa, Fla.-based recruitment firm that has been placing physicians in management positions since 1983. "The question is, how much higher can they go? There are constraints on the upper end. . . . It won't go down, but the rise will be less."
In the organization's most recent survey of 234 physician executives, the average annual salary for all categories was $193,401 in 1996, up 5.3% from $183,732 in 1995. The recruitment firm has been tracking physician executive compensation since 1986, when senior medical managers earned an average of $123,975 in total compensation, which includes salary, bonuses and incentives.
While the 1995 and 1996 increases were about par with management pay raises, they were lower than the 1994 increase of 10.4% to an average salary of $174,261 from $157,797 in 1993.
The 148 full-time senior medical managers in hospitals who participated in the survey had an average 1996 compensation of $193,751, a 7.1% increase from $180,930 in the previous year. The 1995 compensation was 5.4% higher than the 1994 average of $171,615.
Twenty-one full-time senior medical managers in group practices participated in the survey, reporting average earnings of $190,786 for 1996, down 7.7% from the $206,704 reported in 1995. In 1994, the average salary was $201,089, up 25.6% from $160,082 in 1993.
The 65 full-time senior medical managers in managed-care organizations who participated in the survey reported 1996 earnings of $193,455, up 5.9% from $182,633 the previous year. The 1995 figure represented a 5% increase over 1994 earnings of $173,978.
The 1996 survey also included, for the first time, senior medical managers in integrated healthcare systems. The average total compensation for the 50 respondents in that group was $205,233.
Another first is a new physician executive compensation survey from the American College of Physician Executives and Cejka & Co., a St. Louis-based healthcare consulting and physician recruitment firm. The report is based on 1997 data from 3,912 ACPE members.
Not surprisingly, CEOs and presidents ranked at the top of the earnings list, reporting a median annual compensation of $245,000, followed by chief operations officers with salaries of $220,000. Chief medical officers, directors of managed care and vice presidents of medical affairs earned $200,000, which suggests companies are trying to work closer with affiliated doctors and are willing to pay for experienced physician executives who have solid leadership skills, recruiters say.
"People have this burning desire in essence to find the magic bullet to physician leadership," Dye says. "There isn't really one, but people want to find it. Because of this high level of interest in hiring physician leaders . . . there's very good money to be earned. In the contemporary organization, the top physician leader is usually the second-highest paid individual."
But although organizations may consider physician leadership their single greatest challenge, Dye says that doesn't mean they are throwing money at doctors who can't back up their skill claims.
"Organizations now realize that they don't have the time to allow the vice president of medical affairs to learn how to do her job effectively. There are a lot of good physician leaders on the market," he says. "I tell (physicians) to become active in some kind of leadership activity in their organization . . . and get some additional content knowledge. (But) the last thing I say is, 'Let's talk about your leadership skills' -- those kinds of things they can develop, enhance and hone through either mentorships or specific leadership skill-building courses that are never taught in the master's program."
That message isn't lost on doctors already in executive positions. Ernst Vieux Jr., M.D., medical director of trauma surgery at Bayfront Medical Center, St. Petersburg, Fla., says leadership skills are essential, especially for executives like him who are involved almost equally in clinical and administrative operations.
"You have to have a physician who understands the languages and nuances and the paradigm of the moment," he says. "For a while, physicians weren't sure what to do with changes in policies and practices that were taking place, and they were not having a clear dialogue with administration. (Physician managers) learn the other language, the other perspective, and it allows them to sit down and explain that to other doctors."
According to CHESS' Rathert, being able to translate the results of those dialogues into something physicians not only understand but support and practice is critical to being a successful executive.
"The ability to communicate with physicians is still the most important thing," he says. "In general, physician groups want executives who can talk to primary-care physicians. They have to be able to relate to them. On the managed-care side, they want people who understand what goes on in a managed-care environment."
Linda Leckman, M.D., vice president and COO of Salt Lake City-based Intermountain Health Care, left a successful surgery practice to help form IHC's physician division. The integrated healthcare system has 400 physicians, 26 comprehensive community health centers, and 23,000 employees in Idaho, Utah and Wyoming. Leckman admits initially she was unprepared for her new role as a physician executive but she sought out individuals who could help her gain the knowledge she lacked.
Listening skills, she says, are as critical to the success of a physician executive as clinical experience and management training. And, she adds, so is finding the right mentor within an organization.
"In terms of finding a mentor, what I did was ask who the best managers were," she says. "I asked people who had long-term experience in the organization. Every organization has a culture. . . . To ask someone who had minimal experience in the company would not have helped me a lot."
As rosy as the picture appears for physician executives, those already in the trenches say there are sacrifices and adjustments to be made, especially in terms of pay, quality of life and job satisfaction. And each new position has a learning curve, regardless of how much experience a physician has.
Someone deciding to make a move to management needs to make compensation the first consideration. The package will be determined by position, scope of responsibilities, type of organization and geographic region.
For example, the ACPE survey shows the highest median compensation for physician executives in 1997 was in single-specialty groups and practice management companies at $240,000. This was nearly double the amount for executives at government institutions who reported the lowest compensation at $126,000.
Median compensation for all medical directors was $175,000, but the median compensation for medical directors working for a practice management company was $227,500.
While some, such as internists and family practice physicians, frequently see an increase in salaries, other specialists will never earn what they do in private practice.
Specialists earned an average salary of $200,000 as executives, while primary-care physicians made $175,000, according to the data. When compensation data were sorted by specialty, the highest-earning physician executives were radiation oncologists at $350,000, followed by neurological surgeons at $330,000.
"Depending on their specialty, they may take a significant pay cut," says MDR's Schoen. "If you're a cardiologist making $400,000 to $500,000 a year and you have an interest in medical management, first of all you've got to get experience. No one is going to pay you anything near what you're making as a clinician. There may be a lot of people who aspire to be medical managers who, when they're confronted with the reality of the compensation, can't find themselves doing it because of the large sacrifice."
Physician executives also may have to sacrifice the personal fulfillment of hands-on patient care -- unless they can find time to juggle clinical and administrative tasks.
"If you want to switch over completely to the administrative role, you need to recognize that the clinical seed that was planted in you even before you went to medical school in the first place is going to be lacking unless you keep your foot in both camps," Vieux says. "It makes for long weeks. We, on average, do the 8-to-12-hour days, plus six days a month we run for 24 hours. Those are the times we have to be in the slot taking care of patients as doctors. But it helps me in my total fulfillment."
Vieux says he still spends about 55% of his day working in trauma surgery and the rest on his administrative duties, which include handling reimbursement and clinical surveillance issues and working with state committees on healthcare issues.
IHC's Leckman says maintaining direct patient-care ties is so important that physician executives should negotiate a certain amount of clinical duties in addition to administrative responsibilities. Another avenue for their clinical efforts might be a community-based health organization.
"I believe strongly that a physician needs to continue their clinical ties not only to maintain their skills, but really to understand issues of patients, other physicians and even support staff," she says.
Today's physician executives also are expected to be mobile. In other words, if they aren't inclined to relocate, they won't make it very far up the executive ladder.
"If they're going to consider themselves physician executives, they have to be willing to move," says CHESS' Rathert.
But for those physicians who switch from clinical to administrative tasks and make the necessary adjustments, the satisfaction they get from their medical management roles is more than enough to make up for any sacrifices.
"It's almost like living in a different country for part of the day," Vieux says. "I enjoy stepping out of my role as a clinician and living with these people. I also enjoy the idea that I am now learning what the other viewpoint is. I get a chance to sit on the other side and see how the rest of the world looks at us as physicians, as clinicians, as businesspeople and as members of the community."
Elizabeth S. Roop is a Tampa, Fla.-based freelance writer who specializes in healthcare business topics.