02 July 2010

Friday Flashback - Advice for Interns Part Five

Compensation.It's a dirty topic in medicine. Nobody ever wants to admit how much they make, or how that number is derived, or even that money ever has any role in patient care. But that is an elaborate fiction. Money talks, and nothing motivates people like money.

In EM, there tend to be two camps with regard to pay: hourly and productivity-based. Hourly pay is exactly what it sounds like -- you clock in and clock out and get paid a flat hourly rate. Rates vary widely (especially based on geography) but my understanding is that nationally, the average ER doc will get about $125-150/hr.

Productivity pay systems can be much more complex, but generally can be summarized as: instead of an hourly pay rate, you get paid per patient. In most cases, the compensation is determined by the number of patients you see and by the dollars billed per patient. Dollars billed per patient generally relates to how well you documented the patient encounter and your decision-making process and whether your charting quality was sufficient to allow your coders to capture all the legitimate charges.

Some might find this to be off-topic: what does compensation methodology have to do with efficient operation of the ER? I include this here because I strongly believe that in order to optimize the processes in your ED, it is important to have medical staff who are motivated to be as effective as possible. I have worked in settings in which pay was hourly and those which were 100% incentivized. The difference is remarkable. In environments in which a person's individual compensation is not at risk, the motivation to give 100% effort is attenuated. Some docs will do their best because they are altruistic, or for Press-Ganey scores, or just because they are energetic – they are usually the top 25% of docs in any group, either way. But the average doc does about 10% less work, and the bottom quartile really dog it when there is no disincentive against phoning it in. The cumulative effect of this productivity decrement is significant and can really impact the smooth operation of the ER, not to mention the bottom line of the group.

I am sure the comments will fill with stories of lazy ER docs who went to the cafeteria while charts piled up in the racks, places where one doc would be busting his hump while the other spent hours dictating, where two lazy docs played a game of chicken to see who could go the longest without picking up the 300-pound vaginal bleeder. I've seen it time and again. The nurses ask, "Can they not schedule Dr Tortoise with Dr Slug? The department comes to a halt when they are working together." Cases like that are far far more common when the docs are paid hourly.

But when each patient has a direct measurable financial value to the practitioner, each additional patient is viewed not as a burden and extra work, but as an opportunity. What a tremendous transformation in perception! This directly translates into docs who are eager to see patients, and even docs competing to get the next chart from the rack, which in turn translates into shorter waiting times and faster patient flow through the department.

I will also editorialize that I believe productivity-based compensation is fairer. If an individual highly-productive doc is responsible for a certain amount of income for the group, it is perverse to take some of that revenue and redistribute it to the less-productive practitioners. This is what effectively happens under hourly compensation systems. Docs are aware of this fact and it certainly breeds resentment and damages the group morale.

Having said that, there are challenges to a pure productivity payment system. There is an incentive for docs to chart surf, to skip the time-consuming patients in favor of the quick and lucrative patients. The only solution to this is a strong ethic and trust among the partners that cherry-picking is not permitted, or alternatively, a pod system in which patients are assigned to doctors (instead of the other way around). Similarly, there can be an incentive to skip the uninsured or Medicaid patient in favor of the fully funded patient. Our group handles this by paying docs a flat rate per RVU generated, which effectively blinds the practitioner to the patients' payer class: a Medicaid patient is potentially worth exactly as much as a Blue Cross patient.

Some groups try to compromise by utilizing a hybrid system – part base salary and part productivity. The drawback to the hybrid system is that the hourly base salary weakens the incentive effect of the productivity component. If you imagine the productivity distribution of ER docs, there is a normal bell-shaped curve just like in any other population. About 50% of the docs cluster around the mean, and about 25% excel and 25% underperform. So in an "average" hybrid system, something like $80/hr is guaranteed, and $40/hr is based on production. That half of the docs whose production is about average will have pay within a few dollar an hour of the mean. For those who are high or low performers, there is a variation in pay, but the typical range is relatively small compared to the base salary ($5-15/hr). More significantly, the reward for working harder is small, and the punishment for inefficiency is small.

Conversely, the magnitude of the incentive in a fully productivity-based system is much higher; the range between the highly effective and less effective docs can be $50/hr or more. That sort of variation in pay provides a very powerful motivation to all the docs to be as efficient in moving the meat.

There are some counter-arguments I have heard to this approach, which have not been borne out in my experience. For example, concerns that docs who are too motivated by the money will lose focus on quality of care and rush patients through without taking the time to ensure that the diagnosis and treatment are right. However, the fear of being wrong, and the fear of liability provide a powerful counter-balance, which seems to keep docs honest. Some said that if docs get paid based on dollars billed, they'll just order a lot of unnecessary tests to make the bills bigger. But in real life, a CT scan takes a long time and prevents the doc from seeing other patients in that bed, so unnecessary tests actually tend to hurt docs financially. Others were concerned that doctors would hurry through the personal interaction with patients and the satisfaction scores would go down. But truly, patient (dis)satisfaction is more strongly linked to delays in care, and by reducing the door-to-doctor time, scores are more likely to go up, even if the docs spend less face time with the patient.

Physician compensation is complex, and there's no one right way to do it. Some groups, or some EDs, may have unique circumstances which would render incentivized compensation undesirable. But if your ED is underperforming and the docs are the rate-limiting step, smart utilization of financial incentives can bring your performance up to where it needs to be. If you are a graduating resident looking for a practice in which the docs are paid fairly and have a direct financial stake in the operation of the ED, make sure you get the details of the physicians' reimbursement system.


  1. the blog is very good because things properly informed, I will follow up as I find it interesting.

  2. the er where i work the docs are not paid on productivity but oddly enough, the very slowest doc in the group is the highest biller. he fills up his beds once in an eight hour shift then orders every test known to mankind on those patients. never saw a back pain that didn't need an mri.

    of course he's got great press-ganey scores too because the patients love the over kill. meanwhile, while he's got his rooms full, other docs are seeing patients that are ticked off about having to wait longer in the lobby for a bed so their scores are lower.

  3. This is a great post. It wasn't clear from your post (for someone from the outside) who decides on the payment structure. Do EDs usually have a contract with a physician group, and within the physician group the docs decide how to structure the payments? Does the hospital ever employ the physicians directly? Thanks!


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