Tips for bringing new docs on board

If bending over backward hasn’t always been part of the physician recruitment process, it certainly is today.  The physician shortage has put increasing pressure on hospitals to ratchet up their recruitment offerings, including sign-on bonuses, income guarantees, generous salaries, and housing assistance.

According to the 2009 Review of Physician and CRNA Recruiting Incentives, a Merritt Hawkins & Associates survey of 3,288 physician and certified RN anesthetist (CRNA) placement searches, more hospitals are offering monetary incentives to attract physicians.  For example, 1,650 hospitals offered sign-on bonuses to physicians in 2005–2006, and that number rose to 2,795 hospitals in 2008–2009, according to the survey.  Similarly, the average sign-on bonus increased from $20,000 to $24,000 in that same time period.

In addition, 31% of hospitals are currently offering hefty loan forgiveness packages compared to only 14% in 2004 through 2005.  Although hospital administration often has the final say when it comes to how much money the hospital spends on physician recruitment, medical staff leaders often influence recruiting decisions. Therefore, both hospital and medical staff leaders should have a solid understanding of current recruitment trends and what those trends mean for their facilities.  To find out what you need to know to make smart recruiting decisions, MSB spoke with several recruiting experts.

Do your homework on fair market value

When designing an attractive recruitment package for employed or private practice physicians, the first step is to determine what constitutes fair market value.  The hospital must analyze physician salary surveys and market comparisons from physician recruiting firms and the Medical Group Management Association.  Hospitals may also do their own research by surveying peer hospitals in their state or neighboring states to get a sense of what others are paying physicians, says Shannon Penney, director of recruiting at Delta Physician Placement in Dallas.

Fair market value is assessed on the entire benefits and compensation package—not just the individual pieces. Thus, if a hospital offers to employ a family practice physician for $140,000 per year, and the median fair market value for family physicians in that market is $160,000, it appears at first glance as though the hospital is low-balling.

However, if the hospital tacks on a $10,000 sign-on bonus and $10,000 in loan forgiveness, that brings the package up to par, says Penney. Staying within reasonable fair market value ranges will ensure that your facility doesn’t breach Stark Law, which limits funds that hospitals receive from physicians in an effort to ensure that neither physicians nor hospitals abuse business relationships for personal profit.

Fair market value should also be a consideration when a hospital offers a private practice physician a net income guarantee. A net income guarantee ensures private practice physicians that they will earn, at minimum, the average salary for their specialty for the first one to two years in a community, says Kirk Mathews, MD, CEO of Inpatient
Management, Inc., and author of HCPro’s PracticalGuide to Hospitalist Recruitment & Retention. “It basically means that as a hospital, we will guarantee that your salary never falls below X. If you make below X, we will write you a check for the difference,” says Mathews.

If there is one mistake that hospitals should avoid, it’s offering a noncompetitive compensation package. “If you’re going to err, err on the high side without breaching Stark regulations. Don’t be the highest out there, but be on the high side,” says Mathews.  However, there is a flip side to this coin: If the only card your facility has to play is the money card, it’s likely to see a lot of physician turnover. 

“If money is the only thing that brought a physician to your hospital, someone else will come along with more money,” Mathews says.

To find the right balance, chief financial officers, CEOs, physician recruiters, legal counselors, and medical staff leaders should work together to conduct market research and pinpoint appropriate compensation for each specialty in their given community.  Keep in mind that fair market value will vary not only by specialty, but also by market. For example, the average salary for family practice physicians practicing in the Eastern United States is $179,530, whereas family practice physicians in the Western United States average $208,996, according to the 2009 Physician Compensation Survey by the American Medical Group Association and Cejka Search.

Create a customized package

As long as a recruitment package is within fair market value range, hospitals can work with each applicant to create a customized package that meets his or her needs, says Machele Headington, MBA, vice president of communications and marketing at Yuma (AZ) Regional Medical Center.

For example, when Yuma Regional recruits a new physician to the community, it typically offers a net income guarantee. For physicians struggling to pay down their student loans or mortgages, Yuma may structure that income guarantee so that the physician receives a large chunk of the money right away. “Instead of getting the money at the end of 12 months, we might take the money we would give them during the 11th and 12th months and shift that to the beginning so that it looks more like a sign-on bonus,” Headington explains.

Hospitals can also offer physicians student loan forgiveness or housing assistance rather than a sign-on bonus or net income guarantee. Penney has noticed more hospitals offering physicians interest-free mortgages for a period of time by leveraging their relationships with local banks.

“I’ve seen housing assistance allowances, say $2,000, going either toward the physician’s current mortgage, a new mortgage, or rent during the relocation,” Penney says. “In the past five years, that has increased.”

According to the Merritt Hawkins survey, the number of hospitals offering relocation allowances increased from 2,815 to 3,222 between 2005 and 2006 and 2008 through 2009. The average amount offered for relocation has remained steady at around $10,000.

Offer nonmonetary perks at the start

When considering a new position, physicians often factor in how much effort they will need to dedicate toward building a new practice. Although income guarantees and sign-on bonuses often help alleviate those concerns, hospitals can help further by providing administrative services to get physicians off to a running start. Yuma Regional employs an office practice management support administrator dedicated to the task of helping physicians build a practice. This person helps the physician with everything from deciding what type of
insurance coverage to obtain to purchasing office furniture and hiring staff members.The office practice management support administrator also works closely with the physician’s family during their first year to ensure a smooth integration into the community. 

“That takes a lot of pressure off the physician in the beginning if they have that one person they can turn to and stay connected with,” says Headington.  Yuma Regional is also working closely with existing medical staff members who are in private practice to identify which ones are willing to accept a new physician into their practices. This practice is somewhat limited by Stark Law but has proven a successful recruitment strategy, as becoming part of an existing group provides new recruits the support they need to get started.
“We can’t pay any of the expenses of the current physician, but we can pay the new physician a portion of the startup expenses,” Headington says.

Consider the effect of recruitment on current medical staff members

When developing a recruitment package, hospitals need to take into consideration not only the needs of new recruits, but also of existing medical staff members.  If a long-time employed physician finds out that the hospital is paying a newly employed physician in the same specialty $25,000 more, leaders should expect an angry phone call. Leaders should address recruitment packages with existing medical staff members as soon as the hospital identifies a recruiting need.

Penney suggests putting a positive spin on recruiting a new physician. Frame the discussion around the benefits existing medical staff members will enjoy as a result of bringing on a new physician, such as more time at home and fewer nights on call.  But even that may not be enough; some hospitals will  inevitably have to sweeten the pot for existing medical  staff members by increasing employed physicians’ salaries  or writing private practice physicians a check.

“If the going rate has gone up, increasing the income of all the other physicians is going to eliminate turmoil and protect you from having your physicians recruited away from you. Recession or not, it is the cost of doing business,” says Mathews.

As you continue to recruit new physicians, carefully consider these tips to help you polish your physician recruiting strategy to make financially sound decisions for your organization and maintain collegiality within the medical staff.