Total compensation for chief medical officers rose significantly for managed-care organizations in 2006, but CMOs at medical groups, hospitals and integrated health systems achieved only modest salary gains, according to a new compensation survey.
The largest annual pay raise went to CMOs at managed-care organizations, whose average total compensation spiked 17% to $325,355 in 2006, which includes a 26% average bonus/incentive payment, according to the Physician Executive Management Center, a Tampa, Fla.-based search firm that specializes in physician-executives.
CMOs at medical groups also enjoyed a 7% average raise to $293,027, which includes a 33% average incentive payment.
Hospital CMOs average total compensation rose 3% in 2006 to $280,851, including a 16% average incentive payment. On the other hand, CMOs at integrated health systems earned slight increases in average total compensation in 2006 to $357,137, including 17% in bonuses.
For the first time, senior physician-executives at hospitals and systems were polled. These physician-executives typically report to CMOs with such titles as vice president of medical management or vice president of quality. Their total compensation in 2006 averaged $264,231, including 14% in bonuses.
While most CMOs earned single-digit base salary increases, the upward trend toward awarding double-digit bonus and incentive payments for meeting a combination of financial, quality, satisfaction and performance-related targets continues to be a major compensation strategy, says David Kirschman, the PEMCs president. The PEMC released the 21st annual Physician Executive Compensation Report exclusively to Modern Physician.
The voluntary e-mail survey was conducted in early 2007 and was offered to PEMC members and other physician-executives known by PEMC and Modern Physician's sister publication, Modern Healthcare.
We have a steadiness in compensation for systems and hospitals, Kirschman says. We will not see the wide fluctuations from year to year. Salaries will go up 3% to 8% a year. It has leveled out and confirmed the value of CMOs for these organizations.
The increasing use of bonuses shows that many CMO compensation packages are tied to performance. Bonus and incentive payments range from 16% of base pay to 33%.
Incentives are positive for CMOs. One of the best-kept secrets is that quality improves financials, says Hoda Asmar, M.D., vice president of medical affairs and CMO at 236-bed Edward Hospital & Health Services, Naperville, Ill. Putting patients, employees and families first through evidenced-based medicine helps the bottom line.
Some 152 CMOs responded to the survey in four categorieshospitals (62), systems (52), medical groups (18) and managed care (20). The low response rate for medical groups and managed-care organizations may make that data less reliable, Kirschman says. Another 41 senior physician-executives responded.
As hospitals and systems become larger, they need more physicians in roles that CMOs cant fill themselves, Kirschman says. Senior managers often have more clinical responsibilities than CMOs.
From a regional perspective, average total CMO compensation for hospital and system executives ranges from $308,294 for the 10-state Midwest region, which includes Illinois, Missouri and West Virginia, to $326,364 for the 21-state West region, which includes Alaska, Nevada, Louisiana and North Dakota.
The major difference this year is the increase of compensation of CMOs in the Western region, which had previously been the lowest region and now reports the highest among the four regions of the study, Kirschman says.
Total compensation data shows the 12-state Northeast region, which includes Connecticut, Maryland, New York and Virginia, at $319,811, and $313,052 for the seven-state Southeast region, which includes Alabama, Florida and North Carolina.
Asmar, a PEMC member who participated in the survey and reviewed the results prior to an interview, says most CMOs are satisfied with their compensation. Most specialists and subspecialists could achieve higher incomes. Primary-care physicians earn less or about the same, she says.
While their roles have expanded over the years, CMOs are responsible for helping healthcare organizations improve clinical quality, patient safety, strategic planning, satisfaction and financial performance, Asmar says.
I started part-time about eight years ago at a small hospital as a liaison between medical staff and administration. I also oversaw credentialing, privileging, compliance and quality affairs, Asmar says. Once we go full time, there are other things to do.
Now Asmar oversees such information systems as electronic medical records and computerized physician order-entry systems and the development of new clinical programs. I am in charge of building a hospitalist program, and I also have a nontraditional department, coding and billing, under my review, she says.
The survey also showed the percentage of hospital CMOs who report having current clinical duties (15%) has decreased over the past several years. About 44% of CMOs at medical groups perform clinical duties, while about 12% of hospital and system CMOs and only 5% of managed-care CMOs practice medicine.
When I was part time, I kept my clinical duties, Asmar says. Once I went full time, I didnt have time.
CMOs also were asked which of their duties were most important and the average percentage of daily time they spent on these activities.
For hospital CMOs, the top three responsibilities were quality issues (quality and performance improvement), 24% of time spent; liaison duties (medical staff and administration), 23%; and strategic planning (budget/programs), 11%.
You have to be a solid physician with excellent clinical skills to be a CMO, but after you get the job, the important part is to work effectively with people, Kirschman says.
Asmar adds being a CMO is very demanding and requires a mix of interpersonal and communication skills.
You also have to be diplomatic, she says. You have to win people over and build consensus. If you dont have good interpersonal and communication skills, and the ability to energize people, it will be difficult to succeed.
For system CMOs, the top three responsibilities were supervision of physicians, 27% of time spent; quality issues (quality and performance improvement), 25%; and liaison duties (medical staff and administration), 22%.
There always has been an emphasis on quality in CMO jobs. It is who they are, Kirschman says. Liaison has been a top issue because of the traditional schism between administration and medical staff.
For group practice CMOs, the top three responsibilities were supervision of physicians, 24% of time spent; strategic planning (budget/programs), 21%; and quality issues (quality and performance improvement) and liaison duties (medical staff and administration), both 14%.
For managed-care CMOs, the top three responsibilities were supervision of physicians, 20% of time spent; external relations (professional and community), 20%; and strategic planning (budget/programs), 18%.
Kirschman and Asmar also recommend CMOs negotiate written employment contracts with parachute provisions for severance payments. In 2006, 61% of hospital and system CMOs had contracts, a slight increase from 2005. However, only 55% of managed-care CMOs and 90% of group practice CMOs are under contract.
In addition, the percentage of CMOs with advanced management degrees has steadily increased. For example, the number of physician-executives in senior hospital positions who have advanced management degrees was 54% in 2006 with 17% working on a degree.
I used to think that getting these degrees would be required by employers, Kirschman says. Now I dont think so. Rarely do employers ask to hire a doctor with an advanced management degree. Doctors are getting these degrees because it helps them and they feel it is of value.
To view the entire report, visit physicianexecutive.com.
Note: Gross proceeds from the survey will be donated to the Fisher House, a Rockville, Md.-based charity that supports veterans and their families.
Jay Greene is a former Modern Healthcare reporter and now a freelance healthcare writer based in St. Paul, Minn. Contact Greene at [email protected].
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