Adapting Executive Incentive Plans to Meet Today's Performance Imperatives
How Health Systems are Evolving Their Approach Amidst an Uncertain Financial Environment
By Jeff Softcheck, Principal, SullivanCotter
After four years of heightened financial volatility, 2024 brought a moment of respite for many not-for-profit health care organizations. The path forward remains challenging, however. Despite modest improvements, the industry continues to face strong financial headwinds – including expense categories that are outpacing revenue growth, regional variation in financial recovery, the negative impact that the One Big Beautiful Bill Act is likely to have on health system revenues in 2027 and beyond, and the softening of the broader US economy.
While there are common performance themes throughout the industry, we have observed significant variability in focus depending on each system’s circumstances. To assess how organizations are evolving incentive plans to account for financial market dynamics, SullivanCotter recently examined financial statements covering 2019 to 2024 for 133 health systems with greater than $1 billion in total net revenue. This included a review of short-term incentive plan (STIP) and long-term incentive plan (LTIP) market practices. Based on these analyses, we provide considerations for incentive performance measure selection and goal setting in 2026 and beyond to reflect each organization’s financial circumstances and priorities.
Regional Variation in Operating Margins and Incentive Plan Design
While the national median operating margin for health systems grew incrementally from 0.3% in 2022 to 1.6% in 2024, a closer examination of the past 5 years reveals significant regional differences. In 2019, health systems in the Southeast posted a median operating margin of 2.5%. This was only 86% of the national median of 2.9%. By 2024, these systems achieved a median operating margin of 4.2% – an impressive 263% of the new national median of 1.6%. This growth is largely due to recent double-digit revenue increases in this region, resulting in a 3.3% margin improvement from 2023 to 2024 alone.
In contrast, a very different story is unfolding in the West. These systems have seen a sharp decline as their median operating margin dropped from 5.0% in 2019 (172% of the national median) to 0.9% in 2024 (56% of the national median). For the past three consecutive years, margins have hovered below 1% as revenue growth lagged rising expenses.
Health systems in the Northeast have historically operated on slim margins, which have been further compressed relative to national statistics, while those in the North Central and South Central have generally maintained margin positioning relative to national statistics compared to 2019. See the image below for a full breakdown of operating margin by region.
Across the country, financial sustainability performance measures (i.e., margin/income) continue to represent the single most prevalent and highest weighted incentive plan domain in both STIPs and LTIPs. However, non-financial performance categories carry most of the overall weighting. In STIPs, non-financial measures often comprise 70% of the plan weight and are most commonly focused on quality, safety, patient experience, access, and people objectives such as reducing turnover and enhancing engagement.
LTIPs have evolved to focus on a limited set of measures – financial sustainability, growth and transformational performance priorities — with no notable regional differences. Financial measures remain focused on overall sustainability (e.g., income/margin, expenses, cash), while growth measures span a continuum from broad-based financial growth to targeted growth achieved, for example, via geographic expansion or service line development. Transformational goals, as their name suggests, continue to evolve and adapt to strategic priorities and the market landscape. They emphasize improvement in stubborn performance areas such as quality outcomes and workforce engagement and quantify the expected impact of digital and care delivery objectives on financials and patient outcomes.
While many incentive plan elements are consistent across health systems, select regional differences in incentive plan design have evolved over the last few years, particularly in STIPs, to account for local market dynamics within a one-year horizon.
These changes span a few common areas related to financial performance measurement:
Use and design of a financial circuit breaker that ‘opens’ the STIP
- Organizations in the West have increased the use of circuit breakers over time. This has increased from 69% in 2022 to 82% in 2025.
- Other regions have seen a slight decrease (6%) in the use of circuit breakers from 2022 to 2025.
- Systems in the West and Northeast are more likely to have flexible circuit breakers. In the event that minimum financial performance objectives are not met, these circuit breakers reduce rewards for non-financial goal achievement. Reduction is determined at the discretion of the committee that governs the plan, or payouts are incrementally reduced by a set formula depending on the degree of the ‘miss’ against the financial goal.
Tailored changes to emphasize system versus entity performance:
- Some organizations have increased emphasis on system-wide financial performance. This is particularly common for systems operating within a distinct region/market where the service redistribution that may be required to see financial improvements may be incompatible with incentivizing by entity. System measurement represents the most common approach to financial measurement – and other goal areas – to reinforce the success of the enterprise over individual operating units.
- Others have increased emphasis on system-wide goals to drive a pay-for-performance culture and stress accountability against distinct budgets or expense reduction targets. This approach is most often blended with some level of system performance recognition.
Careful consideration of the appropriate financial measure selection:
- Organizations in the North Central and Southeast are generally aligned with overall market prevalence. The data shows that 94% of STIPs include income/margin measures, 42% of STIPs include growth measures, and 23% of STIPs include cost efficiency measures.
- Those in the West are twice as likely to include cost efficiency measures than the broader market and are less likely to include margin/income measures. This likely reflects the ongoing margin pressure in the West and the need to align costs.
- Systems in the South Central region are half as likely to include cost efficiency measures, which reflects their relatively strong margins.
- Organizations in the Northeast are 20% more likely to include growth measures.
Isolated changes to weighting of financial performance measures:
- Organizations in the South Central and Southeast decreased weighting on financial, growth, and cost efficiency measures by 5-10% from 2022 to 2025.
- While other regions have seen little change overall across financial measure weightings, these weightings vary widely (from 20%-50%) at the organization-level and change year-over-year depending on unique performance circumstances.
Framework to Ensure Incentive Plan Effectiveness
Many executive leadership teams and compensation committees have begun adjusting the design of STIP and LTIP incentive plans for 2026 and beyond. By taking intentional steps to restructure or reaffirm incentive plan elements, organizations can ensure the most critical financial and non-financial performance priorities – as well as appropriate measurable and reasonable performance standards – are developed and communicated to participants. The regional differences in incentive plans that have evolved over the last 5 years combined with the future outlook will help inform future decision-making.
Using the following framework can help organizations as they move forward:
Review the plan design:
- Is the use of a financial circuit breaker desired? What is the circuit breaker impact?
- Does the plan have the right emphasis of system versus entity performance?
- What is the role of financial performance in the incentive plan?
Define the performance philosophy:
- What are the guiding principles of the plan?
- What is the intended degree of stretch in the performance standards?
- How should the plan account for ongoing uncertainty in the performance environment?
Select meaningful performance measures:
- What measures will have the greatest impact on the strategy?
- What are appropriate financial measures to include in the plan based on the outlook and strategy?
- Do non-financial performance areas have sufficient investment to see sustained improvement?
Follow a robust goal calibration process:
- Do the selected measures have reliable internal and market data?
- What are the expected headwinds and tailwinds? Can these be quantified?
- How do the goals align with the performance philosophy?
Cascade and communicate goals and associated action plans:
- Are the appropriate change management and action planning processes in place to ensure the entire organization is aligned towards the objective?
- Are the goals and performance during the year adequately communicated to participants?
Considerations for Measure Selection and Goal Setting in 2026
As planning turns toward 2026, the need to balance financial rigor with transformational priorities becomes even more pressing. As incentives for the upcoming year are considered, each organization should ensure that performance measures and goals are tailored to its specific priorities and circumstances.
Our analysis of financial performance indicates significant variability. While some organizations facing significant financial pressure may double down on traditional measures of success such as margin and income, others may argue their positioning necessitates greater and faster transformation. Systems beginning in a place of greater stability should consider where they can get ahead of the market with additional capital to accelerate performance improvement as a buffer against future impacts.
From pandemic-related turbulence to today’s shifting economic and regulatory landscape, health systems have demonstrated remarkable adaptability. The challenge now is to design incentive plans that are both disciplined and forward-focused — supporting near-term stability while laying the groundwork for transformation.
In the short term, STIPs will likely continue to prioritize margin improvement against annual budget targets. This focus helps safeguard operational stability in the face of evolving federal policy, rising labor and supply costs, and increased economic uncertainty. Organizations should assess what levers are within their control. For example, we have seen organizations in the West choose to prioritize cost efficiency while those in the East have emphasized growth and attempt to quantify external market impact on performance. In parallel, LTIPs will likely remain vital for driving long-term imperatives such as capital investment, impact of tech/AI-enabled solutions, patient access expansion, and diversification of revenue streams for growth.
Incentive plans should incorporate an appropriate degree of flexibility given the potential for rapid shifts in market conditions and reimbursement policy. Compensation committees should remain educated on the external environment, regularly review mid-year incentive plan performance updates and be open to discussing unexpected dynamics. While uncommon, committees may contemplate adjustments to goal definitions, weightings, or performance ranges to ensure ongoing alignment with the strategy and the operating environment. Executives should increase the intentionality of incentive plan measure selection, perform robust analyses to ensure effective goal calibration, and adopt best practice change management principles and goal communication processes.
Conclusion
As health systems look ahead, incentive plan design must evolve to be a forward-focused driver of transformation. Success will depend on striking the right balance: building in financial discipline while making space for innovation, adaptability, and long-term growth. To maintain clarity and focus, both STIPs and LTIPs should continue to concentrate on a small set of the most pivotal priorities with clearly defined accountabilities and cascaded goals that connect enterprise operating plans and strategy to business units and functional leaders.
By aligning incentives with mission-critical goals, fostering accountability across the enterprise, and maintaining flexibility in the face of shifting external forces, organizations can ensure that their executive compensation strategies not only withstand uncertainty but also position them to lead in the next era of health care.
INFOGRAPHIC | Executive Benefits Trends
Get the latest insights from SullivanCotter’s Benefits Practices in Health Care Organizations Survey!
Executive benefits are changing! The health care industry is transforming at a rapid pace, and securing executives capable of leading through such change is no easy feat. The stakes are high, and the competition is fierce, as rising health care costs, heightened regulatory complexity, and the demand for organizational transformation mean leaders are carrying greater responsibility than ever before.
Benefits are a critical recruitment, retention, and engagement tool.
Are your current programs aligned with today’s reality?
Dive deeper into the data to see how organizations are evolving their executive benefits strategies to stay competitive in a challenging talent market.
Learn more about our Benefits Practices in Health Care Organizations Survey!
Designed with your organization in mind…
Uniquely focused on only health care organizations, this survey helps organizations address challenges related to executive, physician and employee benefits programs, including optimizing benefits offerings, implementing retirement plans for evolving executive, physician and employee roles and keeping pace with emerging trends in paid time off, severance and disability programs.
SURVEY HIGHLIGHTS
- In-depth reporting on executive, physician and employee benefits
- Data covering all facets of benefits: supplemental retirement plans, paid time off, disability, life insurance, severance policies, perquisites and professional benefits
- Data reported nationally; custom reports available by region and organization size
- This survey is expected to operate on a three-year cycle to better accommodate participant needs and reflect the pace of market trends. The most recent survey was conducted in 2024.
Aligning Executive Compensation with Innovation in Health Care Systems
The time is now! Many health system are investing in innovation-focused strategies.
In this article, leaders from SullivanCotter and McDermott Will & Schulte show how these structures are taking shape and how these forward-looking activities require new compensation models tailored to the unique demands of these new leadership roles.
Contributing authors include John Collins, Principal, Kathy Hastings, Strategic Client Relationships Leader, and Bruce Greenblatt, Executive Workforce Practice Leader, from SullivanCotter; and Jeffrey Holdvogt, Partner, Kerrin Slattery, Partner and Michael Peregrine, Partner from McDermott Will & Schulte.
Originally published by the American Health Law Association
As health systems seek to increase financial stability, sustain growth and advance their missions in today’s dynamic environment, many are investing in innovation-focused strategies—developing centralized innovation centers and launching new subsidiary business ventures to diversify revenue streams. These forward-looking activities require thoughtfully structured compensation models tailored to the unique demands of innovation leadership roles, as well as to the incorporation models and monetization strategies of the newly created businesses.
Innovation Structures Are Taking Shape
Health systems are increasingly organizing innovation initiatives around two primary models:
Innovation Centers – These are centralized departments or businesses responsible for developing and executing innovation strategies across the health system enterprise. They often evolve from internal initiatives into more formalized structures with dedicated leadership whose purpose is to monetize internal innovation through patents, licensing, new devices or other technologies.
Subsidiary Companies – These are newly formed non-profit or for-profit entities incorporated to:
- Sell products, services, or technologies that may have originated from within the health system, been acquired, or resulted from partnerships with third parties.
- Invest in and then sell off to third-party portfolio companies, like a traditional venture capital (VC) or private equity (PE) investor.
Each model brings distinct governance, ownership, and strategic complications—and each requires leadership with specialized expertise that may come from outside the traditional nonprofit health care sector.
A Shift in Compensation Philosophy
Because of the different operational and financial objectives of these innovation entities, compensation strategies must adjust to reflect the realities of the talent market and business structure:
For Innovation Center Leaders, pay is typically benchmarked against comparable corporate innovation leadership roles in the nonprofit or for-profit sector. These individuals are responsible for setting and managing innovation strategy, with performance measured across the innovation portfolio based on overall performance.
For Subsidiary Company Executives, compensation is typically tied to the financial performance of the new nonprofit or for-profit subsidiary and often tied to an exit strategy (sale or IPO).
Regardless of the model, compensation should aim to attract top talent, drive performance, and align with the health system’s values and compliance obligations.
Managing Risk and Ensuring Compliance
Nonprofit health systems must navigate important legal and regulatory risks when forming for-profit subsidiaries and compensating executives involved in those businesses.
Key concerns include:
- Tax-exemption risks related to private inurement, private benefit, or excess benefit transactions
- Reasonableness of compensation, particularly when equity-based awards are involved
- Transparency requirements, such as reporting on IRS Form 990
Importantly, creating a for-profit subsidiary does not automatically shield the parent organization from regulatory scrutiny (and may, in fact, put a target on the parent organization). Compensation arrangements must be carefully structured, well-documented, and regularly reviewed.
Tailoring Incentives to Role and Structure
Several factors influence how compensation should be designed, including:
- The talent market, which may include candidates from the for-profit sector
- The organizational structure, whether embedded in the nonprofit parent or established as a separate entity
- The business strategy, including monetization plans
- The time commitment of executives with dual roles across the system and the innovation center or subsidiary business
For executives leading for-profit subsidiaries, the pay mix typically shifts toward performance-based compensation with lower base salaries and more significant variable pay, including more annual and long-term incentives.
Common structures include:
- Cash-based long-term incentive plans tied to earnings or return on capital
- Equity-based incentives (e.g., stock options, restricted stock, profits interest) for ventures with defined exit strategies
- Carried interest or similar cash incentives for subsidiaries operating like a VC or PE investor
Organizations with innovation centers should also consider applying payout caps or soft caps on pay to ensure that compensation can still be considered reasonable and not exceed the fair value of the services rendered.
Addressing Dual-Role Scenarios
Executives who serve both the parent organization and its innovation ventures present unique challenges.
In these cases:
- Incentives may be prorated based on time spent on innovation responsibilities
- Threshold time commitments (e.g., 75%) may be set for eligibility in innovation incentive plans
- Special bonuses or goal adjustments may be used for executives with partial responsibilities
Regardless of structure, total compensation must remain reasonable to comply with regulatory requirements and aligned with governance expectations.
Conclusion
As health systems increasingly pursue innovation as a strategic imperative, they must also modernize their approach to executive compensation. Aligning pay with innovation performance, market expectations, and regulatory compliance is critical to attracting the right talent and ensuring long-term success. With the right structure in place, organizations can drive meaningful innovation while remaining true to their mission and values.
About McDermott Will & Schulte
Leading organizations turn to global law firm McDermott Will & Schulte for a better way to address legal challenges, connect with those at the forefront, and drive stronger outcomes. Working across more than 20 offices globally, our 1,750+ lawyers act on data-driven insights, deep relationships, and unmatched industry experience to deliver on our commitment of Always Better.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improves outcomes through the development and implementation of integrated workforce strategies. Using our time-tested methodologies and industry-leading research and information, we provide data-driven insights, expertise, and solutions to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision, and values.
Modern Healthcare | Health care compensation is up this year
Hospitals and health systems are rethinking compensation and staffing as they navigate financial challenges.
Here’s what you need to know…
Health care organizations are adopting new strategies to compensate employees and save on costs as they look to balance the growing competition for talent with ongoing financial pressures.
Featuring data from SullivanCotter’s 2025 Health Care Staff Compensation Survey, Modern Healthcare highlights how:
- Bonuses are being dialed back – especially for nurses
- Wages are increasing for critical support staff
- Competition for clinical technicians is high, causing pay to rise
- More employers are upping pay scales for select roles
See what our experts have to say!
“This year we’re seeing organizations identify new funding sources to support broader market adjustments. In other words, despite financial pressures, employers are finding ways to justify increases across a wider range of roles to remain competitive in today’s labor market.” – Steve Meyers, Consulting Principal, SullivanCotter
Looking for the latest survey data?
We know your organization is navigating a tight talent market and complex economic landscape. You need the right data to recruit and retain clinical technicians, support staff, and others through such challenging times.
Our longstanding Health Care Staff Compensation Survey provides data-driven benchmarks on compensation and pay practices to help organizations make informed recruitment, retention, and staffing decisions.
Report Highlights
- Data from more than 3,660 organizations on nearly 2.5 million employees
- Inclusion of approximately 800 reported jobs
- Market data by region, state and organization size, including hourly base rate and total cash compensation for individual contributors, supervisors and managers in clinical and nonclinical functions
- Detailed on-call pay and shift differential data, including evening, night and weekend coverage
- Compensation practices data on salary increases, new hire strategies, holiday premiums, weekend staffing programs, professional and clinical ladder programs, incentive programs and much more
- Information on certification, charge, extra-shift, float pool and preceptor pay
Press Release | Median Base Pay for Health Care Staff Rose 4.3% in 2025
New report reflects ongoing health care labor market pressures …
September 3, 2025 – CHICAGO – SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and data products for health care and not-for-profits, has released the latest benchmarks from its 2025 Health Care Staff Compensation Survey.
This year’s results show that the median base pay for health care staff positions rose 4.3% in 2025, up from 2.7% in 2024 — a notable increase reflecting ongoing labor market pressures and the need to remain competitive in recruiting and retaining talent. This survey includes data from more than 2,660 organizations on nearly 2.5 million clinical and non-clinical employees, representing the largest and most comprehensive health care staff compensation resource for hospitals and health systems.
Health care organizations continue to face significant frontline staffing shortages. According to SullivanCotter’s 2025 Frontline Staffing and Solutions Pulse Survey, health care organizations reported the highest level of staffing concerns with surgical techs, respiratory therapists, radiology/medical imaging techs and security officers. Data from the 2025 Health Care Staff Compensation Survey reflects these challenges, showing more substantial pay increases for several of these harder-to-fill roles — with hourly base pay for clinical technician positions, for example, rising by 5.5% over the prior year.
Beyond these critical frontline roles, the survey also highlights notable trends in compensation strategies for other key positions, including registered nurses (RNs). This year’s data shows that median base pay for RNs is up nationally by 3.1%. While most organizations (75%) reported using a single market pay strategy for all non-executive employees, RNs are the most likely to have a separate pay structure. 56% of organizations report a pay strategy for RNs that targets above the 50th percentile.
However, significant geographic pay variation adds complexity to evaluating market rates. Differences in base pay between urban, rural, and major metro areas within each region can be substantial. For example, the survey shows that RNs in the Greater New York City metro area have median base pay rates that are 45% higher than the national median, while those in the greater Los Angeles metro area earn 48% above the national median. Similar geographic pay differentials are also observed in other job families, including research and academics, supply chain, ancillary diagnostics, and medical specialties.
As organizations prepare for 2026, many are already taking steps to control costs while remaining competitive in attracting and retaining talent. In the near term, this includes modest adjustments to premium pay policies to limit eligibility, refining how these policies are administered, and being more selective in awarding market and annual increases. Moving forward, organizations should conduct more comprehensive reviews of pay programs to identify cost-saving opportunities and refine compensation strategies to target base pay adjustments for roles that have historically received less focus.
“Looking ahead to the coming year, it will be important for organizations to sharpen their market compensation strategy, reallocate budget resources, invest in compensation expertise, and continue building advancement opportunities to keep employees engaged and retained,” said Steve Meyers, Consulting Principal, SullivanCotter. “These steps can help health care organizations balance financial sustainability with the imperative to reward and retain top talent in an increasingly competitive labor market.”
For more information on SullivanCotter’s surveys, please visit our website at http://www.sullivancotter.com or contact us via email or by phone at 888.739.7039.
Board Compensation in Health Systems: Balancing Mission, Talent, and Governance Demands
Where do not-for-profit health systems stand on board compensation?
Prevalence remains low, but interest is growing…
Health care governance is increasingly complex as organizations continue to grow in size and scope. This is leading to intense competition for skilled board members.
While board pay is still a minority practice among not-for-profit systems, some are considering compensation in an effort to:
- Attract and retain the most qualified candidates – particularly those with experience in digital transformation, consumerism, financial risk, strategy, commercialization, transformation, and other related fields.
- Signal the importance of the board’s role amidst growing operational complexity.
- Recognize the significant time commitment and expertise that modern board roles demand.
- Mitigate competition from for-profit boards and other major not-for-profits that often offer board compensation.
Is it the right fit for your organization?
In this article from the The Governance Institute, SullivanCotter experts Renee Stolis and James Ferguson offer a data-driven perspective on what pathways nonprofits can follow and provide six helpful considerations for organizations as they think through their approach.
Want a snapshot of the data?
Prevalence of Board Compensation Programs
- ~15% of organizations with more than $1 billion in revenue
- ~30% of organizations with more than $5 billion in revenue
- ~40% of organizations with more than $10 billion in revenue
How Health Systems Can Respond to the 'One Big Beautiful Bill Act'
Moving forward in a way that protects patient access and preserves your mission
The One Big Beautiful Bill Act (OBBBA) poses significant challenges to health systems, particularly in rural areas.
The legislation includes substantial reductions in Medicaid funding – estimated at more than $1 trillion over a decade – which could result in approximately 16 million individuals losing health coverage. Rural hospitals are especially vulnerable, as many are already operating at a loss. There will be an estimated $50.4 billion reduction in federal Medicaid spending on rural hospitals over 10 years, potentially leading to service cutbacks or closure.
Such outcomes threaten the mission of not-for-profit health systems dedicated to providing accessible care within their communities.
In light of these sweeping changes, health care leaders should act swiftly and strategically to safeguard the continuity of care – especially in underserved and rural regions where health systems are often a lifeline. Preserving access to care in the face of deep funding cuts may include deliberate operational, clinical, and strategic shifts.
To ensure they are continuing to deliver on their mission and provide quality care to the communities they serve, health care organizations should proactively seek ways to protect and preserve patient access.
Some strategies to consider include:
- Rethink traditional operating models and consider restructuring to drive greater efficiency and resilience. This may include streamlining and centralizing administrative and support services where possible to enable better cost control without compromising patient care.
- Evaluate how care is currently delivered and whether it aligns with the unique needs of the populations served. Conducting a thorough review of community needs can help determine the types of services required in each geographic area, ensuring resources are allocated effectively.
- Revisit population health strategies, including preventive care initiatives, wellness campaigns, and patient education and engagement efforts. Evaluating these dimensions can help promote long-term health, reduce demand for costly acute care, and guide smarter investment and resource allocation decisions.
- Analyze current telehealth capabilities to help bridge access gaps, particularly in rural regions where physical infrastructure may be strained.
- Leverage artificial intelligence (AI) to create efficiencies where possible, such as automating administrative workflows, optimizing staffing, supporting diagnostics, and enhancing patient outreach and engagement through data-driven insights.
These approaches can help organizations sustain their commitment to community health, even in times of fiscal uncertainty.
Modern Healthcare | How systems are attracting exec talent in a competitive market
Finding and keeping executive talent is critical – but it’s not easy!
Modern Healthcare explores how health systems are staying competitive.
As operations grow more complex and the demand for strategic leadership rises, health care organizations are facing a shrinking pool of experienced candidates. To take on this challenge and stay competitive, many are increasing compensation, developing talent from within, working to reduce turnover, and more.
Featuring data from SullivanCotter’s 2025 Health Care Management and Executive Compensation Survey, Modern Healthcare’s annual deep dive into executive compensation outlines the top five takeaways from this year’s survey findings:
- Total cash compensation is rising
- Operational and strategic roles are more important than ever
- Executive turnover remains a challenge
- Executive positions are becoming more complex
- Organizations still want to promote from within
See what our experts have to say!
“Organizations are balancing what is a complex, challenging operating and financial environment with what is still a highly competitive executive talent market.” – Bruce Greenblatt, Executive Workforce Practice Leader
“Jobs that are core to financial operations and efficiency measures, including pharmacy and ambulatory care executives, are seeing higher demand.” – Jeff Sprague, Principal
Looking for the latest survey data?
We know your organization is navigating a tight talent market and complex economic landscape. You need the right data to recruit and retain executive-level leaders with the right mix of skills to lead through such challenging times.
For more than 30 years, our longstanding Health Care Management and Executive Compensation Survey has provided data-driven benchmarks on executive and management compensation to help organizations make informed decisions on pay, incentive program design, and more.
Report Highlights
- Data from more than 3,300 organizations on nearly 48,000 individuals
- Inclusion of approximately 350 reported jobs
- Base salary, total cash compensation, and total direct compensation
- Insight into annual and long-term incentive plan design, including performance measures, award opportunities, and payouts
- National compensation data reported by organization type and size with regional and sub-regional breakouts for subsidiary hospitals
- Regression equations by organization type
JAAPA | Optimizing NP and PA Roles to Improve Care Access
Need actionable strategies for increasing patient access to services while also managing costs?
Turn to your NP and PA workforce! We’ve got the latest research and insights as published in the Journal of the American Academy of Physician Assistants.
It’s no secret that patients are struggling to gain access to care when they need it. In fact, a recent Harris poll found that the average wait time to get an appointment is 3.9 weeks.
How can we fix this? By unlocking the full potential of nurse practitioners and physician assistants and optimizing their roles. SullivanCotter’s Amy Noecker, Zachary Hartsell, Jaime Lough and Lacey Buckler recently contributed to an important case study in the Journal of the American Academy of Physician Associates (JAAPA) about improving patient access in an academic medical center. This includes a study of three specialty areas – Cardiology, Hospital Medicine, and Oncology – and outlines how the organization was able to expand patient access while also increasing revenue through a more holistic care model design.
Now’s the time to rethink workforce models and empower APPs to work at the top of their license!
Need more information?
Abstract: The healthcare industry is in the midst of unprecedented change as hospitals and health systems nationwide balance the need to increase patient access to services with managing costs. Nurse practitioners and physician associates are well-positioned, and often overlooked, members of the healthcare team who can serve as resources for organizations to improve care access. Using an intentional and data-driven process, one academic medical center both improved patient access and increased revenue through a holistic care model redesign in three specialty areas, as described in this organizational case report.
Authors: Chris Ferron, MBA, PA-C; Wendy Franklin, MSN, ANP-BC, CCRN; Hope Sellars, MSN, RN, ANP-BC, AACC; James Shamiyeh, MD, MDA, MSPH; Sandy Leake, DNP, RN, NEA-BC; Lacey Buckler, DNP, ACNP; Jaime Lough, RN; Amy Noecker, MEd; Zachary Hartsell, DHA, PA-C
Looking for a summary?
As the U.S. healthcare system continues to recover from the pandemic, patient access challenges remain critical, with widespread dissatisfaction and long wait times. A recent Harris Poll shows that only 10% of U.S. adults rate the system an “A,” while 60% give it a “C” or worse. Key barriers include long wait times, confusing care navigation, and a lack of providers. This is exacerbated by a projected physician shortage of up to 86,000 by 2036.
To address this, healthcare organizations are increasingly turning to advanced practice providers (APPs) like nurse practitioners (NPs) and physician associates (PAs), though their roles remain underutilized. Surveys reveal growing demand for APPs, parity in compensation across roles, and comparable productivity. Strategic deployment of NPs and PAs can enhance access and deliver financial benefits, as evidenced by their expanding role in Medicare billing.
Organization Background
Amid rapid APP workforce growth, a Southeast academic medical center identified critical gaps in structure, utilization, and productivity, prompting a comprehensive internal analysis.
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Workforce Underutilization: Despite employing nearly 360 APPs, many felt underused—55% considered leaving due to unclear roles and lack of recognition, especially in cardiology, oncology, and hospital medicine.
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Productivity Lag: APPs performed fewer independent tasks than national peers, with 10 specialties below median productivity and five below the 25th percentile in wRVUs.
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Missed Financial Opportunity: Bridging the productivity gap to national medians could generate $1.1–$3.6 million in additional annual revenue, yet the organization lacked a strategic plan for APP deployment.
Methods
To improve patient access, the organization launched a structured initiative focused on optimizing PA and NP utilization across key clinical departments.
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Strategic Planning & Department Selection: A steering committee, in partnership with SullivanCotter, identified cardiology, oncology, and hospital medicine as high-opportunity departments based on readiness for change and potential access gains.
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Collaborative Workgroups: Multidisciplinary teams—including physicians, APPs, nurses, and support staff—met to define ideal roles, determine patient management structures, and identify infrastructure and staffing changes to support new care models.
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Implementation Oversight: Recommendations were presented to the steering committee, which met monthly to approve plans and monitor progress as departments moved forward with care model redesigns and execution.
Results
Through a structured redesign effort, three clinical specialties implemented workflow and care model changes to improve NP and PA utilization, patient access, and productivity.
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Specialty-Specific Changes:
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Cardiology standardized scheduling, reduced NP/PA-to-MA ratios, and added rapid access appointments.
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Inpatient cardiology piloted APP-led rounding models and developed a low-risk chest pain observation service.
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Hospital medicine restructured cross-cover roles and trained staff to differentiate urgent vs. routine calls.
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Oncology aligned scheduling and patient-facing time but faced delays in implementation due to leadership turnover.
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Data-Driven SMART Goals: Each specialty established measurable targets—such as increasing patient volumes, reducing no-show rates, and tracking APP encounters—to guide performance improvements and access gains.
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Early Outcome Highlights:
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NP/PA outpatient cardiology encounters rose 7.5%; telehealth visits surged by 93%.
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Inpatient cardiology encounters increased from <100 to 500–700 monthly.
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Hospital medicine saw a 50% boost in cross-cover census and over 300 additional critical care visits.
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Improved Engagement and Retention: NP/PA turnover dropped by 13% across participating specialties, with increased satisfaction leading other departments to request involvement in the redesign process.
Discussion
This case report highlights how intentional care model redesign focused on NP and PA optimization can drive meaningful improvements in patient access, team efficiency, and revenue—while also uncovering challenges in sustainability and implementation.
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Demonstrated Impact: A similar model led to more than 6,600 additional monthly encounters across nine specialties, showing that structured optimization of NP and PA roles can improve care delivery without increasing overall costs.
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Success Drivers: Effective initiatives relied on clearly defined team roles, strong leadership engagement, performance data transparency, aligned compensation, and structured support for role transitions.
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Implementation Limitations: Long-term success remains uncertain due to selection bias, variability in NP/PA scope by organization and region, and operational challenges like unclear benchmarks for overnight staffing and communication systems—highlighting key areas for future research.
Your Clinical Workforce: Improving Value to Ensure Long-Term Sustainability
As health care organizations move through 2025 and reflect on last year’s financial landscape, there continues to be variability in how many systems are performing.
How can you improve the value of your clinical workforce to help support long-term sustainability?
Overall, margins have reboundedwhen compared to 2023 and pandemic-era lows. However, evolving reimbursement, government policy changes, growing patient demand, increased health care demand, workforce shortages, and other concerning developments are impacting future operability. These challenges have caused cost structures to rise across the board – especially within the clinical workforce – and are happening alongside uncertainty in future reimbursement and funding sources.
This raises two foundational questions:
- Is health care financially sustainable?
- What can health systems do to address these issues?
Long-term sustainability relies on the straightforward principle that revenue must outpace expenses. No single industry player – whether health systems, payers, or investors – can independently transform the sector. To help navigate rising costs and reimbursement risks, health systems must understand these changes in greater detail before determining the most effective strategies to improve value within the organization.
Key changes in health care costs and reimbursement
According to SullivanCotter’s proprietary research and survey data, workforce costs are increasing across the board as compensation for physicians, advanced practice providers (APPs), health care staff, and executives is on the rise. Depending on specialty area, physician compensation has increased between 11% and 17% over the past five years, while APP compensation rose between 14% and 17% in just three years’ time. This upward trend extends to other health care workforce roles, with a 5% rise in median base hourly rates for all staff and a 3% increase for staff RNs. Additionally, there was a 5% to 8% increase in management and executive total cash compensation, respectively.
Wage pressures are unlikely to subside soon. There is a projected shortage of nearly 200,000 U.S. nurses and 124,000 physicians over the next 8-10 years, which may be higher if projected increased training levels do not keep pace. This is not limited to clinicians and continues to drive wage growth as health systems compete to attract and retain talent.
Aside from direct labor expenses, the cost of doing business is also escalating in virtually all other areas. Non-workforce expenses are also straining hospital and health system margins, as seen in the reported 10% year-over-year increase in total non-workforce expenses that had drug costs rising by 15%, supply expenses by 13%, and purchased services by 12%.
In terms of reimbursement, the Centers for Medicare & Medicaid Services (CMS) implemented a 2.83% cut in Medicare reimbursement rates for 2025. This marks the fifth consecutive year of such reductions and the second consecutive year that Congress has not acted to patch the cut. When adjusted for inflation, it’s calculated that Medicare physician payments decreased by 33% between 2001 and 2025. While health system revenue extends beyond Medicare, it remains the largest single contributor to national health expenditure and accounts for approximately 21% of total spending. A compounding factor to the historical decreases in Medicare funding is that many health systems are reimbursed by commercial insurers based on a percentage of Medicare rates – a practice known as Medicare benchmarking. When Medicare rates decline, commercial reimbursements often follow suit. For example, if Medicare reimburses $100 for a procedure and a commercial insurer pays 150% of that rate ($150), a 2.83% Medicare reduction to $97.25 would cause the commercial rate to drop similarly from $150 to $145.86.
The five-year run of declining Medicare reimbursement conversion factors is expected to come to an end as CMS has proposed the 2026 Medicare Physician Fee schedule. This includes a 3.8% increase for physicians in advanced payment models and a 3.3% increase for all other physicians. However, uncertainty over future reimbursement remains. Health systems face heightened reimbursement risk due to anticipated cuts in Medicaid and clinical research funding. The Congressional Budget Office (CBO) projects that Medicaid funding will decline by $911 billion over the next decade following the passage of the One Big Beautiful Bill Act – which was signed into law on July 4, 2025. In parallel, the Kauffman Family Foundation (KFF) estimates that the number of uninsured individuals will rise by more than 10 million. Compounding these challenges, the National Institutes of Health (NIH) could lose up to 40%—or $20 billion—of its annual budget under the Administration’s recent proposal, with potentially significant consequences for health system financing and research infrastructure.
Addressing rising costs with the Workforce Value Formula
When macroeconomic trends and industry headwinds challenge a business model, there are limited levers to pull. Health systems can enhance revenue, manage expenses, and/or invest strategically in long-term structural changes. Each approach involves complex variables requiring expertise across multiple disciplines, often without a clear path forward. This is why simplifying strategies to their core elements can be valuable, and there is no element more essential to a health system than its clinical workforce.
Without a sufficient number of qualified and accountable physicians, APPs, and other care team members, organizations cannot effectively achieve their health care delivery or payer reimbursement missions for long. With a limited supply of clinicians and a continued rise in demand, organizations must identify ways to expand the value of their existing clinical workforce. They must focus on strategies that allow them to achieve provider alignment and effectiveness.
One way to measure the value of a health system’s clinical workforce is with the Workforce Value Formula: Value = Efficiency × Effectiveness.
Although not exhaustive of all considerations, this formula provides both a reasonable and practical economic framework for assessing the clinical workforce’s overall contribution to a health system’s performance.
Workforce efficiency focuses on how well physicians, APPs, nurses, and other clinical staff utilize their time, skills, and resources to deliver care with minimal waste. It emphasizes the importance of managing staffing levels, shift coverage, work expectations, and scope of responsibilities to ensure optimal resource use.
Meanwhile, workforce effectiveness measures how well clinicians are meeting patient care goals like improving health outcomes, enhancing patient satisfaction, and ensuring timely access to quality care. Together, these elements determine a high-level summary of overall value and productivity of the clinical workforce.
The Workforce Value Formula also underscores the importance of balancing both components to maximize the value of the clinical workforce. For example, a hospital with highly specialized physicians capable of delivering exceptional care (high effectiveness) but limited patient access (low efficiency) would experience delays in care delivery – thus reducing overall value. Similarly, the hospital could deliver excellent care but be financially unsustainable due to the underutilization of resources or the high cost of care delivery.
Conversely, high workforce efficiency without effectiveness might result in increased patient throughput but compromised care quality. A well-staffed care team with great patient access but suboptimal health outcomes would fail to meet the community’s needs.
Achieving a balance between workforce efficiency and effectiveness is crucial for delivering positive patient outcomes while maintaining long-term operational sustainability.
Key considerations for health systems
To improve value by ensuring the right balance of efficiency and effectiveness, health systems should consider the following questions:
How can our clinical workforce be better utilized to expand patient access or improve financial performance?
- Is your workforce leveraging technology to expand access?
- Do team-based care models address access shortages?
- Are workflows set up for efficient patient care?
- Is the right clinician providing the care?
Are clinicians motivated to exhibit the right behaviors?
- Does the current compensation model advance your organizational mission and access to care?
- Is compensation aligned with payor reimbursement? Are your quality incentives aligned with your measure of effectiveness?
Is the cost of delivering care sustainable?
- Is your cost of delivering care less than your total revenue?
- Are your APP, nursing, and support resources working to the top of their scope, training, and capability?
- Are your measures of quality aligned with your reimbursement model?
How sustainable is your workforce composition?
- Are there significant retention challenges or a long-term recruitment plan in place?
- What is your ratio of physicians to APPs?
- What is your mix of clinical specialties, settings, and affiliations?
Conclusion
Health system sustainability is directly tied to the performance of its clinical workforce. Recruitment and retention aren’t enough – organizations must continuously improve the value of their clinical workforce by balancing efficiency and effectiveness. This is a controllable strategy that can help manage uncontrollable industry challenges and create a foundation for long-term success.
Long-term sustainability requires all hands on deck.
SullivanCotter’s Provider Affiliation and Optimization team partners with organizations to identify, quantify, and optimize physician and APP relationships and performance to improve productivity, engagement, financial results, staffing ratios, and more.
Excise Tax Expansion Ahead: Is Your Health System Ready for 2026?
More individuals may fall within the scope of the excise tax under the One Big Beautiful Bill Act.
This could increase the cost of compensation for many health systems.
The One Big Beautiful Bill Act (OBBBA) is expected to have a dramatic impact on many health systems across the country. While much of the focus has been on the impact of Medicaid eligibility reductions and other revenue implications, a change to the tax code may increase compensation costs for many health systems.
Excise Tax Rule Changes
Since the Tax Cuts and Jobs Act of 2017, health systems have had to pay excise taxes of 21% of remuneration above $1,000,000 for a group of “covered employees”. The definition of this term included the five highest-paid individuals plus anyone who was in the top five group in a prior year. For purposes of the excise tax calculation, remuneration is essentially all taxable pay, excluding pay related to the provision of medical services.
Effective in 2026, the OBBBA changes the definition of “covered employees” to include all employees of the organization, not just the five highest-paid. This means that the health system must pay excise taxes for every employee with includable pay above $1,000,000. The exclusion of pay related to the provision of medical services continues to apply, so excise taxes are not expected to be incurred for most physicians paid over $1,000,000.
What’s Next?
As health systems prepare for this, a first step is to understand the magnitude of the change in excise taxes. While systems with fewer than five individuals with pay above $1,000,000 may not be impacted today, they could be in the future since the $1,000,000 threshold is a fixed amount. Health systems that have multiple individuals with pay above $1,000,000 may see a substantial increase in excise taxes.
For health systems impacted by the change, the following strategies may help mitigate risk and manage costs:
- Review compensation program structure: Excise tax exposure is often highest in years when executive compensation spikes – particularly due to deferred compensation arrangements or long-term incentive plan payouts. Health systems should evaluate how these plans impact excise taxes and whether modifications can help manage the tax liability while continuing to meet the core objectives of these programs. They may also consider less traditional compensation strategies – such as split-dollar life insurance – that reduce pay subject to excise taxes.
- Evaluate pay acceleration strategies: With changes effective in 2026, there may be a one-time opportunity to make compensation changes in 2025. As an example, accelerating certain payments or vesting of deferred compensation into 2025 may mean those amounts never become subject to excise taxes, particularly for new covered employees. Health systems should carefully consider the optics of such changes given increased scrutiny and the current sociopolitical environment. They should also ensure compliance with tax rules governing the acceleration of payments and should also weigh other consequences related to acceleration – including the impact on 2025 excise tax calculations, Form 990 compensation reporting implications, impact on other benefits costs tied to cash compensation, and an individual’s particular tax circumstances.
- Review processes for determining includable pay: In addition to identifying tax savings opportunities, health systems should ensure a sound process for determining includable pay, particularly for physicians with administrative roles. Many may have used a simplified process historically, such as reviewing remuneration levels only for physicians with administrative roles who may be in the five highest-paid group. Going forward, health systems will need to determine the portion of pay attributed to the provision of medical services for more physicians. The calculation of includable pay is critical for all covered employees and requires collaboration between those calculating excise taxes and those who understand the compensation program to ensure that certain nuances of the calculation are addressed.
With the expanded definition of “covered employees,” more individuals may fall within the scope of the excise tax – potentially increasing costs. To prepare, health systems should assess their current compensation structures and consider adjustments before the rules take effect in 2026. This includes ensuring a more robust process for determining includable pay.
Need support navigating these excise tax changes?
Reach out to us to learn how SullivanCotter can help you align your compensation strategy with these recent developments!
On-Demand Webinar | Building a Next Gen Operating Model
It’s time to create a stronger health care enterprise…we have the blueprint for building a next gen operating model!
Health care leaders are reimagining operating models to drive sustainable performance and resilience. But how?
Drawing from real-world experience and strategic insights, experts from SullivanCotter and Lotis Blue highlight what it takes to build a more agile, outcomes-driven health care enterprise.
During this session, we provide guidance on how to:
- Design integrated, flexible operating models to support evolving care delivery and address cost pressures
- Align strategy, structure, and capabilities to improve financial, clinical, and patient experience outcomes
- Enable transformation through strong governance, cross-functional collaboration, and leadership agility
Our esteemed panelists include:
- Sean Butler, Director of Client Experience – SullivanCotter
- Garrett Sheridan, CEO & Managing Partner – Lotis Blue
- Tom Robertson, National Advisor, Health Systems – Manatt Health
Turn bold objectives into real, measurable results.
Many organizations have well-defined strategies but struggle to execute them consistently. Lotis Blue’s Operating Model Playbook helps leaders design an organization that doesn’t just plan well, but executes effectively…
Sign up for instant access to the recording:
Physician Faculty Recruitment: NIH Funding Cuts Intensify Recruitment Challenges
Academic medical centers are under intense pressure as funding cuts for National Institutes of Health begin to take effect.
How are organizations preserving the academic mission of advancing science, training future clinicians, and caring for the nation’s most complex patients?
By Jason Tackett, Managing Principal, SullivanCotter
Originally published by Fierce Healthcare
These cuts come at a time when AMCs are already navigating immense financial strain, workforce shortages, and evolving partnerships with health systems that are increasingly expanding academic initiatives. For institutions where federal research dollars are critical to faculty compensation and innovation infrastructure, the path forward likely demands difficult choices, and a rethinking of how to sustain the tripartite mission amid shifting federal priorities.
At the same time, the traditional lines between AMCs and broader health systems are blurring. Some health systems are establishing medical schools, while others are forming academic partnerships, expanding residency and fellowship programs, and investing in medical student teaching infrastructure. These efforts are designed to address immediate physician workforce shortages and strengthen long-term talent pipelines. As a result, more organizations—regardless of structure—are recruiting from the same pool of clinical and research talent, particularly in high-priority service lines such as cardiology, neuroscience, behavioral health, and oncology.
As health systems prioritize expanding patient access, strengthening community presence and optimizing care delivery, competition for physician talent, particularly in high-demand specialties, is intensifying—regardless of academic affiliation. All health care organizations are drawing from the same limited talent pool. Without a proactive strategy, AMCs risk falling behind, especially as widening pay differentials make some academic roles and specialties less market competitive and increasingly vulnerable.
Physician Workforce Models are Evolving
The 2024 Association of American Medical Colleges (AAMC) and SullivanCotter Physician Recruitment and Retention Survey found that AMCs were already taking steps to address financial pressure. Among the top strategies cited were improving patient access and care delivery (75%) and adjusting physician faculty work effort expectations (66%) – reflecting an emphasis on the clinical mission to preserve long-term academic viability.
A key shift highlighted in the survey is the increased clinical workload expected of newly hired physician faculty. At the same time, many existing faculty face a widening pay-to-productivity gap, with performance expectations set at higher levels relative to compensation. Together, I see these dynamics further straining recruitment and retention, particularly for early-career physicians evaluating an academic career.
As AMCs adapt to this financial reality, they must redefine workforce strategies, optimize governance structures, and realign faculty compensation models to remain competitive and sustain their academic missions.
Reductions in Funded Research Could Deter AMC Physician Talent
Employed physician faculty are central to AMCs’ missions, balancing the demands of research, clinical care, and teaching. NIH funding reductions exacerbate existing challenges in recruiting and retaining both clinically oriented physicians and leading physician-scientists. Specialties such as cardiology, neurology, and oncology are particularly affected, given the heightened competition and notable compensation disparities compared to non-academic settings.
According to the same joint AAMC and SullivanCotter study, 47% of departing physician faculty transition to private practice or non-AMC health systems, underscoring the growing difficulty of retaining talent within the academic setting. Unlike clinical revenue, research funding is secured through a lengthy and uncertain process of grant applications, peer reviews, and renewals. Many physician-scientists depend on these grants to support their compensation.
Beyond the financial implications, I believe that a sudden reduction in NIH funding risks are undermining the culture of academic medicine. If increased clinical demands replace research and teaching effort, both new and existing faculty will question the long-term value of remaining in academic practice.
Four distinct concerns stand out:
- Greater Reliance on Clinical Revenue: As NIH funding declines, AMCs are placing greater emphasis on clinical revenue streams. As a result, new physician hires will be expected to dedicate significantly more time to patient care, while existing physician faculty with previously protected research time may be asked to increase their clinical workload. Over time, this shift may discourage early-career researchers from pursuing academic paths, weakening the pipeline of future physician-scientists.
- Increasing Salary Pressures and Physician Migration: Historically, AMCs have leveraged their reputation and mission-driven environments to attract faculty, often compensating below private practice levels in exchange for research opportunities and academic distinction. Now, NIH funding cuts threaten to widen existing pay gaps—already 15 to 25 percentage points in some specialties—moving AMCs toward a tipping point and eroding their longstanding competitive advantage. Without market-competitive salaries, physician-scientists may increasingly migrate to private industry or non-academic roles.
- Rising Competition for Research Talent: Historically, with over three-quarters of NIH funding concentrated among just one-third of U.S. medical schools, well-funded AMCs have been better positioned to recruit and retain top physician-scientists. In contrast, the remaining AMCs —particularly those lacking fully integrated governance across the health system, faculty practice plan, and school of medicine—face steeper challenges in attracting research talent. Without coordinated institutional support and aligned strategic priorities, faculty at these AMCs may find it increasingly difficult to sustain competitive, long-term research programs.
- Erosion of Start-Up Support: Start-up packages, often ranging from $500,000 to $2 million, are critical to attracting research talent and academic leadership such as Department Chairs. These packages typically include funding for lab space, research staff, equipment, and early faculty hires. With potential cuts to NIH funding—through fewer grants or reduced indirect cost reimbursements—AMCs may be forced to scale back these investments, hampering their ability to support early-career physician-scientists.
How AMCs Can Respond to NIH Funding Challenges
To remain competitive in the face of NIH funding reductions, AMCs must take proactive steps to restructure faculty funding models, realign financial resources, and adapt workforce expectations.
Evaluate Governance Structures for Agility
- Perform a comprehensive governance assessment to identify areas of fragmented or overly centralized decision-making, evaluating potential impacts on faculty engagement and strategic execution.
- Redesign governance frameworks to clarify accountability, promote faster decision-making, and strengthen alignment across community and academic practice entities.
- Actively engage Department Chairs and faculty leadership as strategic partners in recruitment, retention, and compensation planning to support unified enterprise goals.
Engage Key Physician Leaders and Facilitate Broader Collaboration
- Shift key physician leaders from department-focused oversight to broader collaboration across the entire enterprise.
- Ensure key physician leader stakeholders, like Department Chairs, have an active voice and role in enterprise-wide decisions to align department and faculty practice plan goals with enterprise-wide strategy.
Optimize Faculty Workloads and Service Line Strategy
- Strengthen the primary care strategy and geographic expansion to enhance patient access and financial sustainability. Notably, primary care was identified as the most difficult specialty to recruit and retain in the 2024 AAMC and SullivanCotter survey, underscoring the need for renewed focus in this area.
- Focus on clinical-research integration, ensuring that high-volume service lines (e.g., oncology, neuroscience) serve as financial engines to sustain academic efforts.
- Take steps to improve team-based care and minimize administrative burden, such as streamlining documentation requirements and compliance processes.
- Develop hybrid clinical-research models that allow physician-scientists to maintain research commitments without over-reliance on clinical revenue.
Clarify Work Effort Expectations and Career Progression
- Develop differentiated physician faculty tracks that reflect varying levels of clinical and academic focus, ensuring that roles and growth pathways align with institutional strategy.
- Establish a clear, transparent framework for defining faculty work effort across all responsibilities, with aligned expectations for each faculty track.
- Define minimum performance standards for both clinical and academic roles to support accountability, inform compensation decisions, and guide career development.
Redesign Compensation Models
- Assess market dynamics, including the expansion of key service lines among health systems, and evaluate the impact on physician faculty recruitment and retention.
- Address pay compression where salaries for entry-level roles are growing faster than those for senior faculty.
- Harmonize executive, Department Chair, and faculty incentive compensation models to drive engagement, performance, and institutional alignment.
- Introduce salary structures and faculty tracks that balance research, clinical work, and teaching responsibilities while integrating both academic and community practice market benchmarks.
Diversify Research Funding Streams
- Expand philanthropic efforts and forge industry partnerships to supplement lost NIH dollars.
- Prioritize big data, AI-driven research, and translational medicine—fields that align with commercial investment opportunities.
A Defining Moment for AMCs
In the past, AMCs that have successfully navigated financial challenges have done so by aligning leadership, restructuring financial models, and integrating research and clinical revenue streams more effectively. Institutions that act decisively—and take a proactive posture—will be best positioned to attract and retain top physicians, while safeguarding the long-term strength of their research enterprise and the culture of academic medicine, even in the face of uncertainty.
AMCs have an opportunity to differentiate through innovation, partnership, and a renewed commitment to the tripartite mission. The race for talent will continue to be won by forward-thinking organizations, and for AMCs, the time to sprint forward is now.
Physician Compensation and Compliance: Mitigating Risk Through Effective Governance
Understanding the nexus between physician compensation and compliance is critical in an active enforcement environment.
Our experts explain how a robust governance process can help to shield your organization from risk and address growing regulatory scrutiny.
Over the past couple of years, federal agencies—including the DOJ, HHS, and CMS—have significantly increased oversight of health care organizations and compliance with the Stark Law and Anti-Kickback Statute. Scrutiny over these violations is no longer a trend, it’s the norm with more whistleblower lawsuits being filed in 2024 than any other year.
How can your organization work smarter to support compliance? Governance isn’t just about oversight—it’s your first line of defense against regulatory risk.
In their latest piece for Chief Healthcare Executive, SullivanCotter’s Mark Ryberg and Dave Hesselink focus on address financial arrangements between hospitals, health systems, and their employed and contracted physicians:
- Fair Market Value – These regulations require that physician compensation is consistent with fair market value – which is based on a variety of factors such as years of experience, specialty, market demand and more. Additionally, compensation cannot be based on the volume or value of referrals.
- The Case for Compliance – In 2024, the DOJ reported a record number of whistleblower actions and collected $2.9 billion in False Claims Act settlements—$1.67 billion from health care alone. Key violations included fraudulent Medicare/Medicaid billing, improper physician compensation, and kickbacks. As enforcement intensifies, health care organizations must adopt current best practices and conduct regular audits to avoid costly, multi-year investigations and settlements.
- Robust Governance – Strong governance is essential for compliant physician compensation. Organizations must ensure compensation aligns with fair market value, is commercially reasonable, and supported by an administrative team that is able to effective manage a complex process. Mistakes must be addressed promptly as failing to act on known issues increases your risk. Consistent oversight, effective governance mechanisms, and clear policies can help to prevent whistleblower claims or support your organization should an investigation occur.
INFOGRAPHIC | Physician Compensation in Community Health Systems
Get the latest insights from SullivanCotter’s Physician Compensation and Productivity Survey!
The pressure on financial sustainability continues to increase as physician compensation in community health systems remains high. Lower professional collections and higher physician pay when compared to the national market are driving costs up. What can you do about it? Turn insight into action with the right data!
When compared to national benchmarks, physician total cash compensation (TCC) is higher in community health systems across three of the four specialty categories. However, collections for professional services are flat or even lower than national benchmarks.
This results in significantly higher TCC to collections ratios – indicating that physicians within community health systems are paid higher for each professional services dollar they collect than national data would indicate. National and community wRVU data is virtually the same, further indicating that community health system collections are lower than national benchmarks on a per-wRVU basis.
How can community health systems address these challenges?
Carefully balanced compensation design and recruitment:
- Implement core performance expectations – including a minimum level of services tied to base salary before any potential productivity incentives are paid
- Align productivity incentives and financial affordability with a specific focus on the retention of high performers
- Include non-productivity incentives, such as physician and APP care coordination, that are aligned with payer performance measures
- Ensure advanced practice provider (APP) compensation program is externally competitive and aligned closely with the physician plan
Thoughtful workforce planning:
- Perform consistent provider needs assessments for physicians and APPs
- Focus on recruitment and retention within the local community – including incumbents and training programs with geographic ties
- Ensure that succession planning is proactive and coordinated considering the high cost to replace providers, and staff
Performance enhancement:
- Use of collaborative care models to ensure top-of-license practice for all providers and care team members
- Develop care teams with shared incentives
- Improve patient-centered access via joint panels, maximizing APP scheduling, and more
Learn more about our Physician Compensation and Productivity Survey!
It’s time to strengthen your physician workforce strategy…
Tap into the industry’s most expansive and detailed dataset to support your organization with critical insight into compensation, pay practices, and productivity benchmarks. This survey includes information from 500 organizations on nearly 232,000 individual physicians
SURVEY HIGHLIGHTS
- Clinical productivity data and ratios, including collections and wRVUs
- Base pay, total cash compensation and total cost of benefits
- Value-based compensation approaches
- Multiple position levels from staff physicians to department chairs
- Patient encounters and panel sizes
- Quality and performance incentives
- Bonuses, relocation assistance, and other perquisites
- Data reported both nationally and regionally by organization type, position level, and specialty
Press Release | SullivanCotter Releases Results for 2025 Health Care Compensation Surveys
Support your workforce strategy with industry-leading benchmarks!
JULY 15, 2025 – SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and data products for health care and not-for-profits, has released the latest benchmarks from this year’s suite of health care compensation and workforce productivity surveys. These industry-leading surveys provide critical data and insights to help health care organizations navigate complex workforce and compensation strategies in an evolving operating environment.
This year, SullivanCotter’s longstanding flagship health care compensation surveys included participation from nearly 4,800 health care organizations nationwide and collected data on 2.9 million incumbents.
These surveys include:
- Health Care Management and Executive Compensation: For more than 30 years, this survey has been and continues to be the largest of its kind for health care organizations nationwide. It includes data from more than 3,300 organizations on nearly 48,000 individuals.
- Physician Compensation and Productivity: Tap into the industry’s most expansive and detailed dataset with information from more than 500 organizations representing nearly 232,000 providers in 232 different specialties.
- Advanced Practice Provider Compensation and Productivity: Inform strategic decision-making across your APP workforce with critical benchmarks for physician assistants, nurse practitioners, and other certified clinicians (CRNAs, CAAs, and CNMs) across more than 150 specialties. This survey includes data from 800 organizations on more than 150,000 incumbents.
- Health Care Staff Compensation: This comprehensive national survey contains data for 812 clinical and non-clinical staff positions within 20 different job families. Nursing makes up the largest subsection of this survey with data on nearly 900,000 individual RNs, LPNs, and nursing managers
With participation from more than 90% of the nation’s largest 200 health care organizations, these surveys represent one of the most comprehensive sources of health care compensation and workforce benchmarks available. The results support data-driven decision-making in key areas such as executive and clinical leadership compensation, physician and APP productivity, market-competitive base pay for staff roles, and evolving compensation models across the care continuum.
“As the health care industry continues to adapt to financial pressures, workforce shortages and shifting delivery models, organizations rely on robust, timely and industry-specific data to make informed compensation decisions,” said Ted Chien, President and CEO, SullivanCotter. “Our survey results help health care leaders align pay practices with performance, support engagement and retention, and maintain competitiveness in a tight labor market.”
The 2025 survey reports are now available for purchase! Organizations that participated in the surveys receive discounted pricing and early access to the results.
For more information or to purchase survey results, visit www.sullivancotter.com/surveys or contact surveys@sullivancotter.com.
Note to media: Data and interviews are available on request.
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About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improves outcomes through the development and implementation of integrated workforce strategies. Using our time-tested methodologies and industry-leading research and information, we provide data-driven insights, expertise, and data products to help organizations align business strategy and performance objectives–enabling our clients to deliver on their mission, vision, and values.
FORBES | Aligning Clinical Contracts with Value-Based Care
How can your organization incentivize the shift to value-based care?
Quality can only improve when clinicians are compensated based on the right goals and metrics.
The goals of value-based care are clear as organizations strive to reduce rates of readmission, proactively manage chronic illness, improve patient access and satisfaction, reduce spending, and implement more effective preventative health measures. For many health systems, however, this strategy can often fall apart at the contract, compensation, and incentive levels.
In his recent article for Forbes, SullivanCotter’s President and CEO, Ted Chien, highlights three key considerations organizations must take into account as they transition clinicians from traditional production-based pay structures to those tied to the quality of care and patient outcomes:
- New Models for Compensation Design– The legacy ‘one-size-fits-all’ approach no longer suit today’s evolving health care landscape. To better support recruitment, retention, and value-based care delivery, health systems are shifting toward more tailored compensation strategies. Larger systems, in particular, are adopting varied, personalized pay plans designed to incentivize specific roles rather than entire groups or specialties. As care delivery models change, clinicians may now have different pay structures even if they have similar skills and tenure, reflecting differences in responsibilities and time commitments.
- Evolving Comp. Models Requires Different Contracts – As health care business models and compensation approaches change, employment contracts must also adapt. Beyond outlining base pay and benefits, contracts now need to address flexible work arrangements, including hybrid and telehealth options. Ensuring that contract terms align with actual program administration is critical to avoid operational risks and maintain clinician trust. Additionally, incorporating retention-focused clauses can help strengthen clinician commitment and reduce turnover.
- Clarifying Incentives in Value-Based Contracts – In value-based care, clear contract language around shared savings incentives—such as those in the Medicare Shared Savings Program—is crucial to align physician compensation with care quality and efficiency goals. For nurses, factors like job stability and predictable schedules often outweigh pay in driving retention, emphasizing the need to set clear scheduling expectations in contracts. As health care organizations focus more on patient outcomes, thoughtfully designed contracts that define incentives, outline expectations, and reflect what clinicians value most are essential to retaining talent and achieving long-term success.