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Hospitalist compensation can be thought of as consisting of two components: the amount of total compensation, including all elements such as base salary and bonus (sometimes referred to collectively as total W-2 wages); and the method by which it is earned. Both the amount and method of hospitalist compensation have evolved significantly over the last 10 to 15 years. However, the attributes of a desirable compensation plan have remained unchanged.

Easy to Understand

Any compensation plan should be simple enough that the hospitalist can explain it from memory. Complicated formulas used as the basis for paying a quality bonus or end-of-year “profit distribution” are problematic if the hospitalists do not fully understand them. A significant value of a salary bonus is to influence and reward behavior, but if the method of calculating the bonus is hard to understand then it is likely to be much less effective in bringing about this change. Disputes and resentment may arise when a doctor has misunderstood the formula and anticipated a larger bonus than the one that was paid.

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Practice Point

Any compensation plan should:

  • Be simple enough that the hospitalist can explain it from memory
  • Be easy to defend in public
  • Comply with all laws and regulations
  • Have the ability to be modified over time
  • Reward good work

Easy to Defend in Public

Despite efforts to keep the details of a compensation plan private, it will nearly always become public information either through a member of the practice talking about it to others at the “home” hospital or elsewhere. Or it could become public during a malpractice suit. In either case, the practice should think carefully in advance whether it could lead to significant embarrassment. For example, a financial reward for hospitalists' reducing length of stay could be seen as an incentive to send patients home so aggressively that some are sent home before they are ready. This could be very embarrassing and damaging information if it were made public.

Complies with All Laws and Regulations

The laws and regulations governing physician compensation and the financial relationships between doctors and hospitals or other entities are complex and always changing. It is important to ensure that any proposed compensation plan is reviewed by someone knowledgeable in these areas. Despite good intentions, it can be easy to inadvertently violate a legal requirement when designing a compensation plan.

Can Be Modified over Time

Even if a compensation plan seems perfect today, it is very likely that the practice will evolve within just a few years so that the plan is no longer a good match with current reality, and it may even cause problems and inhibit the ability of the practice to make necessary adjustments in scheduling and other areas. ...

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