Physician executive compensation continues climb.

Physician executive compensation rose by an average of 7.5 percent--to $258,000 from $240,000--based on 2006 data collected for the 2007 Physician Executive Compensation Survey released by Cejka Search and the American College of Physician Executives (ACPE). As last reported in the 2005 survey, the two-year rate of increase was 6.7 percent.

Over the past 10 years, the two-year rate of increase in physician executive compensation has grown to 7.5 percent compared from a 5.9 percent rate of increase published in the 1999 survey, which compared 1996 and 1998 compensation data.

The survey has been conducted every two years by ACPE and Cejka Search, a nationwide health care executive and physician search firm. This year's survey is based on responses from 2,116 ACPE members providing data on their 2006 compensation.

Questions in the survey covered various categories, including compensation by organization type, group size, time allocated to administrative duties, geographic area, organization location, scope of operations, revenue, years of experience, scope of responsibilities, executive bonus percent, medical specialty and post-graduate business degrees.

"The larger rate of increase reflects the unique value that physician executives deliver as they call upon their business and clinical skills to advance organizational strategy and performance," said Carol Westfall, president of Cejka Search.

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"Their skills and influence can be applied across organizational lines to increase the effectiveness in a wide range of areas including electronic medical record implementation, quality initiatives, service line development, medical staffing, patient safety and access concerns, to name a few."

Top earners grow

Respondents to the 2007 survey represented 15 titles. Six comprised 80 percent of the total pool of respondents: chief executive officer (8 percent), chief medical officer (18 percent), vice president of medical affairs (9 percent), division chair (12 percent), medical director (28 percent) and associate/assistant medical director (5 percent). Each of these title categories received at least 111 respondents, sufficient to draw meaningful observations when comparing two-year and 10-year changes.

Notably, the number of chief medical officers--which comprised 6 percent of the respondent pool in 1997--has grown three-fold to comprise 18 percent of the respondents in the 2007 survey. Chief medical officers also have made the second-highest 10-year gain in compensation (46 percent), exceeded only by the 49 percent increase in the compensation of division / department chairs and managers.

Seven positions revealed double-digit increases in median compensation over the 2005 survey. However, the small number of respondents for some titles may suggest that the findings are not meaningful.

Bonuses big

Bonuses continue to represent a growing component of administrative compensation. Ten years ago, 42 percent of respondents said that a bonus constituted a portion of their administrative compensation. In the 2005 survey, that percentage rose to 48 percent. And in the 2007 survey, slightly more than half (52 percent) of the respondents reported that a bonus was part of their 2006 compensation program. Of these, nine out of 10 said that their bonus was up to 30 percent of their administrative compensation.

The growing importance of bonuses as part of total compensation should prompt physician executives to ask probing questions about their bonus plan.

"It is important to know who determines the organizational and personal performance goals, and how much input physician executives have in establishing them," Westfall said. "They should also ask about the payout history. If bonuses were unpaid or partially paid, they should know why and what the organization may be doing to address the causes."

Quality concerns

The commitment to improving quality continues, as evidenced by the growing prominence of quality measurement as a bonus component. In the 2007 survey, 32 percent of respondents included "quality measurements" as being among their bonus components. This is a 33 percent increase in the frequency of this component being reported since the 1997 survey when only 24 percent of respondents mentioned it.

By contrast, "cost containment," was identified as a bonus component by 14 percent of respondents in the 2007 survey, a 30 percent decrease compared with 20 percent who mentioned it 10 years ago. "Organizational profit" was identified by 39 percent of the 2007 respondents, a 13 percent decrease compared with the 45 percent who mentioned it in 1997.

"Executives are rewarded for measurable improvements that can enhance overall organization effectiveness and, ultimately, financial performance," Westfall said. "The long-term shift in bonus components is consistent with other trends and areas of leadership focus that we see among healthcare organizations."

Quality management has long been at the top of the list of administrative responsibilities associated with the physician executive positions included in the 2007 survey. Clinical quality and safety improvements also were reported as the top critical focus areas for organizational success among the hospital chief executive officers surveyed in 2005 by Cejka Search in partnership with Solucient[R].

Compensation varies

The 2007 physician executive respondents represented 66 different medical specialties. Eight specialties--each of which had at least 70 respondents--accounted for 69 percent of the total number of respondents. The 2007 survey showed that anesthesiologists derived the greatest proportion of their compensation from clinical duties and were the most highly compensated among the eight largest specialties.

By contrast, family medicine physician executives derived the highest percentage of their income from administrative duties, and they had the lowest total compensation among the eight largest specialties.

The average time devoted to administrative duties for all physician executives reporting is 70 percent versus 30 percent devoted to clinical duties, an average proportion that has endured over the past 10 years.

Those physician executives who devoted the greater proportion of their time to administrative duties are ranked below, followed by those physician executives who devoted the least.

In the 2007 survey, respondents were asked to describe how the president of the medical staff was compensated in their organizations. Thirty-eight percent said that their organization pays the president of the medical staff, and an equal number said they do not. The remainder (24 percent) reported that they did not know.

Among those organizations that pay their president of the medical staff, 42 percent said that the hospital pays the entire stipend, and 25 percent said that the medical staff pays the entire stipend. The remainder (33 percent) said it is split on an average basis of 52 percent paid by the hospital and 48 percent paid by the medical staff.

Geographic location and scope

Compared with those in local or national organizations, physician executives working for organizations that are regional in scope are more highly compensated and experienced a higher increase in compensation (10 percent) between the 2005 and 2007 surveys. The same is true for physician executives whose individual responsibilities are regional in scope, who experienced an 11 percent increase in compensation.

About half of physician executives reported working in urban locations (51 percent), with the remainder in suburban (36 percent) or rural locations (13 percent). Notably, physician executives in rural settings are seeing gains in numbers and compensation.

In the past 10 years, the percentage of physician executives working in rural areas versus urban areas has shifted. In the 1997 survey, 59 percent of physician executives reported working in urban areas, and 9 percent in rural areas.

Physician executives in urban and suburban settings are compensated at the same level, with rural median compensation at approximately 5 percent less according to the 2007 survey.

But the survey showed meaningful differences in the compensation gains for rural physician executives. Their compensation increased over two years at twice the rate (12.5 percent) of those in urban areas (6.1 percent). Over the past 10 years the rate of growth in compensation has been essentially the same for all physician executives.

"This is an encouraging trend as it relates to health care delivery in rural settings," Westfall said. "There is an opportunity for physician executives to make an impact, and build a professionally satisfying and rewarding career in rural health care organizations."

Business management degrees

Physician executives continue to report an increasing percentage holding post-graduate business management degrees. The 2007 survey reports that 40 percent of physician executives hold such a degree, an 8 percent increase since the 37 percent reported in the 2005 survey, and doubling the 21 percent of physician executives holding a post-graduate business management degree in 1997.

In 2007, the 40 percent of physician executives who held one of these four business management degrees was distributed as follows: Master in Business Administration (20 percent), Master in Public Health (9 percent), Master in Medical Management (8 percent), and Master in Health Administration (3 percent).

The largest proportion of business management degree holders are chief executive officers/presidents (44 percent) and chief medical officers (45 percent). Among chief executive officers/presidents, 27 percent hold a Master in Business Administration. Among chief medical officers, 19 percent hold a Master in Business Administration and 13 percent hold a Master in Medical Management.

Although smaller in numbers, a Master in Medical Management represents the fastest rate of growth. From only 1 percent of all physician executives in 1997, the percentage has grown to 8 percent. The percentage holding a Master in Medical Management grew 14 percent from 2005 to 2007, faster than the 11 percent increase in Masters in Business Administration during that period.

Gender diversity

The proportion of survey respondents who are women was 13 percent in 2007 compared with 10 percent in 1997.

Of those women, 40 percent were medical directors, which is the title held by the greatest number of women overall and represents the category of physician executive for which there is the largest percentage of women in proportion to men.

In 2007, 19 percent of medical directors were women, compared with 12 percent in 1997. In 2007, women constituted 17 percent of associate medical directors and 19 percent of program directors.

"The position of medical director appears to be the gateway for female physicians who are pursuing an executive career path, and the pipeline is consistently filling," said Westfall.

Still small in numbers, the percentage of female chief executive officers/presidents doubled from 5 percent in 1997 to 10 percent in 2007. By contrast, nearly 21 percent of the chief executive officers at hospitals and systems belonging to the American Hospital Association are women. Two percent of the Fortune 1000 companies have a woman in the top leadership role.

"The findings in the physician executive compensation survey are consistent with the marketplace trends we see in boardrooms and executive suites across the United States," Westfall said. "There are growing opportunities for physician executives who are willing to contribute to the administrative leadership of their organizations."

To purchase a copy of the Cejka Search and the American College of Physician Executives 2007 Compensation Survey visit www.cejkasearch.com/acpe ($150 for ACPE members; $350 for non-members). Individual sections with the Executive Summary may also be purchased ($75 for ACPE members; $150 for non-members).

                                                         % Change
                          2007      2005      1997      2-year  10-year

All Physician Executives  $258,000  $240,000  $188,850   7.5%   36.6%
Chief Executive           $339,324  $301,500  $245,000  12.5%   38.5%
  Officer / President
Department / Division     $300,000  $271,000  $201,000  10.7%   49.3%
  Chair / Manager
Chief Medical Officer     $292,000  $265,750  $200,000   9.9%   46.0%
Vice President of         $275,000  $243,000  $200,000  13.2%   37.5%
  Medical Affairs
Medical Director          $240,000  $223,250  $175,000   7.5%   37.1%
Associate / Assistant     $210,000  $205,000  $160,000   2.4%   31.3%
  Medical Director

                               2007      2005      % Change

Chief Executive Officer/       $339,324  $301,500   13%
  President (168)
Department / Division Chair/   $300,000  $271,000   11%
  Manager (251)
Chief Medical Officer (378)    $292,000  $265,750   10%
Chief Operations Officer (21)  $285,000  $260,000   10%
Chief Medical Information      $284,000  $220,000   29%
  Officer (32)
VP of Medical Affairs (192)    $275,000  $243,000   13%
President of the Medical       $275,000  $235,000   17%
  Staff (23)
Chair / Member, Board of       $270,000  $310,000  -13%
  Directors (37)
Chief Quality Officer/VP of    $262,500  $270,000   -3%
  Quality (54)
Medical Director (602)         $240,000  $223,250    8%
Program Director (78)          $217,500  $220,000   -1%
Associate / Assistant Medical  $210,000  $205,000    2%
  Director (111)
Full-Time Professor (51)       $210,000  $205,000    2%
Consultant (77)                $200,000  $212,500   -6%
Physician Advisor (42)         $185,500  $191,000   -3%

(n) = number of respondents to 2007 survey.

Executive Bonus  % of         Median
Percentage       Respondents  Compensation

10% or less      37.1%        $250,000
11%-20%          35.5%        $282,500
21%-30%          17.9%        $307,000
31%-40%           5.7%        $377,500
41%-plus          3.8%        $400,000

                            % of Compensation from Duties
Specialty*                  Administrative  Clinical

Anesthesiology (73)         41%             59%
General Surgery (73)        59%             41%
Obstetrics Gynecology (81)  64%             36%
Emergency Medicine (170)    66%             34%
Psychiatry (95)             71%             29%
Pediatrics (150)            77%             23%
Internal Medicine (436)     79%             21%
Family Practice (387)       80%             20%

                       2007
Specialty*             Median Compensation

Anesthesiology         $350,000
Emergency Medicine     $300,000
General Surgery        $280,000
Obstetrics/Gynecology  $269,000
Internal Medicine      $246,000
Pediatrics             $235,000
Psychiatry             $228,000
Family Practice        $226,000

(n) = Number of respondents
*These specialties had at least 70 respondents

Proportion of Time Spent
on Administrative Duties            2007  2005  % Change

Most
Chief Medical Officer               91%   91%     0%
VP of Medical Affairs               89%   89%     0%
Chief Operations Officer            86%   94%    -9%
Chief Quality Officer / Vice        86%   86%     0%
  President of Quality

Average                             70%   73%    -4%
Chief Executive Officer             70%   71%    -1%

Least
Full-Time Professor                 46%   56%    18%
Physician Advisor                   41%   53%   -23%
Chair / Member, Board of Directors  40%   35%    14%
President of the Medical Staff      34%   31%    10%

             2007                      2005
          %           Median        %           Median
Location  Responding  Compensation  Responding  Compensation

Urban     51%         $260,000      55%         $245,000
Suburban  36%         $260,000      33%         $242,500
Rural     13%         $247,500      12%         $220,000

                   1997
          %           Median
Location  Responding  Compensation

Urban     59%         $190,000
Suburban  32%         $190,000
Rural      9%         $180,000

Median Compensation Change

Location  2-Year Change  10-Year Change

Urban      6.1%          36.8%
Suburban   7.4%          36.8%
Rural     12.5%          37.5%