Survey reveals emphasis on tying pay to quality: physician executive pay increase holds steady near 7 percent.

Physician executive compensation rose by an average of 6.7 percent--from $225,000 to $240,000--on data collected in 2002 and 2004, according to a survey recently released by Cejka Search and the American College of Physician Executives.

Overall increases in this year's Cejka Search/ACPE survey run parallel to a similar survey conducted in 2003, where compensation rose 7.1 percent over the previous two years.

The survey is the fifth of its kind to be 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 2,422 ACPE members.

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

* Post-graduate business degrees

This year's survey results for average pay increases are not surprising. The average pay increase for physician executives in recent surveys has been 5 to 7 percent.

Although organization goals/objectives are still the leading bonus component, the percentage of physicians with bonuses tied to quality measurements more than doubled (from 15 to 31 percent) in this year's findings.

Quality measurements, as a bonus component to all physician executive positions, increased 107 percent over those reported in the 2003 survey, likely reflecting the ever-growing emphasis on quality of care and patient safety.

This finding corresponds with the increasing organizational attention to quality outcomes and pay-for-performance initiatives, as well as the need for physician leadership in these areas.

Quality pays

With an 18 percent pay increase, the vice president of quality position experienced the highest percentage increase from the 2003 survey to the 2005 survey, possibly indicating the growing significance of this position.

According to a June 2005 Hospital CEO Leadership Survey released by Cejka Search in partnership with Solucient[R], a health care information products company, the majority of hospital CEOs listed clinical quality and safety improvements as the number one critical focus area for an organization's success over the next three years.

Top earners

Of the 15 titles that responded to the 2005 survey, the highest paid physician executives were medical directors of single-specialty groups, reporting an average yearly income of $340,000, compared to executives working for government-run institutions reporting incomes of $170,000.

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The highest median compensation for all physician executives based on organization type is for those working in health system corporate offices ($302,000) and single-specialty groups ($300,000).

Member/chair board of directors led the list of top earners with a median compensation of $8,500 more than CEOs/presidents and $87,500 more than medical directors.

Three positions revealed double-digit increases over the 2003 survey (based on 2001-2002 data). Two positions were reported in the 2005 survey for the first time, there-fore comparison data from the 2003 survey is not available for them.

Decreases for some

Some positions experienced decreases in pay from the 2003 to 2005 survey: chief medical officers in both HMOs and multi-specialty groups, along with associate and assistant medical directors in multi-specialty groups. Decreases for these positions ranged from 4 to 7 percent.

The decreases offset significant compensation growth from the 2001 to 2003 survey, which ranged from 12 to 30 percent. The leveling off in the associate/assistant medical director compensation in multi-specialty groups may correspond with a solid supply of candidates in the market for these more entry level positions.

New titles

Two new titles were reported with increased frequency in this year's survey: president of medical staff and chief medical information officer. In previous surveys, responses for these positions were so negligible they were never reported.

President (or chief) of the medical staff is not a new title and is an elected, voluntary position, which typically has a stipend associated with it. Increased numbers in survey responses for this title reflect a possibility that more presidents of the medical staff are now viewing the role as a key administrative step in the physician executive career path.

In addition, the presence now of the chief medical information officer title indicates its growing importance in health care. Organizations are likely focusing on the necessary integration of technology and medical applications, which requires significant physician input and leadership.

Best locations for higher pay

Physician executives whose organizations are regional in scope are more highly compensated than those in local or national organizations. They also experienced the highest increase from the 2003 to 2005 survey. The north central areas of the U.S. remain the best paying regions according to the 2005 survey.

Physician executives reported working in urban (55 percent), suburban (33 percent) or rural locations (12 percent). Typically, those in an urban setting are compensated at the highest levels with suburban settings following closely behind. Rural median compensation lagged behind urban and suburban compensation by $20,000 for all physician executives reporting.

Chief medical officers and department/division chair/managers in suburban settings, however, are more highly compensated than those in urban settings.

Specialty groups: Where's the money?

Compensation for physician executives employed by a single-specialty group is higher than the compensation for those employed by a multi-specialty group. This finding is most likely due to higher clinical compensation levels associated with single-specialty groups, often composed of high revenue producing specialties and sub-specialties.

The median compensation for a single-specialty group medical director is $340,000, or $118,000 more than the median compensation for a multi-specialty group medical director at $222,000. Likewise, the compensation for a department/division chair/manager employed by a single-specialty group practice ($350,000) is $50,000 more than those employed by multi-specialty groups ($300,000).

The outlier is with CEOs/presidents. Those employed by multi-specialty groups are more highly compensated ($322,000) than those in single-specialty groups ($300,000).

How do benefits look?

According to U.S. Department of Labor, Bureau of Labor Statistics Occupational Outlook Quarterly, published summer 2005, over the past decade, the change in benefits costs for American businesses has outpaced the change in the cost of wages.

Salaries and benefits accounted for nearly 30 percent of employers' total compensation costs in March 2005. Yet, employers spent the least amount on benefits for service workers and the most on benefits for management, business, and financial workers.

It seems health care organizations are no different. According to the Cejka Search/ACPE 2005 Physician Executive Compensation Survey, tax deferred compensation, as a benefit, increased from 4 percent for physician executives in the 2003 survey to 25 percent in the 2005 survey.

On the downside, however, 74 percent of all physician executives surveyed reported no severance packages. On average, the top five benefits indicated in the 2005 survey were:

Health Insurance                86%
Vacation, Holidays, Personal    82%
CME, Travel, and Paid Time-Off  81%
401(k)/Retirement               80%
Life Insurance                  73%

Which degree pays the most?

Higher increases in median compensation were seen in CEOs, presidents and medical directors with MMM degrees compared to those with MBAs. MMM medical directors now earn more than those with MBAs.

Female executives

According to an April 2005 article published in the New England Journal of Medicine (NEJM) Resource Center entitled "Women in Medicine Force Change in Workforce Dynamics," for the first time in history, women make up the majority of medical school applicants.

It is predicted that by 2010, approximately 40 percent of U.S. physicians will be women. Yet despite those inroads, women are still a minority in the boardroom and executive suite, NEJM says.

The Cejka Search/ACPE 2005 Physician Executive Compensation Survey indicates change may be on the way. Two percent more female physician executives responded to this year's survey than the 2003 survey.

Although this is not a large percentage, it is worth watching in the future as more and more women are entering medical school and will be gravitating toward physician executive careers.

Management time

It is not unusual for physician executives to maintain some component of clinical responsibilities. The average time devoted to purely administrative duties for all physician executives reporting is 73 percent, up from 71 percent in the 2003 survey.

Those physician executives who spent the most time in management are ranked on the previous page, followed by those physician executives who spent the least time in management. Physician advisors experienced a 23 percent increase in management work over the 2003 survey.

Carol Westfall is president of Cejka Search in St. Louis, Mo. She can be reached at 800-678-7858 or [e-mail]

To purchase a copy of the Cejka Search and the American College of Physician Executives 2005 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).

                                        2005       2003      Percent
Position                                Survey     Survey    Change

Member / Chair Board of Directors       $310,000   $280,000  11%
CEO / President                         $301,500   $277,800   9%
Department / Division Chair / Manager   $271,000   $250,000   8%
Chief Operations Officer                $260,000   $237,500   9%
Chief Medical Officer                   $265,750   $253,500   5%
Vice President of Quality               $270,000   $229,000  18%
Vice President of Medical Affairs       $243,000   $230,000   6%
President of Medical Staff              $235,000*  --        --
Medical Director                        $223,500   $214,000   4%
Program Director                        $220,000   $200,000  10%
Chief Medical Information Officer       $220,000   --        --
Consultant                              $212,500   $200,800   6%
Associate / Assistant Medical Director  $205,000   $204,000   0%
Professor                               $205,000   $198,000   4%
Physician Advisor                       $191,000   $177,500   8%

Source: Cejka Search / ACPE 2003 and 2005 Physician Executive
Compensation Surveys
* Median compensation for President of Medical Staff includes primarily
clinical compensation.

In addition to vice president of quality, compensation for two other
positions climbed by double digits in this year's survey: board
membership by 11 percent and program director by 10 percent.

$ Physician Executive Compensation Survey 2005--Compensation by Location

          Number                25th                  75th
Location  Responding  Mean      Percentile  Median    Percentile

Urban     1319        $266,078  $196,000    $245,000  $310,000
Suburban   797        $272,080  $199,000    $242,000  $305,000
Rural      302        $236,010  $182,500    $220,000  $269,500

          90th
Location  Percentile

Urban     $400,000
Suburban  $440,000
Rural     $337,200

Source: Cejka Search/ACPE 2005 Physician Executive Compensation Survey

Most Time Spent in Management

                                   2005  2003  Percent Change

Chief Medical Officer              91%   91%   no change
Vice President of Medical Affairs  89%   88%    1%
Chief Operations Officer           94%   86%    9%
Vice President of Quality          86%   84%    2%

Least Time Spent in Management

Member/Chair Board of Directors    35%   35%   no change
Physician Advisor                  53%   43%   23%
President of Medical Staff         31%   *     not applicable
Department/Division Chair/Manager  55%   53%    2%

*Was not included in 2003 survey.

$ 2005 and 2003 Surveys Median Physician Executive Compensation Percent

                                      2005      2003      Percent Change

All Physician Executives              $240,000  $225,000   6.7%
Associate/Assistant Medical Director  $205,000  $204,000   1.0%
* Hospital                            $212,500  $212,000   0.2%
* Multi-Specialty Group               $212,000  $220,000  -3.6%
* HMO                                 $205,000  $202,939   1.1%
CEO/President                         $301,500  $277,800   8.5%
* Hospital                            $340,000  $313,000   8.6%
* Single-Specialty Group              $300,000  $300,000   0.0%
* Multi-Specialty Group               $322,000  $250,000  28.8%
* HMO                                 *         $270,000  n/a
Chief Medical Officer                 $265,750  $253,000   4.8%
* Hospital                            $260,000  $250,000   4.0%
* Multi-Specialty Group               $236,000  $250,000  -5.6%
* HMO                                 $280,000  $300,000  -6.7%
Chief Operations Officer              $260,000  $237,500   9.5%
Consultant                            $212,500  $200,800   5.8%
Department/Division Chair/Manager     $271,000  $250,000   8.4%
* Hospital                            $280,000  $257,840   8.6%
* Single-Specialty Group              $350,000  $330,000   6.1%
* Multi-Specialty Group               $300,000  $220,000  36.4%
Medical Director                      $223,250  $214,000   4.3%
* Hospital                            $224,500  $220,000   2.0%
* Single-Specialty Group              $340,000  $249,000  36.6%
* Multi-Specialty Group               $222,000  $215,000   3.3%
* HMO                                 $232,500  $218,500   6.4%
Member/Chair Board of Directors       $310,000  $280,000  10.7%
Professor                             $205,000  $198,000   3.5%
Program Director                      $220,000  $200,000  10.0%
Vice President of Medical Affairs     $243,000  $230,000   5.7%
* Hospital                            $240,500  $230,000   4.6%
* Academic Health Center              $250,000  $250,000   0.0%
Vice President of Quality             $270,000  $229,000  17.9%

Source: Cejka Search/ACPE: 2005 Physician Executive Compensation Survey
Note: The difference in compensation between the 2003 and 2005 surveys
could be affected by a shift in survey sample.