Total compensation jumped an average of 13% in 2005 for chief medical officers at hospitals and nearly 19% for CMOs at medical groups, according to a new survey by the Physician Executive Management Center, a search firm that specializes in physician-executives.
CMOs at integrated health systems and managed-care-type organizations also enjoyed total compensation increases of 14% and 16%, respectively. Total compensation includes base salary and end-of-year bonus payments.
Driving the double-digit percentage increases is the evolving strategy by healthcare organizations in rewarding CMOs with bonuses for meeting a combination of financial, quality, satisfaction and performance-related targets, says David Kirschman, president of the Tampa, Fla.-based management center. The organization released the 20th annual Physician Executive Compensation Report exclusively to Modern Physician.
We are being graded and evaluated for quality improvement by a whole host of external organizations, says Jeffry Komins, M.D., CMO at 266-bed Mercy Hospital of Philadelphia. As those scores go up, hospital reimbursement goes up, market share goes up, and we are rewarded for our contributions through incentives.
The survey includes data on base pay, incentives, benefits, contracts and several categories of job satisfaction. About 400 CMOs responded to the survey in four categorieshospitals, systems, physician groups and managed care.
Kirschman says healthcare organizations are placing greater value on CMOs because entities such as the CMS, the Joint Commission on Accreditation of Healthcare Organizations, payers and other information companies are tracking and publicizing quality data.
Organizations are recognizing that CMOs are a valuable part of the management team and are rewarding those contributions through higher compensation, Kirschman says.
As key team members, CMOs are responsible for helping healthcare organizations improve clinical quality, patient safety, satisfaction and financial performance, Komins says.
For hospital-based CMOs, total compensation increased an average of 12.9% in 2005 to $273,712 from $242,507 in 2003. Over the past decade, total compensation has increased 41% for hospital CMOs. Bonus payments for 2005 averaged 17% of base pay for hospital CMOs. Except for 2003-2004 (when total compensation dipped 3%), total compensation has steadily risen since 1991, Kirschman says.
At integrated systems, CMO average total compensation increased 14.4% last year to $350,044 from $305,879 in 2003. Over the past 10 years, total compensation has risen 71%. Bonuses for 2005 averaged 21% for system CMOs. Pay is highest here because CMOs at systems are responsible for multiple hospitals and have a larger scope of strategic responsibility, Kirschman says. CMOs in group practices saw average total compensation increase 18.6% to $274,623 in 2005.
Total compensation has risen 89% in the past 10 years. Bonuses for 2005 averaged 18% for group practice CMOs.
At managed-care-type organizations, CMOs enjoyed a 15.8% increase in average total compensation to $278,773 in 2005 from $240,674 in 2003. Total compensation has increased 44% over the past 10 years. Bonuses for 2005 averaged 25% for managed-care CMOs.
Compared with average compensation of practicing physicians, CMOs appear to be catching up with their specialist cousins.
For example, sister publication Modern Healthcares 13th annual Physician Compensation Survey, which tracks surveys by professional medical organizations and physician recruiters, showed that noninvasive cardiologists in 2006 averaged $370,000, an 7.5% increase from 2005. General surgeons averaged about $284,000, a 1.8% pay hike.
Going back a few years, CMOs were not reimbursed at the same level as practicing physicians, Komins says. I was a practicing obstetrician and gynecologist for 31 years and have enormous respect for the people at the front line. CMOs also have a very demanding job with long hours and the challenge of keeping up with regulations and integrating doctors and nurses into a team.
Because of the ability of healthcare organizations to track and measure quality, the role of the CMO has changed over the past decade, says Paul Convery, M.D., CMO of 12-hospital Baylor Health Care System, Dallas.
In the past, healthcare organizations did not have defined methods to measure clinical quality, and CMOs were more involved in improving physician relationships.
Convery says the increasing use of bonuses shows that many CMO compensation packages are tied to performance. Healthcare organizations have expectations that (CMOs) will perform and show measurable improvements, he says.
While not all healthcare organizations track all clinical measurements, Convery says Baylor tracks some 50 different clinical and patient-safety measures. We develop teams of doctors and nursing leadership to improve care across the continuum, he says.
The survey found that the use of incentives varies somewhat depending on the type of healthcare organization. For example, the top three incentive priorities for hospitals, integrated systems and groups are meeting financial objectives, quality and patient-satisfaction goals.
However, the top three goals for managed-care-type organizations are financial, strategic and utilization control/resource management, the survey showed. It was the first time the Physician Executive Management Center surveyed CMOs on incentives.
From a regional perspective, average CMO total compensation ranges from $328,000 in the seven-state Southeast regionwhich includes Alabama, Florida and North Carolinato $283,000 in the 21-state West region, which includes Alaska, Louisiana, Nevada and North Dakota.
Total-compensation data show the 12-state Northeast region, which includes Connecticut, Maryland, New York and Virginia, at $317,000 and the 10-state Midwest region, which includes Illinois, Missouri and West Virginia, at $302,000.
Kirschman recommends CMOs negotiate written employment agreements. Only 55% of hospital CMOs have contracts. Some 56% of CMOs at integrated systems have contracts, but only 43% for CMOs at managed-care organizations do. However, 75% of CMOs at group practices are under contract.
Contracts provide a certain degree of security that physicians will want more of as negotiations become more formalized, Komins says. Group CMOs have more contracts because they were practicing physicians with contracts with the group before, and when they emerged into a management capacity, they expected to continue in a contractual arrangement.
Jay Greene is a former Modern Healthcare reporter and now a freelance healthcare writer based in St. Paul, Minn. Contact Greene at [email protected].