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, or PEMC, 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, said David Kirschman, the PEMCs president. The PEMC released the 21st annual Physician Executive Compensation Report exclusively to Modern Healthcare sister publication 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.
We have a steadiness in compensation for systems and hospitals, Kirschman said. We will not see the wide fluctuations from year to year. Salaries will go up 3% to 8% a year. 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, said Hoda Asmar, 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 said. Another 41 senior physician-executives responded.
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 said.
Total compensation data show 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, said 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 said.
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 said.
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 said. 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.
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.
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%.
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%.
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%.