For the past many years, HealthCare Appraisers has seen a steady rise in hospital-physician employment arrangements. Whether the result of the desire of hospitals and health care systems to expand their affiliated physician networks and delivery models, declining reimbursement rates and the need to gain bargaining power with commercial payors, or lifestyle considerations, physician employment arrangements are expected to continue to increase in the foreseeable future.
Given this increase in activity, coupled with the rigorous regulatory environment, hospitals and health systems are faced with the need to support fair market value (“FMV”) for these arrangements. Further, the prevalence of physician employment may lead some hospitals to utilize unsophisticated internal FMV guidance or simple benchmarking to physician compensation surveys to support the underlying compensation.
A review of benchmark data may provide a ”onedimensional” view, and employers often incorrectly assume that compensation reported by physician compensation surveys solely relates to clinical activity. In reality, most of the well-known physician compensation surveys report total cash compensation received from all sources, including salaries, incentive bonuses, call coverage, medical directorships, practice distributions, etc. and provide no segregation of the amounts by source. This consideration is of particular importance when a physician provides multiple services pursuant to an employment arrangement. Any associated analysis also requires careful scrutiny of the physician’s total basket of responsibilities. This is often referred to as a “stacking analysis,” wherein it becomes critically important to understand the magnitude of the additional elements that are being “layered in” over and above underlying clinical services. While each individual component of compensation may be found to be consistent with FMV, when considered in totality, total compensation may exceed a supportable FMV level; or the subject physician may be required to dedicate time well beyond that of a full-time provider to render the totality of services.
While a more comprehensive and sophisticated analysis by a professional, independent valuation firm leads to greater FMV defensibility, time constraints and expenditure – a concern for most employers - are typically associated with FMV opinions.
The Solution: HealthCare Appraisers’ Physician Employment Calculator
As a solution, and with no compromise to the thoroughness or defensibility of the FMV analysis, HealthCare Appraisers developed a cost-effective and easy-to-use Physician Employment Calculator. Introduced in 2014, our Physician Employment Calculator provides FMV support for most physician employment arrangements, while supplemental analysis can be performed for those arrangements that contain unique FMV challenges.
The Physician Employment Calculator is a highly sophisticated, interactive, web-based application that mirrors the analysis methodologies that HealthCare Appraisers utilizes in its traditional FMV reports. Using an intelligent data-gathering interface and a series of drop down menus, the calculator captures relevant information related to the subject physician’s specialty, skills, qualifications, historical and/or projected productivity (both work relative value units (wRVUs) and professional collections (PCs)), the specific compensation model, details of the physician’s services, and characteristics of the marketplace.
The Physician Employment Calculator incorporates data for nearly 100 physician specialties and supports a variety of widely used clinical compensation structures. The calculator also incorporates analysis of other sources of physician income, including excess call coverage, administrative/medical director duties and midlevel supervision.
The Physician Employment Calculator establishes FMV compensation based on the unique attributes of each employment arrangement, considering:
- Full or part-time arrangements;
- Compensation structure (e.g., guaranteed salaries, production-based compensation, and hybrid models);
- W-2 employment and independent contractor arrangements; • Additional compensation components, such as sign- on bonuses, student loan repayments, and quality bonuses;
- On-call coverage requirements;
- Administrative and/or management services;
- Local market information (e.g., rural or HPSA status and past history of recruiting efforts); and
- The physician’s training, qualification and experience.
If productivity metrics for the subject physician are available, the Physician Employment Calculator utilizes three separate market-based approaches for both wRVU and PCs productivity, for up to six independent market approaches, each based upon multiple physician compensation surveys. If productivity data is unavailable, the Physician Employment Calculator assesses the compensation based upon HealthCare Appraisers’ proprietary non-production approach, which considers factors applicable to the specific physician’s qualifications and experience and attributes of the specific market. These various valuation approaches are then synthesized into a single FMV determination, provided in a printed report and delivered within minutes.
To the extent compensation terms of a proposed employment arrangement do not conform to the results produced by the calculator, two options are available:
(1) users are permitted, and even encouraged, to alter aspects of the proposed compensation plan to seek a successful calculator outcome; or
(2) secondary analysis can be performed by HealthCare Appraisers’ professional staff at a reduced expense, and with greatly enhanced turnaround times.
How can the Physician Employment Calculator help your organization?
- Quick – The Physician Employment Calculator provides an FMV opinion within minutes rather than days or weeks, thus allowing improved efficiency in contract negotiations.
- Simple – With its web-based platform, and easy to-use data gathering interface, users easily input readily available information regarding the physician employment arrangement. Furthermore, we provide user training and support, as needed, to ensure ease of use.
- Defensible – The FMV analysis is based on the specific terms of the proposed arrangement, factors specific to the particular physician’s background, including historical and projected performance, as well as local market conditions, and utilizing the same proprietary valuation methodologies as deployed in our traditional valuation reports.
- Efficient - The Physician Employment Calculator is designed to opine on most compensation arrangements without the need for secondary analysis.
- Cost-effective – The per-click cost of the calculator provides our clients with significant cost savings opportunities as compared to traditional analyses.
- Flexible – Produces consistent and defensible FMV outcomes for virtually all physician specialties and most commonly used compensation structures. Generally, just as with our traditional written valuation reports, the results of the Physician Employment Calculator are effective for up to three years. With over 300 hospitals nationwide currently using the Physician Employment Calculator, over 3,000 unique FMV analyses have been performed since its introduction in 2014.
It's Time to Automate Your FMV Today