Physician Compensation Benchmark Analysis

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Physician Compensation Benchmark Analysis

  • The benchmarks for physician compensations change every year. However, there are rarely any significant changes.
  • The average compensation changes by 5% for those that work between the 50th and 75th percentile.
  • These changes can be due to general inflation, change in responsibilities, change in hospital characteristics, and/or a new counterparty in the contract.
  • Sometimes, an addition of a single contract to the benchmark can alter the benchmarks.
  • If an organization determines that the rates are at or below the 75th percentile, the compensation is considered compliant.
  • Determination of fair market value is done in two ways, either via the market approach or the cost approach.
  • The market approach utilizes the database of transactions between other hospitals and their physician to map the range of the transactions. The fair market value can be anywhere between the 25th and the 75th percentile.
  • The cost approach uses the value of a service within its organization and references the market approach.
  • The commercial reasonableness of a physician compensation is quantitatively calculated by taking into account the "significant losses" on physician practices.
  • When the physician compensation arrangement fails to be commercially reasonable, the government files a violation of "Stark's Law."
  • The median pay is neither statistically coherent nor is it backed by academic research.
  • The 75th percentile of compensation per wRBU is not a mythical ceiling on fair market value.
  • "Physician compensation that is less than the 75th percentile of national compensation benchmarks is considered fair-market value in order to comply with Stark Law, the Federal Antikickback Statute, and Internal Revenue Code requiring that 501c3 hospital systems pay reasonable compensation".

Research Strategy:

We began our research by going through legal databases to find cases involving physician over payment, violations of anti kickback statute, stark's law, and internal revenue code. We went through databases such as Justia, Public Access to Court Electronic Records (PACER), CaseLaw, George Mason University's legal research directory, and WorldII's US Court database. While we found some cases that talked about the laws, none addressed the topic of overpayment.

We also went through the websites of trusted physician benchmarks providers, appraisal groups and survey providers such as Medical Group Management Association (MGMA), Association for American Medical Colleges (AAMC), Advisory Board, MD Ranger, Sullivan Cotter, Medscape, Kaufman Hall, and Huron Consulting Group. We hoped to find some analysis of physician compensation benchmarks from experts. We found a few reports about the physician compensation benchmarks and fair market value but none addressed the issues with the 75th percentile

We also looked into the websites of Internal Revenue Services and Centers for Medicare and Medicaid Services hoping to find some guidelines, fraud cases or self disclosures, about physician overcompensation. We also checked these websites for any releases that may support the idea "that organizations would be better protected with a policy that relied on median or mean of the national compensation benchmark, rather than the 75th percentile" but we only found regulations and codes about the compensation of physicians.

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