A recent survey by the American Medical Group Association (AMGA) of executive and leadership compensation reveals several trends, including that incentive compensation plays an important role in increases and value-based care is driving executive compensation incentives.
The AMGA 2017 Medical Group Executive and Leadership Compensation Survey indicates material increases in overall cash compensation for several C-suite executive positions over the prior year.
Results show national median total cash compensation for CEO (physician) increased by 7.5 percent; CEO (non-physician) by 11.1 percent; and COO by 7.2 percent. Several of the other traditional C-suite positions saw increases of up to 4.4 percent at median. Some of the larger increases may be driven, in part, by differences in the demographics of survey participants year-over-year. However, the general upward trend is consistent with other compensation survey data, AMGA reported.
The survey results suggest that incentive compensation continues to play an ever-more-important role for leaders. Analysis of executive roles indicated that the median “earned bonus-to-base ratio,” a measure of the proportion of compensation driven by performance incentives beyond base salary, increased for several executive roles over 2016.
For CEOs (physicians), the median “earned bonus-to-base ratio” increased from 18.2 percent in 2016 to 22.7 percent in 2017; for CEOs (non-physicians) the ratio increased from 20 percent in 2016 to 24.9 percent last year; for CFOs, the median bonus-to-base ratio went from 15.7 percent in 2016 to 19.6 percent last year; and for COOs, the ratio increased from 15 percent to 21.9 percent in 2017.
“At this time, value-based care is driving executive compensation incentives in a manner similar to physician compensation for many groups,” Fred Horton, president of AMGA Consulting, said in a statement.
Wayne Hartley, COO of AMGA Consulting, said, “As we work in the field with medical group executives, we commonly hear that there is a renewed focus on operations. Many resources have gone into payer strategy and care model design in recent years and now organizations are focused on orchestrating those investments to achieve the desired outcomes.”
Consistent with this move to value-based care, one role that is key to these efforts is director, care coordination, which registered a more than 14 percent increase in median total cash compensation year-over-year, the AMGA survey found.
This year’s survey includes data from 55 medical groups across the country, representing more than 1,300 incumbents. Approximately 63 percent of incumbents are from system-affiliated groups, while 37 percent represent independent groups. The survey is weighted towards mid- to large-size groups, with 73 percent of incumbents from groups of more than 100 full-time equivalent (FTE) physicians.
The survey also shows an increase in the prevalence of Supplemental Executive Retirement Plans (SERPs), a common tool to promote retention of key executives. The prevalence of such plans for CEOs (physicians) in 2016 was 41 percent and that increased to 62 percent in 2017. In 2016, 31 percent of CEOs (non-physicians) had Supplemental Executive Retirement Plans compared to 50 percent in 2017.
“With the effort required to align resources for success under value-based care, it may be that more organizations are deciding that incentives to promote consistency in the leadership team are key to success,” Horton said. “Alternatively, as SERPs tend to be more common in larger organizations, it may be that continued consolidation into larger systems is driving this benefit. Either way, there is high demand for talented executives, and vacancies in senior positions can impact organizational momentum during a challenging time for the industry.”
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