Governance Institute Webinar Led by Kim Mobley and Tim Cotter
Managing Principal Tim Cotter and Physician Compensation Practice Leader Kim Mobley examined the subject of "Compensation Oversight: An Emerging Governance Best Practice."
Compensation arrangements for employed as well as independent physicians aligned with a health care organization have the potential for significant financial and regulatory risk. Thus, it is critical for organizations to develop and adhere to a governance process which will help to manage this risk in an efficient and effective manner. This webinar will provide board members and executives with information about how to develop a best practices process for reviewing physician compensation arrangements.
For more information, or to register, go to www.governanceinstitute.com.
Kim Mobley Led AHLA Physicians Organization Bootcamp Webinar
The American Health Lawyer's Association tapped Physician Compensation Leader Kim Mobley to lead its webinar entitled "The Anatomy of Physician Integration, Part II—Governance Issues." Along with co-leader Claire Turcotte of Bricker & Ekler LLP, Kim discussed issues involving physician billing for service and non-financial compensation.
For more information, or to register, click here.
Becker's Hospital Review 2013 Annual Meeting Featured Jim Rohan as Speaker
Managing Director Jim Rohan discussed "The Changing Landscape of CEO and CFO Compensation" at the 2013 Annual Meeting, which took place May 11-13, 2013 in Chicago.
This exclusive conference brings together hospital business and strategy leaders to discuss how to improve your hospital and its bottom line in these challenging but opportunity-filled times. The best minds in the hospital field will discuss opportunities for hospitals plus provide practical and immediately useful guidance on ACOs, physician-hospital integration, improving profitability and key specialties.
To learn more about this event, please click here.
SullivanCotter Principal Craig Pederson Addresses the NAMCP 2013 Spring Managed Care Forum
Craig presented "Next Generation Physician Compensation Design - Getting to 'There' from Here" to the annual conference, sponsored by the National Association of Managed Care Physicians.
Click here for more information on this event.
Managing Principal Kim Mobley publishes "Valuation of Physician On-Call Pay and Coverage Arrangements"
Physician Compensation Practice Leader Kim Mobley's article was featured in the 2013 American Health Lawyer Association's Health Care Guide.
"The Emergency Medical Treatment and Labor Act of 1986 (EMTALA) requires most Medicare participating health care organizations to have physicians available to provide services to patients presenting the in emergency room. Two types of call coverage are typically provided by physicians:
-
Unrestricted call coverage, which allows for the physian to remain off of the premises but available to report for duty within a specified timeframe (typically within 30 minutes), and
-
Restricted call coverage, which requires the physician to remain on hospital premises."
Maureen Cotter Joins SullivanCotter as Director of Research and Information
SullivanCotter, one of the nation’s leading independent compensation, benefits and human resources management consulting firms, has named Maureen Cotter as Director of Research and Information.
Maureen will lead the research team in providing clients and partners with valuable information on emerging trends and issues in compensation and benefits for the health care industry. She will work with client advisory boards to align the Firm’s research agenda with client needs and leverage technology to create a better user experience for participants in SullivanCotter’s industry-leading surveys. Maureen will also lead the marketing team to bring awareness to the Firm’s emerging services and expanding geographic footprint as well as to strengthen relationships with industry partners.
“Maureen brings more than 30 years of consulting expertise and business leadership to SullivanCotter, making her well-positioned to lead our research and marketing teams,” said SullivanCotter CEO, Ted Chien. “Her experience and understanding of today’s rapidly evolving health care landscape are invaluable assets to our Firm as we continue to leverage our unsurpassed data and information to better serve our clients.”
Prior to joining SullivanCotter, Maureen has held a variety of leadership positions within consulting and private sector companies, most notably serving as Global Director of Group and Health Care Consulting for Watson Wyatt (now TowersWatson), a human resource consulting firm. She has also led projects with a wide variety of health care policy stakeholders as an independent consultant, and served as Senior Director of Health and Welfare Benefits Consulting at HighRoads, a firm specializing in human resources technology and benefits.
Maureen is also a frequent contributor, author and speaker on the topics of health care, benefits finance and industry trends. She is one of the founding directors of the National Business Group on Health’s Institute on Health Care Costs and Solutions and is active in The Healthcare Roundtable. Maureen holds a Bachelor of Science degree in mathematics from the University of Michigan and is an associate of the Society of Actuaries.
SullivanCotter is the leading independent consulting firm in the assessment and development of tailored total compensation and reward programs for tax-exempt, not-for-profit organizations. For more than 20 years, the Firm has provided executive and employee compensation, governance and physician compensation counsel to a wide variety of health care and higher education organizations, associations and foundations. A recognized leader in health care compensation benchmarking, trends and analyses, SullivanCotter has also developed the most widely recognized physician and health care executive compensation surveys in the United States. Building from this unparalleled data, the Firm works closely with executives, boards and compensation committees to devise innovative solutions to attract and retain leadership talent while satisfying not-for-profit missions and regulatory requirements.
"Current Practices in Physician Valuation" Presented by Tim Reed to The Healthcare Roundtable
Managing Principal Tim Reed was the speaker at the 2013 THR for Employed Physicias Networks on March 21 in Bonita Springs, Florida. Tim's topic will be "Current Practices in Physician Valuation."
For more information on this event, please click here.
Managing Principal Warren Kerper Speaks at Great Ideas Conference
In his presentation, "An Innovative Approach to Executive Compensation," Warren's co-presenters were Jennifer Schlener and William Mallon of the Association of American Medical Colleges. The Great Ideas Conference was held March 10-12, 2013 and was sponsored by ASAE. To learn more about this event, please click here.
Managing Principal Kim Mobley Addresses Center for Healthcare Governance Conference
Physician Compensation Practice Leader Kim Mobley spoke at the Center for Healthcare Governance's Winter Symposium on February 19, 2013. Her topic: "Physician Compensaiton Trends for Tomorrow: What Every Board Member Should Know."
The Winter Symposium is designed for governing boards, CEOs and senior executives, physicians and other clinicians with leadership and governance responsibilities, staff members who coordinate and support governing board activities, and executives in health-care related industries. This year's event was held at the Arizona Biltmore Resort & Spa in Phoeniz, Arizona.
To learn more about this event, visit the Center for Healthcare Governance website by clicking here.
Survey Reveals High Demand and Increased Salaries for Advanced Practice Clinicians
Findings released today in the 2012 Advanced Practice Clinician Compensation and Pay Practices Survey Report from SullivanCotter (SullivanCotter), a health care compensation and human resources management consulting firm, and the American Medical Group Association (AMGA), a trade association representing medical groups and integrated health systems, indicated an increase in demand for Advance Practice Clinicians (APCs) as well as an increase in salaries for this group.
The survey revealed a high demand for clinical professionals, as 63% of respondents reported a 17% increase in the APC workforce over the last 12 months and 53% indicated they plan to increase the APC workforce by 15% in the next 12 months. In addition, of 135 organizations responding to APC compensation questions, nearly two-thirds (62%) reported increased salaries with an average and median increase of 3.9 % and 3.0 %, respectively, over the past 12 months. The survey also found that more than half of these organizations (54%) plan to provide salary increases to APCs in the next 12 months, with a projected average and median increase of 3.1% and 3.0%, respectively.
“These findings provide hard data to bolster anecdotal evidence regarding this trend in health care practice,” said AMGA President and Chief Executive Officer Donald W. Fisher, Ph.D., CAE. “For years, we have seen the movement towards a more team-based, coordinated approach to patient care. As more and more groups expand these models throughout their organizations, they now will have the tools to systematically track and benchmark changes in this area, which will help them in their strategic and financial planning for continued growth and success.”
“While reported salary increases continue to be moderate, the increases show no sign of abating,” said SullivanCotter Principal Kay Jensen. “Drivers of demand and salary increases include responses to physician shortages and repositioning of the workforce to ensure all medical professionals can work to the top of their practice level.”
More than 275 health systems, hospitals and physician group practices participated in the survey, submitting data for Certified Registered Nurse Anesthetists (CRNAs), Midwives, Nurse Practitioners (NPs) and Physician Assistants (PAs) with data effective May 1, 2012. Not only does the surveyprovide cash compensation data for APCs, but it also includes data on pay practices such as on-call pay, shift differentials, annual incentive plans and supplemental benefits and perquisites.
The 2012 Advanced Practice Clinician Compensation and Pay Practices Surveyis now available for purchase. If you have any questions about the report visit www.sullivancotter.com or email surveys@sullivancotter.com.
Life Insurance as an Alternative to Traditional Deferred Compensation Designs?
Every once in a while, a new life insurance product or approach enters the market that will revolutionize our thinking; more often, an existing concept is repackaged and promoted as something that will revolutionize our thinking. How can you differentiate between the two?
Life insurance has often been marketed as a tax-efficient way to minimize or avoid the solvency risk and “substantial risk of forfeiture” required by traditional deferred compensation designs in tax-exempt organizations. Split-dollar life insurance was once the answer: what could be better than the employer paying premiums, then getting those premiums back later? For many participants in these plans – and the sponsoring employer – it was too good to be true, with many employers taking large financial losses and participants not receiving the anticipated benefit.
A new wave of life insurance approaches is now entering the market with a range of features. While the marketing literature may indicate that the benefits of the life insurance approach outweigh those of more common 457(f) approaches used for deferred compensation, there is always a trade-off among complexity, investment risk, expenses and taxation. Some features of life insurance products may compare favorably to 457(f) plans but certain features are often sacrificed, including simplicity, and the approach may only be beneficial within a certain range of economic scenarios (e.g., low interest rates, consistent investment growth).
Because of the complexity and nuances involved with life insurance arrangements, it is critical for employers to fully understand these arrangements prior to their adoption as an employer-funded or voluntary program. An independent, unbiased review and an objective explanation of the proposal are recommended to ensure a balanced assessment of the proposed life insurance arrangement compared to other approaches.
Employers and individuals should be asking the following key questions when reviewing life insurance proposals:
QUESTION ONE
Does the life insurance approach achieve the organization’s objectives?
A key objective may be to meet competitive life insurance coverage and deferred compensation market practices. Targeting each benefit individually may be more effective – and simpler – than trying to use a combined approach through a life insurance policy. A combined approach often requires the policy to have a very high level of life insurance to support the targeted deferred compensation level, at a level that may be more than the individual needs or wants to carry. The high level of life insurance is also accompanied by higher mortality expenses and may require a more onerous underwriting process.
Some organizations may be looking to offer the life insurance approach as an additional investment vehicle for individuals who have maximized deferrals to 401(k), 403(b) and 457(b) plans – at least $35,000 in annual deferrals in 2013. While the program may be voluntary, the organization should acknowledge that allowing the insurance broker access to employees may be seen as an implicit endorsement of the approach, and disappointment from any negative outcomes may be directed toward the organization – even if the initial messaging is clear that the individual is responsible for determining whether or not to participate. Organizations should ask themselves the following:
is providing this voluntary program worth taking on the additional responsibility of monitoring the offering or taking on potential reputational risk?
QUESTION TWO
Is providing life insurance through the employer better than individuals purchasing coverage on their own?
The personal insurance market offers many different insurance designs that can be tailored to each individual’s life insurance needs. However, it may be possible to provide better pricing and access to better investment options within employer-provided coverage. The advantages to the individual should be compared to the administrative cost and risks involved.
QUESTION THREE
Have I been provided the right information?
Executives and, more recently, physician groups have become key target markets for life insurance providers, and human resource (HR) leaders are often asked for access to these individuals. The initial marketing material provided to HR may provide compelling comparisons to other approaches. However, it is important that the right information be carefully reviewed prior to allowing access to physicians and other employees, particularly since those individuals may consider the product to have been endorsed by the employer.
An independent review can provide the right information: a balanced assessment of the risks and rewards; results under multiple scenarios; and the impact of unexpected events.
QUESTION FOUR
Are comparisons to other approaches fair?
Life insurance comparisons often focus on certain features and scenarios that make the life insurance policy look better than more traditional approaches. This may include using high investment returns, low interest rates, “best case” tax treatment of life insurance and “worst case” tax treatment of the alternative. While assumptions may be defensible and the tax treatment may reflect one possible scenario, an independent review can be a surefire way of providing a fair comparison of all the features.
QUESTION FIVE
Are the investment return assumptions appropriate?
What happens if we experience another period of stock market volatility or if performance is worse than expected?
What if tax rates change?
Of course, none of us can predict the changes in the investment market, and any estimate of future returns is likely to end up missing the mark. Since the projected results are significantly affected by the investment return assumption, it is important to consider multiple investment return assumptions to determine the range of possible outcomes.
Even with multiple scenarios showing the impact of fixed investment return assumptions, market volatility can cause significant changes in the expected outcome. Life insurance arrangements are more sensitive to market changes than more traditional deferred compensation designs.
Changes in tax rates are likely to change the relative merits of different approaches. Furthermore, many life insurance approaches hinge on the current tax treatment of life insurance. It is important to consider the impact of changes in tax rates and tax treatment of life insurance in evaluating options.
QUESTION SIX
Will the participants understand the policy features?
Life insurance can be very complex. It is important that participants understand the benefits, risks, costs and limitations of participating.
Many approaches need premiums to be paid and the policy to be held for 10 to 15 years, or more, in order to provide beneficial results. Often, life insurance illustrations show what happens if an individual participates until a specified retirement age. However, the policy may have very different results if the individual participant stops making premium payments at an earlier date.
There is a greater chance of disappointment with the program if participants don’t understand it or if they don’t fund the policy for as long as expected.
QUESTION SEVEN
What might affect a participant’s ability to receive income from the life insurance policy?
Some products allow participants to take withdrawals from the policy to supplement other sources of retirement income. However, withdrawals are only permitted if there is sufficient cash value in the policy. If policy performance is poor, participants may not be able to take withdrawals. Participants may even be required to choose between paying additional premiums to keep the policy in force at an advanced age when they are financially less able to do so, or surrendering the policy and incurring a significant tax liability.
It is prudent to periodically consider the available alternatives for providing retirement benefits or deferral opportunities to ensure that the organization is providing good value to participants while meeting organizational objectives. However, it is important to consider all of the implications to the organization and participant through an independent review, asking the right questions and getting the complete answers you need.
Salaries Continue to Rise in Hospitals and Health Systems
SullivanCotter, a health care compensation and human resource management consulting firm, released the 2012 Survey of Manager and Executive Compensation in Hospitals and Health Systems. A key finding of this year’s survey was that among health systems and hospitals that participated in both 2011 and 2012, base salaries increased on average by 2.8% and 2.5%, respectively. Increases are consistent with the projected 2012 salary increases for health systems of 2.9%. However, increases for hospitals are slightly lower than the projected 2012 salary increases of 2.9%.
“Moderate salary increase budgets continue to be the trend – the reported data indicate projected manager and executive salary increase budgets will hover around 3.0%.”
“Moderate salary increase budgets continue to be the trend – the reported data indicate projected manager and executive salary increase budgets will hover around 3.0%,” noted SullivanCotter Managing Principal Tom Pavlik. “In addition, we saw a decline in the number of systems and hospitals that provided no salary increases last year.”
In its twentieth edition, this survey has become a respected industry resource. More than 300 health systems and 980 hospitals participated in the survey, submitting data for nearly 23,600 executives and managers between February and June 2012. Not only does it provide cash compensation data for executive and management jobs in hospitals and health systems, but it also includes data on pay practices, short- and long-term incentive plans, supplemental benefits, perquisites, supplemental and nonqualified retirement plans and much more.
The 2012 Survey of Manager and Executive Compensation in Hospitals and Health Systems is now available for purchase. To order a copy, please visit the Sullivan, Cotter and Associates website at www.sullivancotter.com or email surveys@sullivancotter.com.
Advanced Practice Clinician Pay – What's Happening and What's Coming
- In theory, APCs can be “more cost efficient” than physicians on a straight salary basis or even when paid base salaries and incentive compensation.
- Because their time is less expensive, they can be leveraged to do more time-consuming patient education, patient monitoring and follow-up tasks that can improve outcomes while freeing physician time for direct care or managing more complex patients.
In fact, demand is increasing. According to SullivanCotter’s 2011 Physician Compensation and Productivity Survey, over half (59 percent) of survey participants have increased the size of their APC workforce within the past 12 months. Of these, the average increase was seven APCs. Sixty-one percent of survey participants indicated that they plan to increase the size of their APC workforce in the next 12 months. Of these, the average increase will be six APCs.
Salaries are trending up as well. For example, data from the American Medical Group Association’s (AMGA’s) 2011 Medical Group Compensation and Financial Survey show salaries for primary care Nurse Practitioners (NPs) went up approximately 8 percent at the market median over the two-year period between 2009 and 2011 (from $86,841 to $93,642); Physician Assistants (PAs) in medical specialties salaries went up approximately 9 percent over the same period (from $90,151 to $96,575).
These salary increases, however, stand in contrast to what NPs and PAs just entering the workforce are expecting. An organization that attended graduations this spring for large PA and NP programs reported that PAs were being told to expect a starting salary of $120,000. The NP graduates were told a less optimistic starting salary of $98,000.The different expectations being set by the two programs are almost as disconcerting as the salary levels quoted – both well above reported salary range medians. These expectations are frequently reinforced by APC professional associations in articles and on websites.
For hiring authorities, this creates real challenges when balancing the need to hire more and more APCs while dealing with salary levels of current staff which may, despite years of experience, lag the expectations of the new graduates. In these situations it is critical to be prepared with accurate market competitive data and a strong recruitment strategy that focuses on additional factors (beyond base salary) for choosing your organization
So what are those additional factors?
TO PROVIDE INCENTIVES OR NOT TO PROVIDE INCENTIVES
While the majority of health care organizations do not offer individual performance bonuses to APCs (less than 15 percent of organizations according to the Integrated Healthcare Strategies’ 2011 Advanced Practice Clinician Survey), the data are likely affected negatively by the number of hospitals that responded to the survey compared to the number of physician group practices. Overall, hospitals are less likely to provide incentives than group practices.
It may seem that, with the movement from encounter-based to outcomes-based reimbursement, offering or developing productivity based incentive plans is counterintuitive. However, SullivanCotter cautions against abandoning these programs or rewards too quickly. There is still significant value in measuring and rewarding for productivity as long as the following conditions are true
- Productivity isn’t the only incentive plan measure. The best plans include measures and rewards for other components such as patient satisfaction, compliance with established protocols, participation in process improvement activities and good citizenship (timely charting, referrals, etc.).
- The plans make economic sense. You would think this would be intuitive, but we have seen plans that have paid PAs 80 percent of the pay and incentive provided to their supervising physician – even when the physician was a neurosurgeon.
- The plans don’t set up a competition between the physicians and APCs. No APC should be influenced by a bonus plan when deciding whether to refer a patient to a physician.
- The design doesn’t violate regulatory requirements. The following is according to legal guidance provided to SullivanCotter:
- There can be private inurement from an Internal Revenue Service (IRS) perspective if APC compensation is above fair market value (FMV).
- Because APCs order items or services that can be reimbursed by Medicare or Medicaid, the financial arrangements with APCs do implicate the Anti-Kickback Statute.
- Although Stark does not apply to APCs directly, as Stark is targeted only to physicians, if a hospital has an agreement with a physician organization and some of the contracted services are to be performed by an APC, Stark can be implicated.
Of course, there can be another regulatory issue if an APC’s productivity is “added” to that of a physician’s in order to calculate the physician’s productivity bonus.
WHAT ABOUT THE WORK ENVIRONMENT?
The level of physician support for APCs in an organization, as well as the level of independence APCs are allowed, can be a source of satisfaction or dissatisfaction for an APC. The physicians need to view APCs as partners and not competitors or an added burden. Stipends for APC oversight and team-based reward systems can go a long way in addressing this issue, but ultimately it’s a matter of an organization’s culture whether APCs will feel they are valued.
Of course, state practice laws will also determine the level of APC independence and it appears the trend is toward more APC independence. The following are examples: Nurse practitioners in Virginia have been lobbying for autonomy in practice for more than two years. Currently the law requires that doctors supervise and direct NPs and until very recently physicians in Virginia had resisted any changes to the law.
The proposed changes would require NPs to work in teams led by physicians, which would provide more flexibility in coordinating patient care and the bill being written would allow for electronic collaboration.
On April 4, 2012, Nebraska’s unicameral legislature cast the final vote to approve changes to the law that will allow PAs to order respiratory therapy when delegated by the supervising physician.
Finally, what other factors will APCs consider in assessing the rewards an organization offers? Pay for evening, night and weekend shifts, being on-call, working extra shifts – these “extra” pay offerings cut two ways. They may be perceived as valuable to the APC, but can also reduce the value proposition for the organization. It is not uncommon for SullivanCotter to find, in helping a client catalogue all their special pay practices for APCs, situations where pay for these “extras” has driven take home pay up more than 25 percent above the base salary.
WHAT’S NEXT AND HOW TO PREPARE?
The growth in demand for APCs will fuel competition and thus salary increases. The need to balance salary costs against reimbursement will (for forward thinking organizations) provide opportunities to reward the best performing APCs and health care teams.
The best strategy is to have a strategy. That may require assessing what you are doing now in terms of base pay, extra pay, the work environment and in comparison to market practices and trends; getting the key stakeholders together to identify what’s good, what’s working and what is not so good about what you’re doing; establishing a total compensation strategy; and articulating and implementing that strategy in a way that provides a true competitive advantage
HealthLeaders Media Quotes Sally LaFond in "C-Suite Compensation Remains Taboo"
Compensation is usually a taboo conversation in every industry. Interestingly, health care leaders don't mind talking about how they calculate physician salaries, but don't ask them to chat about how they calculate their own. That conversation quickly runs dry.
OIG Issues Advisory Opinion Regarding Physician On-Call Pay
A key factor noted in the opinion is that, based on an independent valuation, the hospital certified that the per diem rates are commercially reasonable and fair market value for the services provided.
Other OIG considerations included the following:
- The hospital administers a per diem fee, calculated annually in advance, to specialist physicians to provide unrestricted on-call coverage for the emergency department.
- All specialists on the hospital’s medical staff are offered the opportunity to participate in the call arrangement. Thus, the on-call pay cannot be offered to select physicians or physician groups only within the specialty.
- Physicians who elect to participate in the program enter into one-year written agreements containing automatic renewal provisions, under which they agree to serve on the call coverage panel.
- The arrangement is limited to specialists who are only required to provide “unrestricted call” (does not require physical presence at the hospital during the call time but requires availability within 30 minutes).
- Physicians who participate must agree to provide the inpatient care required by any patient that is admitted by the physician. The participating physician is also required to provide certain follow-up care in their offices, without additional compensation, following discharge of the patient.
- A uniform methodology is used by the hospital to allocate call coverage equitably among participants within each specialty.
- Physicians are monitored for compliance with the program requirements.
The OIG concluded that it would not impose administrative sanctions on the hospital in conjunction with the arrangement as described in the opinion.
In December of 2011, SullivanCotter released its seventh annual Physician On-Call Pay Survey Report. The report includes data from 189 organizations, including Level I, II and III trauma centers, non-trauma center hospitals, medical groups and other facilities providing on-call services. On-call pay rates from over 40 physician and advanced practice clinician specialties are presented in the survey by call type (restricted versus unrestricted) and are reported by trauma center status and trauma call versus non-trauma call.
Other on-call pay practices covered in the survey that directly correlate to factors the OIG considered in its recent opinion include the following:
- Organizational payer mix.
- Prevalence of payment for on-call coverage, by specialty.
- Practices used to compensate physicians for providing services when called in.
- Prevalence of “excess call” (the practice of requiring some number of uncompensated call coverage shifts before becoming eligible for on-call pay), by specialty.
- Number of physicians participating in call rotation, by specialty.
- Telephonic on-call coverage practices.
According to the 2011 survey participants, the following pay variables affected the reported rates paid for on-call coverage:
- Local market rates.
- National market rates.
- Frequency of call.
- Likelihood of being called in when on-call.
- Acuity and intensity of care provided when on-call.
- Payer mix.
- Amount of inpatient follow-up care required.
- Malpractice risk.
SullivanCotter’s 2012 Physician On-Call Pay Survey Report is currently closed for participation. The survey report is scheduled to be published in late January 2013. To pre-order a copy of this survey report, or to participate in a future release of the survey, please contact SullivanCotter's Survey Team at surveys@sullivancotter.com.
Governance Institute Publishes "Assessing Compensation Advisor Independence" by Tim Cotter
Although the rule does not apply to not-for-profit health care and was not written with this sector in mind, it provides helpful guideposts for such organizations given the potential for governance-related "spillover" from the public company sector. Compensation committees in the not-for-profit health care sector would be well-advised to consider the extent to which applying the prescribed compensation advisor independence factors would strengthen their decision-making process, as conflicts of interest (real or perceived) can compromise an effective executive compensation governance process.
Kathy Hastings and Sally LaFond Contribute to HealthLeaders Media Article, "Volume, Value and Compensation Metrics"
Though few external benchmark resources are available to help create the guiding metrics, boards continue to try to shift away from rewarding solely on organization-wide financial performance and move toward incentivizing for quality and patient satisfaction. Ultimately, though, fiscal goals still dominate when it comes to incentivizing the C-suite.
Modern Healthcare Features SullivanCotter's Comments in "Best Places: Financially Fit, Employee-Oriented, Reform-Ready"
Healthcare remains a bulwark of an otherwise tentative economy, and employment in the sector will grow even faster during the next couple of years if the Patient Protection and Affordable Care Act is fully implemented, according to healthcare employment experts and human resources managers, who say that for now, everyone is “holding their breath” until after the presidential and congressional elections.
SullivanCotter Published in Becker's "5 Steps for Hospitals Reviewing Benefits"
Becker's Hospital Review quoted the 5 action steps in our white paper, Reviewing Executive Benefits
- Revisit your executive benefits philosophy as part of your executive compensation philosophy.
- Ensure your benefits consultant is independent.
- Review executive benefit programs and severance arrangements in light of current, pending and potential legislation to assess the organization's and individual executive's compliance risk.
- Conduct an independent, objective review of your executive benefits program.
- Ensure results are understood in the context of total compensation.
Reviewing Executive Benefits
The following are five key action steps in reviewing your executive benefits program:
ACTION STEP ONE
Revisit your executive benefits philosophy as part of your executive compensation philosophy.
ACTION STEP Two
Ensure that your benefits consultant is independent.
ACTION STEP Three
Review executive benefit programs and severance arrangements in light of current, pending and potential legislation to assess the organization’s and individual executive’s compliance risk.
ACTION STEP Four
Conduct an independent, objective review of your executive benefits program.
ACTION STEP Five
Ensure that the results are understood in the context of total compensation.
Benefits programs are one of the first areas to suffer when organizations battle with managing expenses (attempting to avoid staff layoffs and pay cuts instead) as they are seen as a seemingly easy place from which to extract savings.
Whether this is a temporary reduction to retirement contributions or a longer-term change to the health insurance, the impact is immediate. However, though a more moderate effect, there are savings to be gained at many health care organizations without reducing benefits: vendor management, dependent care audits and program design changes can all be effective tools to reduce cost instead.
Nevertheless, while benefits still play an important part in the compensation package, it is evident that the landscape for providing executive benefits and perquisites is changing. Historically, executive benefits have been a way to provide less-visible forms of compensation. Due to Form 990 reporting requirements, and increased scrutiny of executive compensation, executive benefits and perquisites are now becoming very visible. As such, it is important, now more than ever, for compensation committees to review and understand the executive benefits and perquisites provided to their leadership team.
Many executive benefits have evolved to take advantage of loopholes; over time, the Internal Revenue Service has closed those loopholes. Tax rules have become more restrictive; the tax-mitigation strategies have become more complex. However, despite these patterns of opposition, in actuality any advantages gained from trying to circumvent the impact of the tax rules are quickly eroded by their complexity and the new risks that such strategies often create. Further, few executives have the time or tax background to fully understand their executive benefits, let alone board members who often only review benefits once a year, at most. Many organizations have already taken the step of eliminating or limiting perquisites to avoid such measures.
A once-popular design, flexible benefit programs are being replaced by simpler programs that executives can understand and appreciate. Performance issues, complexity and regulatory uncertainty have led to many executive benefits programs being redesigned in a way that meets both the organization’s and the executives’ needs. While new regulations are periodically proposed, organizations often find that changes to their executive benefits programs are needed, even before those changes are required by law. Organizations should review their executive benefits as part of their total compensation strategy to ensure that the benefits program supports the organizational objectives.
An independent review of benefits is essential and is a best practice in governance. Typically, the depth of review and industry expertise needed requires the use of an outside consultant. However, many consultants also sell insurance, and this can be a conflict of interest if the consultant’s revenue is directly affected by the new benefits design. With an independent consultant, the organization can be sure that the recommended benefits program design is best for the organization, not what generates the most income for the consultant.