INFOGRAPHIC | Optimizing Nursing Skill Mix
How Organizations Can Help Drive Down Labor Costs
Nursing skill mix is an important consideration in the design of nursing department staffing as hospitals and health systems continue to face critical staffing shortages. Having an adequate mix of nurse roles, from registered nurses (RNs) to licensed practical nurses (LPNs) and nursing assistants (NAs), can enable organizations to configure the appropriate nurse staffing mix where each role performs at the top of their license and delivers the highest quality care.
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PRESS RELEASE | SullivanCotter Releases Annual Workforce Metrics Benchmark Survey Results
SullivanCotter Releases Annual Workforce Metrics Benchmark Survey Results and Offers Insight Into Health Care Workforce Structure
Chicago, IL | December 08, 2021 01:26 PM Eastern Standard Time
SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and technology and data products for the health care industry and not-for-profit sector, recently released results from its 2021 Workforce Metrics Benchmark Survey.
The survey contains benchmark data on 10 staff level job families, including Ancillary Services, Care Management, Emergency Medical Services, Facilities Services, Financial Services, Human Resources, Information Technology, Legal and Compliance Services, Nursing, and Technical Medical Support. “Insights from this survey will arm health care organizations with essential information on how the composition and cost of their workforce compares to the market,” said James Roth, Managing Principal, SullivanCotter.
“Health care organizations face unprecedented pressure as disruptions in patient volume, reductions in employer-sponsored insurance, labor shortages and rising expenses all remain key challenges. As these organizations look for better ways to optimize care delivery and improve performance, effectively managing the size, shape and architecture of the workforce is critical. By gaining an understanding of how your organization compares to industry benchmarks, you can better support operational restructuring decisions that help manage labor expenses, recognize acquisition-related cost saving opportunities, identify retirement risks, and uncover gaps in meeting your diversity objectives,” said Roth.
Increased Attention on Workforce Architecture
Understanding the drivers of workforce cost requires a multi-dimensional analysis that must take into consideration the interaction between three factors – the overall size of the workforce, the distribution of the workforce across career levels and the job level pay position relative to your target market.
“The tension between responding to a compressed labor market and rising labor costs, and managing profitability battered by shifts in payor mix driven by the pandemic, has cast focus on the efficiency and effectiveness of the current workforce structure,” said Cathy Loose, Managing Principal, SullivanCotter.
Thoughtfully defined career stages and job levels are the foundations for building a workforce architecture. SullivanCotter’s 2021 survey data indicates that almost one-quarter of titled managers do not have any staff accountability, which suggests that clarifying job definitions is a critical step many organizations miss. Then, carefully considering the desired workforce distribution within each functional area is a key pivot point that can inform the level of managerial span of control needed, define the overall size of the workforce, and influence the affordability and effectiveness of different pay philosophies.
Boardroom Focus on Demographics is Accelerating
There are few topics getting more attention from health care organization boards today than diversity and inclusion. Objectively, there are documented and researched benefits to expanding the representational diversity in the workforce. “In today’s constricted labor market, many organizations are focused on diversity as defined by race and gender, yet they are also revisiting legacy job requirements that may be limiting the diversity of experience, thought and skill in the candidate pool,” said Nanci Hibschman, Managing Principal, SullivanCotter.
SullivanCotter’s data reveals that almost one-quarter of the active health care workforce will reach retirement age eligibility in the next ten years. While this will create a significant challenge in terms of accelerating the pace of staff replacement, the industry has a strong foundation of diversity to build upon with over three-quarters of the workforce being female and almost one-third ethnic minorities as indicated by SullivanCotter’s data.
Health care organizations have a unique opportunity to lead change and influence the profile of the workforce of the future. Giving fair consideration to candidates with diverse backgrounds, experiences, knowledge, skills and abilities gives the organization the opportunity to discover new workforce combinations that may change how jobs are defined, how teams work together and how value gets created.
Considerations for 2022 and Beyond
As hospitals and health systems plan for what lies ahead and look to support financial sustainability and mitigate risk, organizations should consider market practices as well as their individual financial circumstances and structural definitions when determining their compensation and workforce-related actions.
To support more sophisticated benchmarking and customized workforce design, SullivanCotter has developed a robust statistical analysis which integrates our extensive workforce demographic and structure data with our financial, performance and quality data. This enhanced methodology produces client-specific predictive modeling of workforce size, distribution and cost customized by job family to support large-scale workforce planning and analysis.
“SullivanCotter’s 2021 Workforce Metrics Benchmark Survey reflects data collected using a rolling database model through 2020 and 2021. Due to the continued impact of the pandemic and the extremely dynamic environment, the survey data should be used thoughtfully, with appropriate context, and with sound business judgement as you plan and consider workforce management initiatives in 2022 and beyond,” said Roth.
For more information on SullivanCotter’s 2021 Health Care Workforce Metrics Benchmark Survey or any other SullivanCotter surveys, please visit our website at www.sullivancotter.com, email us or contact us by phone at 888.739.7039.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve 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, data and technology products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.
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INFOGRAPHIC | Advanced Practice Provider Leadership Compensation Practices
As the advanced practice provider (APP) workforce continues to evolve, many health systems and medical groups are developing intentional, consistent operating models for APP utilization. Consequently, APP leader roles have emerged to help oversee day-to-day clinical operations, support workforce planning initiatives, and drive overall APP strategy at the executive level.
Putting APP leaders in place can help organizations improve efficiency by centralizing and standardizing key processes such as credentialing, privileging, and onboarding. APP leaders can also help reduce turnover, enhance APP engagement and satisfaction through better workforce representation on organizational committees, and improve profitability. Recent data show that organizations with APP leaders see 2% less APP turnover than organizations without this role. With the cost of turnover estimated to be between $85,832 - $114,9191, this could have significant financial impact.
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INFOGRAPHIC | Endowment and Foundation Investment Staff Compensation Survey
The world of philanthropy continues to thrive as foundations and endowments identify new giving opportunities and develop innovative programs and services to support them.
This requires a highly unique and specialized workforce, however, and organizations are seeking guidance on how to develop and elevate their talent management and investment strategies.
With unique insight into base salary, total cash compensation, incentive plan design and more, SullivanCotter's Endowment and Foundation Investment Staff Compensation Survey can serve as an important resource for organizations looking to benchmark key investment staff positions including chief investment officer, managing director, director, manager, analysts, and operations staff.
View highlights from the 2021 survey results to learn more!
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2022 Physician Fee Schedule: Understanding Changes to Split/Shared Visits
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Each year, the Centers for Medicare and Medicaid Services (CMS) incorporates changes in policy, regulations and requirements for billing under the Medicare Physician Fee Schedule (PFS). These changes are often adopted by commercial payers.
On November 2, 2021, CMS released the final rule for the 2022 PFS that included changes to split/shared visits scheduled to go into effect on January 1, 2022. The proposed changes included some important considerations related to the conditions for submitting split/shared visits for reimbursement and have the potential to alter the existing workflow of physicians and advanced practice providers (APPs) related to billing for split/shared encounters.
While some changes took effect in 2022, a number of the most impactful changes to split/shared billing were delayed to January 1, 2024. The 2023 PFS final rule indicates CMS’ desire to make significant changes to split/shared visits while allowing organizations time to prepare.
Split/Shared Visits
According to the Medicare Claims Processing Manual Publication #100-04:
“A split/shared E/M visit is defined by Medicare Part B payment policy as a medically necessary encounter with a patient where the physician and a qualified non-physician provider each personally perform a substantive portion of an evaluation and management (E/M) visit face-to-face with the same patient on the same date of service. A substantive portion of an E/M visit involves all or some portion of the history, exam or medical decision-making key components of an E/M service. The physician and the qualified NPP must be in the same group practice or be employed by the same employer.”
Split/shared E/M visits are only applicable in the hospital inpatient and hospital outpatient departments using provider-based billing and emergency room sites of service for all professional encounters currently except for critical care services, procedures, or time-based codes (e.g., prolonged service time).
What is Changing?
The 2022 final rule included several changes that are designed to reflect current clinical practice, recognize APPs’ evolving role as members of the care team, reduce duplication of services and clarify the conditions of payment for these types of services.1,2 These changes were implemented beginning in 2022 with additional changes identified for implementation in 2024. The most significant change is moving the split/shared visit from an E/M and medical decision-making based attribution to a time-based attribution. Under the current medical decision-making rubric, split/shared visits are typically billed by physicians, assuming specific conditions of collaboration have been met (e.g., face to face encounter, contributing to the evaluation, management or medical decision, employed by the same group or employer). In 2022, changes include the allowance of time-based accounting for a split/shared visit where “the practitioner who provides the substantive portion of the visit (more than ½ of the total time spent) would bill for the visit.” In 2022 and 2023, split/shared visits can be submitted using the current medical decision-making methodology or the new time-based methodology. Other changes applicable in 2022 include the ability for critical care services to be reported as split/shared, and the requirement that a new billing modifier be added for all shared visits. A survey performed by SullivanCotter of National APP Advisory Council (NAAC) members found that 54% of organizations were still using split shared billing.3
The greatest impact on split/shared visit billing is set to occur in 2024 when all shared visits must be billed using the time-based methodology where the practitioner who provides the substantive portion of the visit (“more than ½ of the total time spent”) bills for the visit1. In 2022 and 2023, the impact of the split/shared change will likely be modest but will allow organizations time to better understand the degree of split/shared billing that occurs within their organizations through the shared visit modifier requirement.
In 2024, the impact on attributed wRVUs for physicians and APPs providing services in the inpatient setting could be significant. The time-based methodology will require physicians to have greater than 50% of the time spent with a patient in order to bill and receive wRVU attribution. Because of this change, in 2024, the same patient volume using current split/shared workflows could result in an increase in reported APP wRVUs and a corresponding decrease in reported physician wRVUs. This change could also result in an overall decrease in professional collections (to account for the 15% difference in Medicare physician and APP reimbursement levels for the same service).
When accounting for time, CMS identified these specific activities:2
- Preparing to see the patient (for example, review of tests).
- Obtaining and/or reviewing separately obtained history.
- Performing a medically appropriate examination and/or evaluation.
- Counseling and educating the patient/family/caregiver.
- Ordering medications, tests, or procedures.
- Referring and communicating with other health care professionals (when not separately reported).
- Documenting clinical information in the electronic or other health record (Note: CMS has stated it may be helpful for each individual to document their own participation in the medical record in order to determine the substantive time).
- Independently interpreting results (not separately reported).
- Communicating results to the patient/family/caregiver.
- Care coordination (not separately reported).
Example
A hospitalized patient with a diagnosis of pneumonia is being cared for by the hospital medicine team composed of a physician and an APP. On hospital day 2, the APP sees the patient in the morning and spends 25 minutes with the patient performing a focused history and physical, reviewing the morning labs and providing patient education related to the course of treatment with the patient and their family. Based on a detected decrease in lung sounds during the lung exam, the APP orders a chest x-ray. Later in the day, the physician and the APP spend an additional 10 minutes together to make afternoon rounds and review the chest x-ray findings, make changes in treatment, and meet with the patient to review the chest x-ray results (35 minutes in total for the APP and 10 minutes total for the physician).
The hospital medicine team bills the encounter as 99233 (subsequent hospital care level 3). Under the historical medical decision-making approach, this could be billed by the physician as a split/shared visit (assuming all of the other criteria were met) or by the APP (paid at 85% of the allowed amount for Medicare patients).
Under the time-based billing approach, the visit could only be billed by the APP as the APP provided the majority of the encounter (35 out of 45 minutes or 78% of the total time spent in the encounter). As the physician would not receive wRVU or reimbursement credit for this visit using this methodology, this could impact credited physician productivity and, for organizations using productivity-based compensation models, both physician and APP compensation.
What Now?
Current care delivery models should be reevaluated when developing a strategy to transition to time-based billing for split/shared visits. It is important to design an effective and transparent workflow that allows for top-of-licensure operation and minimizes any competition for credit. With changes imminent, organizations can take the following steps to prepare:
- Assess the current state of split/shared billing at your organization.
- Evaluate current care team composition and work responsibilities to determine the optimal team composition and anticipated wRVU attribution impact to ensure that providers are efficient and optimally utilized.
- Assess the impact on specific patient workflows (e.g., new patients, established patients, discharges) where split/shared visits are utilized today.
- Identify types of encounters that could be performed solo by the APP thus allowing physician to see other patients.
- Consider if modifications to physician and APP compensation arrangements are needed to ensure financial sustainability and regulatory compliance. Be aware these changes may influence the reported wRVU and compensation per wRVU 2023 survey report data.
Sources
1. Calendar Year (CY) 2022 Medicare Physician Fee Schedule Final Rule. Published November 2, 2021. Retrieved from https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2022-medicare-physician-fee-schedule-final-rule
2. RIN 0938-AU42 Medicare Program; CY 2022 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment Policies. Published November 19, 2021. Retrieved from https://www.federalregister.gov/d/2021-23972
3. National APP Advisory Council - Fall 2022 Pulse Survey
PRESS RELEASE | SullivanCotter Welcomes Cathy Loose to Lead Employee Workforce Practice
Learning from global experience brings fresh perspectives to workforce rewards strategies
Chicago, IL | October 27, 2021 10:23 AM Central Daylight Time
SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and technology and data products for the health care industry and not-for-profit sector, is pleased to announce the addition of Cathy Loose as a Managing Principal and Practice Leader of the Employee Workforce Practice.
For over 25 years, Cathy has advised employers in health care, higher education and global markets on all areas of broad-based, workforce compensation. She has also served as compensation consultant to companies in the biotech, pharma, hi-tech and life science industries. Having lived and consulted in various regions around the world, including Europe, Asia Pacific, Africa and North America, Cathy brings innovation to traditional total rewards and workforce planning initiatives, as well as to priorities driving diversity, equity and inclusion.
“While we tend to think of health care as a U.S.-based industry, the world’s influence and international collaboration is increasing even in health care, challenging us to help our clients think differently about how they appeal to and reward today’s workforce,” said Ted Chien, President and Chief Executive Officer, SullivanCotter. “Cathy’s global experience brings a fresh perspective to our work and helps our clients remain agile during times of change like we have been seeing this past decade, and more specifically this past 18-24 months.”
Cathy advises executive teams in developing enterprise-wide rewards philosophies, career architecture and compensation frameworks to align employee pay and incentives with their organization’s mission and key strategies. In addition, she helps redesign workforce rewards to drive and enable enterprise growth, organization realignments, business consolidations and merger and acquisition transactions.
Before joining SullivanCotter, Cathy held leadership positions around the world at several large global consulting firms. She led a variety of practices including global mobility, broad-based compensation, total rewards and human capital solutions.
She is a frequent speaker at national conferences on global, broad-based compensation and talent mobility, and she holds the designation of SHRM-Senior Certified Professional (SCP). Cathy is fluent in English, French and Vietnamese and proficient in Japanese and Mandarin Chinese.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve 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, data and technology products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.
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PRESS RELEASE | Enhanced Benchmarking Capabilities Added to SullivanCotter’s Provider Performance Management Technology™
Enhanced Benchmarking Capabilities Added to SullivanCotter’s PPMT™
Chicago, IL | October 19, 2021 11:00 AM Eastern Daylight Time
SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and technology and data products for the health care industry and not-for-profit sector, announces significant benchmarking enhancements to its growing Provider Performance Management TechnologyTM (PPMT™) platform. PPMT is an industry-first, cloud-based product that engages clinicians and informs leaders through transparent performance-based compensation administration, contract management, and analytical and reporting capabilities.
PPMT’s fall product release includes new configurability options for its already powerful benchmarking capabilities, including the ability to select months for productivity benchmarks and identify and benchmark physicians who specialize in multiple service areas. “Our latest enhancement allows users to remove abnormally low productivity months, particularly like we’ve seen with COVID-19, to make the data set more relevant. This can also be beneficial when clinicians take a leave of absence and more,” said Shelly Slowiak, Director, Product Support, PPMT, SullivanCotter.
PPMT’s current functionality enables clients to view both individual and collective physician performance relative to their own custom organizational benchmarks. This allows physicians and leaders to monitor real-time productivity and compare to the organization’s key compensation productivity thresholds. In addition to displaying wRVU productivity, users may compare total cash compensation (TCC) and metrics to external and internal benchmarks for both full-time and split clinical roles.
Designed to address a spectrum of physician, leadership and other key stakeholder needs, PPMT combines years of health care compensation insight and expertise with an intuitive and automated technology platform to help drive provider performance and support the transition from volume- to value-based care.
“Based on the evolving needs of our clients, SullivanCotter continues to invest in and improve our technology products. Alongside Benchmarks360™, which enables clients to analyze and visualize compensation, clinical productivity, and workforce perceptions, we continue to offer our clients additional ways to benchmark pay and productivity,” said David Schwietz, Chief Information Officer, SullivanCotter.
For more information on these enhancements or our entire suite of Provider Performance Management Technology™, visit www.sullivancotter.com/PPMT or contact us at 888.739.7039.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve 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, data and technology products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.
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ARTICLE | Key Agenda Items for Board Committees
Featured in McDermott Will & Emery's newly published e-book from its Governing Health series
SullivanCotter’s Kathy Hastings, Executive Workforce Practice Leader, and Tim Cotter, Managing Director, have contributed two chapters to a newly published e-book from McDermott Will & Emery entitled, Key Agenda Items for Board Committees: A Briefing for Governance and Executive Leadership.
Their two chapters include:
- 10 Focus Areas for Your Human Capital Committee
- Top 10 Diligence Questions for Executive Compensation Committees
Access the E-Book Here
PRESS RELEASE | SullivanCotter's 2021 Physician and APP Compensation and Benchmarks
SullivanCotter Announces the Release of 2021 Physician and Advanced Practice Provider Compensation and Productivity Benchmarks
Chicago, IL | August 24, 2021 02:42 PM Central Daylight Time
SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and technology and data products for the health care industry and not-for-profit sector, is excited to announce the release of its 2021 compensation and productivity benchmarks for nearly 260,000 physicians, physician leaders and advanced practice providers nationwide.
Organizations are currently struggling to understand how to utilize the new survey benchmarks and effectively adjust for a number of unprecedented changes from last year and, as a result, are looking for more reliable and stable datasets moving forward.
“This year more than ever, hospitals and health systems require critical data-driven insights as they look to normalize the impact of COVID-19 on clinical workforce compensation and productivity and address substantial modifications to the 2021 Physician Fee Schedule. To help clients plan for 2021 and beyond, SullivanCotter will be offering enhanced analyses and reporting as well as guidance on best practices for evaluating the newly released survey data,” said Chris Brandt, Senior Director, Data Analytics and Reporting, SullivanCotter.
In addition to standard, non-adjusted benchmarks as historically reported, organizations who purchase an eligible survey report will receive complimentary COVID-19-adjusted work RVU and TCC per work RVU data – providing greater insight into the effect of the pandemic and enabling hospitals, health systems and medical groups to quickly measure the impact on compensation and productivity within their organizations.
Newly available for purchase this year are three tiers of detailed productivity reporting– including monthly work RVU volumes by specialty in addition to individual CPT code-level details. When combined with SullivanCotter’s innovative Benchmarks360™ platform, organizations can more effectively analyze and visualize this data with access to dynamic filters, multi-year coding profiles, and annual updates to CPT codes.
SullivanCotter will also be offering adjusted benchmarks for total cash compensation, work RVUs, collections and other related ratios for use in conjunction with the 2021 Physician Fee Schedule. This includes proprietary data from SullivanCotter's 2021 surveys as well as other third-party market datasets (with appropriate licensing and non-disclosure agreements in place).
The 2021 surveys are now available for purchase at SullivanCotter.com. To learn more about this year’s enhanced reporting and analyses, please contact surveys@sullivancotter.com or dial 888.739.7039.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve 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, data and technology products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.
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PRESS RELEASE | Reid Health Selects SullivanCotter’s Provider Performance Management Technology™
Reid Health Selects SullivanCotter’s Provider Performance Management Technology™ to Provide Transparency and Insight into Physician Pay and Performance
Chicago, IL | September 14, 2021 07:00 AM Central Daylight Time
SullivanCotter, the nation’s leading independent consulting firm in the assessment and development of total rewards programs, workforce solutions, and technology and data products for the health care industry and not-for-profit sector, has partnered with Reid Health to implement its comprehensive Provider Performance Management Technology™ (PPMT™).
Reid Health is a nationally recognized regional referral center in Richmond, Indiana, with a 200+ bed hospital and physicians network meeting health care needs in east central Indiana and west central Ohio. By leveraging PPMT™, an industry-first, cloud-based product that enables physician and advanced practice provider (APP) engagement through transparent performance-based compensation administration and analytical capabilities, the organization proactively enables physicians to review their productivity and compensation calculation details with insights into patients, visits, and performance. “With PPMT’s powerful heat map, we are able to drill down into our providers’ productivity and identify those with potential capacity. This helps us uncover community outreach opportunities, enabling providers to increase patient access and boost productivity,” said Amy Gowin, Director of Finance, Reid Health Physician Associates.
Along with providing increased transparency, PPMT™ has reduced compensation planning and administrative challenges by automating Reid Health’s complex provider compensation contract calculations and notifications. With PPMT™, budgeted wRVUs are loaded into the system for use in compensation calculations and forecasting for the upcoming fiscal year. “PPMT™ provides Reid Health’s physicians, like myself, a transparent view of my clinical work performance and how I will be compensated for it. It provides timely, accurate, and actionable data, and I appreciate the ability to see my data promptly,” said Dr. Rohit Bawa, Chair, Network Operations Council, Reid Health Physician Associates. “Additionally, as a physician leader, the software enables clinician engagement through transparency of their performance”.
“We are excited about the operational efficiencies and physician trust and engagement gained by our clients. PPMT™ provides physicians, administration, and leadership with a single source of reliable compensation and performance information. We are thrilled to partner with Reid Health,” said Shelly Slowiak, Director, Product Support, PPMT™, SullivanCotter.
PPMT™ includes four dynamic modules, including Provider Performance Management, Provider Productivity Insights, Compensation Management Analytics, and Contract Lifecycle Management, powered by Ntracts. Reid Health plans to use all modules to help support its growing network of providers, allowing for a more cohesive approach to compensation and performance management.
For more information on Provider Performance Management Technology™, visit www.sullivancotter.com/PPMT or contact us at 888.739.7039.
About SullivanCotter
SullivanCotter partners with health care and other not-for-profit organizations to understand what drives performance and improve 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, data and technology products to help organizations align business strategy and performance objectives – enabling our clients to deliver on their mission, vision and values.
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The Governance Institute | Executive Compensation and Governance Trends for 2021 and Beyond
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As the response to COVID-19 continues, healthcare organizations nationwide face an uncertain environment in the near-term as vaccination rates slow, virus variants appear, and operational recovery from the pandemic accelerates. Additionally, there are a myriad of intermediate and longer-term forces at play—such as reimbursement pressures, technology disruption, workforce burnout and labor shortages, new competitive threats, and regulatory changes—that require attention.
The complexity of healthcare organizations continues to increase as pressures mount for financial sustainability, diversification, efficiency, and new care delivery models. Leadership retirements and burnout brought on by the pandemic have exacerbated the limited supply of executive talent with the skills, experience, and competencies needed to lead these complex organizations through significant change. As healthcare organizations and their boards confront this environment, executive compensation programs, talent strategies, and governance will continue to adapt.
In this article, we recap the response of healthcare organizations in 2020 and outline priorities for 2021 and beyond.
Pandemic Response: Impact on Executive Compensation
Compensation committees and healthcare leaders took several actions during 2020 in response to the pandemic:
- Prioritizing the broader workforce: The healthcare workforce rose to the challenge of meeting community needs as the pandemic took hold. The workforce made extraordinary professional and personal sacrifices to ensure patient needs were met. There was a focus on ensuring the broader workforce was supported through the implementation of special incentives and pay differentials, accommodations for childcare and other personal needs, and the delivery of base salary increases when financially viable (with budgets in the 2 to 3 percent range).
- Lowering base salary budgets: Executive salaries were impacted with many freezing, temporarily reducing, or moderating increases. Broad-based workforce increases were prioritized over consideration of executive increases. About one-third of healthcare executives did not receive a base salary increase between 2020 and 2021. Overall, the median base salary increase for healthcare executives was 2 percent, which was lower than the initially projected prepandemic 2020 salary increase budget of 3 percent.
- Changing incentives to reflect the COVID-19 response: Executive incentive plans changed. Performance measures and goals were adjusted by many organizations to reflect shifting priorities in response to COVID-19. The adjudication of incentives was holistic as business judgment was applied to consider performance, pandemic response, treatment of the workforce, and stakeholder perspectives. Approximately 15 percent of executives did not receive an annual incentive award. For those who did receive an award, the typical payout as a percentage of the target opportunity was lower than in prior years.
- Rewarding positions leading COVID-19 response and transformation: Higherthan-average salary increases were observed for a number of positions that led the COVID-19 response or longer-term transformation efforts (e.g., Chief Operating Officer, Chief Medical Officer, Chief Technology Officer, Chief Nursing Officer, and Top Facilities Executive). In addition, more organizations reported emerging leadership positions in key functions, including telehealth, ambulatory care, digital strategy, and diversity, equity, and inclusion.
Key Priorities for 2021 and Beyond
There are five priorities for compensation committees as pay determinations are made this year and the executive compensation program’s effectiveness is considered.
- Compensation actions: Plan for flexibility as 2021 compensation decisions are made, to recognize the ongoing impact of the pandemic on operations:
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- Executive base salary increase budgets are projected to rebound to prepandemic norms of 3 percent, although some organizations may provide more significant increase budgets to respond to retention and competitiveness needs.
- Additional salary adjustments are anticipated for select roles based on data from SullivanCotter’s 2021 Health Care Management and Executive Compensation Survey (e.g., physician leaders and executives in operations, technology, nursing, supply chain, and quality).
- Business judgment may be needed when determining incentive awards for 2021 performance, to account for the unanticipated effect on performance goals and priorities, as well as competitiveness considerations and stakeholder optics.
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- Compensation philosophy: Ensure the executive compensation philosophy supports the organization’s recruitment, retention, and motivation needs:
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- Peer groups that reflect the potential for recruiting talent from outside of traditional healthcare peers, including broader industry peers.
- Flexibility so that compensation can be appropriately competitive rather than tied to a specific percentile, to allow for variation based on a role’s organization impact, performance, and other factors.
- Allowance for variation in pay models for different business units (e.g., health plans, long-term care, and business ventures).
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- Performance and incentives: Examine the executive incentive plan to ensure it aligns with new performance priorities and measures of success:
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- Measures and goals that capture operating and strategic objectives, such as financial sustainability, patient experience, community benefit, care access, and deployment of new delivery models (e.g., telehealth).
- The degree of stretch in performance goals to help ensure meaningful performance is attained for corresponding payouts.
- Consider long-term incentives that reward for attaining multi-year transformation objectives.
- Consider the impact of regulatory developments on incentives (e.g., actions to encourage more competition).
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- Executive talent strategy and succession: New skills and competencies will be required to achieve organizational goals. Plus, organizations should plan for executive turnover due to the competitive talent market and career/retirement changes accelerated by the pandemic:
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- Expect to recruit from expanded talent markets (including for-profits) for select positions based on specific organizational needs (e.g., telehealth/digital executives from IT and population health executives from managed care organizations).
- Anticipate the need to provide highly competitive pay for new recruits.
- Refine executive succession plans (including the identification of emergency successors) based on the organization’s talent needs.
- Ensure there is a strong talent pipeline and determine if talent will be developed internally or recruited externally.
- Assess organizational structure and spans of control to support the delivery of cost-effective and quality care using new operating models.
- Monitor the impact of regulatory developments (e.g., potential restrictions on non-competes).
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- Diversity, equity, and inclusion: Determine how diversity, equity, and inclusion (DE&I) priorities will impact the executive talent strategy, recruitment/retention, program design, and governance:
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- Assess executive and broader workforce diversity through the use of governance dashboards and other committee reporting; understand how talent strategies and succession plans are considering DE&I.
- Ensure that pay equity is assessed and that processes and policies are in place to monitor and maintain pay equity over time.
- Consider the use of DE&I measures in annual and/or long-term incentive programs.
- Expect highly competitive compensation for DE&I leadership roles.
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➜ Key Considerations for Compensation Committees
As healthcare organizations and their boards address changing performance priorities and leadership recruitment and retention needs during this uncertain time, executive compensation programs, talent strategies, and governance will continue to adapt. Compensation committees should expect an active agenda in this environment, focusing on five priorities:
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- Ensuring compensation actions (base salary increase budgets, market adjustments, and incentives for 2021 performance) account for the rebound in the industry, the highly competitive talent market, and the challenges of operating in the environment. Anticipate the use of business judgment as actions are determined.
- Align the compensation philosophy to evolving needs and provide for the flexibility to recruit, retain, and reward talent in line with changing needs.
- Adjust the incentive compensation program to ensure performance measures reflect evolving priorities and payouts align with meaningful performance outcomes.
- Review executive talent strategies and succession plans to account for new skill requirements and expected emergency and long-term succession requirements.
- Incorporate diversity, equity, and inclusion (DE&I) into the compensation strategy—review pay equity, consider the role of the compensation committee in DE&I governance, and determine how the incentives and other programs can further DE&I goals.
Conclusion
Healthcare organizations increasingly are focused on opportunities emerging from the pandemic. Compensation committees should expect continued refinements to the executive compensation program and talent strategies to support organization and performance needs.
The Governance Institute thanks Bruce Greenblatt, Managing Principal, SullivanCotter, Inc., for contributing this article. He can be reached at brucegreenblatt@sullivancotter.com.
Featured in the September edition of The Governance Institute’s E-Briefings, SullivanCotter recaps the response of healthcare organizations in 2020 and outlines priorities for 2021 and beyond.
Reprinted with permission from The Governance Institute, San Diego, CA, (2021), (Bruce Greenblatt, SullivanCotter. Executive Compensation and Governance Trends for 2021 and Beyond).
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INFOGRAPHIC | Optimizing Utilization of the Advanced Practice Provider Workforce
The focus on team-based care will require health care organizations to optimize the performance of all members of the care team.
Many hospitals and health systems continue to grow their advanced practice provider (APP) workforce as they realize important operational benefits such as improving the quality of care, increasing patient access, enhancing provider satisfaction and reducing costs.
However, this growth is often organic and can result in significant variation in APP utilization and organizations must develop strategic models of care in order to effectively integrate, optimize and engage this growing workforce.
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Case Study | Optimizing Utilization of the Advanced Practice Provider Workforce
The focus on team-based care will require health care organizations to optimize the performance of all members of the care team.
Learn more about how a leading academic medical center assessed opportunities for care team optimization and redesigned their APP workforce.
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How to Take Advantage of New Stark Law Compliance Regulations
Now that the government has allowed for some regulatory relaxation, how can health care providers take advantage while still mitigating risk?
SullivanCotter's Ron Vance, Managing Principal, recently joined a panel of experts to discuss changes to the Stark Law and how organizations can position themselves to best ensure compliance.
Listen to the webinar recording or download the discussion highlights to gain a better understanding of the regulatory updates and how they impact provider arrangements, as well as how health care providers can and should be proactive in reconciling the management of those arrangements and the data surrounding them to mitigate potential risk and exposure.
Modern Healthcare | 2021: Annual Executive Compensation Article
Health care organizations focus on recruitment and retention of key executive talent as industry attention on diversity, wellness and other long-term transformations intensifies.
As the health care industry continues to respond to the extraordinary and unprecedented impact of the COVID-19 pandemic, organizations are evaluating and adjusting their executive compensation practices to adapt to the changing landscape.
Competition to fill executive positions is becoming increasingly challenging with limited talent available with the skills, experience and competencies needed to successfully lead complex health care organizations through the post-pandemic environment. In addition, the definition of organization success is changing as strategic and operating plans are updated.
Featured in Modern Healthcare’s annual executive compensation article, SullivanCotter’s Bruce Greenblatt and Tom Pavlik share data from SullivanCotter’s 2021 Health Care Management and Executive Compensation Survey, and highlight some of the actions organizations are taking to draw in and retain executive talent, while also focusing on the recovery that lies ahead during such an uncertain time.