Physician recruitment in rural America: Is paying more a sustainable solution?

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According to the 2021 Medscape Physician Compensation Report, states where physicians are paid most tend to be more rural. The top three, for example, are Alabama, Kentucky, and Oklahoma. This is most likely a result of these states having to pay more to attract doctors to their underserved communities, which is something we’ve witnessed firsthand when designing compensation programs for rural clients. 


But is paying more for recruitment a sustainable solution for these organizations? Rural hospitals experience a lower patient volume than their metropolitan counterparts. Lower volume means lower revenue and smaller operating margins, so having to pay more than their competitors to attract doctors puts them in a tough financial situation. Administrators also have to balance the pressure to pay top dollar with their obligation to stay within legal boundaries.


Due to financial strain, rural hospitals are closing at an alarming rate, threatening the health of their communities. If rural facilities are going to survive, they have to think differently about how they structure their compensation and benefit plans. 


Finding sustainable solutions


At MaxWorth, we design our compensation programs with sustainability in mind whether we’re working with a small, rural organization or a large health system, but we know sustainability is particularly important for organizations in rural areas. 


The positive outcomes we’ve experienced with our Call Pay Solution demonstrate how impactful it can be to approach compensation in a way that supports an organization’s long-term viability. Call pay programs should be a component of an organization’s cost-containment strategy since the expense can quickly turn into a financial liability if it’s not routinely examined. 


How much should you pay for call?


We’re often asked how much a specialty should be paid for call. Our answer is: it depends. There are plenty of benchmarking services that do a good job of determining a fair market value (FMV) range. FMV is important and should be benchmarked for legal reasons, but given that every healthcare organization has its own set of circumstances and needs, FMV shouldn’t be the final deciding factor when determining call pay rates that are fair and appropriate. No one understands an organization's circumstances and needs more than its medical staff. That’s why we believe in inviting physicians to participate in the decision-making process. 


Physician participation


The first step in our process is to establish a call pay committee made up of representatives from a wide range of specialties. This committee uses a standardized process to determine call pay rates that are based on each specialty’s burden. Given that call burdens vary from hospital to hospital, physician insight is invaluable to this process.


When physicians understand that their call pay rates have been determined in a fair manner, they rarely approach administrators demanding more pay. In fact, since the committee’s work often leads to a better understanding of one another's burdens, more often than not, a committee will choose to include more specialties in the program even if it results in a lower per diem for all. 


Increasing value without increasing pay


The call committee’s process naturally yields more sustainable rates than the traditional approach, but just because these rates are sustainable doesn’t mean they can’t also be appealing to prospective physicians. 

Like most people in high marginal tax brackets, physicians are interested in sheltering current income from state and federal taxes beyond the limits and restrictions of 401(k) and pension plans, but they aren’t often in a position to do so. Our Physicians’ Advantage Plan turns call compensation into more a meaningful reward by creating a way for physicians to tax shelter the income. So without increasing its call pay budget, a hospital can use call pay as a means of distinguishing itself in the marketplace. 


Cost recovery


Another way we like to ensure the sustainability of our call pay programs is to incorporate a funding vehicle that allows a hospital to recoup a portion of its call pay expense over time. This is particularly useful for rural organizations that are concerned about being able to continue to offer attractive rewards in an increasingly competitive recruitment environment.


Measurable results 


When you approach call pay strategically, it can have a noticeable impact on your bottom line. According to a 2014 SullivanCotter survey, the average hospital’s call pay expense rose 50% from 2012 - 2014. MaxWorth’s clients experienced a 4.5% increase during that time period. 


How MaxWorth can help


Many hospitals address the needs of their emergency department with a blended medical staff. Employed physicians, private-practicing physicians, and part-time contractors work alongside each other. Our approach can be a part of a larger solution to attract physicians to your team in a more sustainable way. To learn more, schedule a call with one of our plan consultants today.



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