From the Top

Six Steps for Building Compensation Consensus

Dear Colleague,

Thinking of changing your physician compensation plan? Be careful—rolling out a new pay plan without solid physician support can prove disastrous. In my experience, mapping out a careful consensus-building strategy can help you bypass major collisions and arrive at a final plan that everyone can be happy with.

The following six-step guide shows you how to initiate the planning process, focus the dialogue, win buy-in from physicians and—as an extra layer of “insurance”—validate the plan before full commitment.

Step 1—Create a core team and pick the destination. When planning salary and benefits, physicians need to be on board every step of the way. The best strategy is to create a compensation steering committee made up predominantly of doctors. Make sure to include the group's informal leaders, such as the most productive physicians or those who are most highly regarded professionally. (You may even want to include the most “difficult” members of the group so that you can address their concerns early on.) Once the committee is in place, define the guidelines and goals. Lay out how the work will proceed and set a quantifiable target. Example: “Cut group losses by 75% by the end of year three.”

Step 2—Let data drive the dialogue. Focus the discussion by creating a comprehensive data picture of current group performance. Provide the committee with high-level reports that concentrate on physician productivity, physician compensation and bottom line results. To help the committee see the issues more objectively, compare the group's data to industry benchmarks. For the most accurate benchmarking picture, use multiple data sets. Then take the opportunity to step aside, out of the line of fire, and let the numbers do the talking.

Step 3—Options! Options! Options! After everyone is clear about the group's current situation, the next step is to discuss possible compensation strategies. Even if you have a favorite solution, you still need to let physicians work through the process. Develop four or five different compensation models with basic financial projections and present them to the committee.

Step 4—Enable a preliminary decision. Have the steering committee select three compensation models for more in-depth examination. For each model, work up a complete financial impact scenario that includes forecasts for group income and individual compensation. Make sure committee members have several different opportunities to examine the scenarios, both as a group and on their own. Once they digest the information, the committee will be ready to endorse one plan model as the overall best.

Step 5—Widen the circle of discussion. Now is the time to enlarge the circle of the dialogue by presenting the plan to the whole physician group. Since you have built a solid foundation by developing agreement among the steering committee, you should have a critical mass of opinion on your side. Of course, concerns will come up. Work with the committee to address them carefully, adjusting the plan as needed.

Step 6—Do a dry run. Run the new compensation plan as an information-only “phantom plan” for six months. While you continue to issue paychecks under the existing plan, provide physicians with reports that detail what their pay would be under the new model. This approach will help you work out any bugs and solidify acceptance. (In fact, the promise of a “trial run” can help you win agreement under Step 5 above.) When the trial period is up, review the results, respond to input, make any necessary revisions and shift into full plan implementation.

If you'd like to talk more about how to build consensus in your organization, please feel free to contact me any time at fiscallyfit@healthdirections.com .

Wishing you the best,

Jeffry A. Peters
President and CEO
Health Directions, LLC

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