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In some areas, benefits are becoming richer; in others, they’re stagnating or declining
By Bonnie Darves
Many young physicians who are evaluating compensation packages — or if they’re fortunate, comparing two attractive offers — focus primarily on the cash salary component and how competitive that number is. That’s an important consideration, of course, but looking at salary outside the context of the entire compensation package is short-sighted. Benefits, those humdrum components of the picture, are much more important from a financial perspective than some physicians might realize, experts say, in both the short term and the long term.
“To compare two compensation packages, you have to really look at the details of the benefits and the monetary value of the benefits,” said Mary Heymans, managing director and senior advisor for physician services at Integrated Healthcare Strategies in Minneapolis, which advises health care organizations and physician groups on physician compensation plans. “One plan might have a cash component that’s $10,000 higher, but if the other plan has much richer benefits, the physician might lose as much as $35,000 by taking the higher-salary position.”
As example of the potential difference, Ms. Heymans notes, is in employers’ 401(k) retirement plan offerings. If one organization offers a 5% employer-paid match for plan contributions and the other has no matching provision, the difference over even a 10-year period could be substantial. Likewise, if one organization picks up the tab for 90% of health care premiums and covers dependents, and another organization pays only 80% and requires a higher cost-sharing expense for family members’ coverage, the difference might significantly affect the physician’s annual finances.
Full employer-paid health insurance coverage, as in 100% of premiums and no cost-sharing, is pretty much gone, as is the case in most industry sectors today because of the rising expense. The data from SullivanCotter & Associates, a national health care workforce consulting firm, illustrates the new reality. The firm’s 2018 compensation survey found that typical health coverage cost sharing is now an 80%/20% employer/employee split, and a 70/30 split for dependent coverage.
“From a design perspective, physicians are usually eligible for the same basic health coverage, dental coverage, and qualified retirement plans as other employees,” said Mark Rumans, MD, chief medical officer and a managing principal at SullivanCotter. “Most organizations offer several different coverage options, from a PPO to an HMO or a high-deductible plan.”
On a countering note, health care employers are increasingly incorporating wellness programs that might qualify the physician — or any employee — for a discount on premiums. “Approximately 80% of physician employers offer wellness programs now,” Ms. Heymans said, “and 75% of those will reduce your premium if you participate in the program.”
Benefits’ dollar value rising
The thing to keep in mind is that the value of employer-paid benefits is a big-ticket item that easily tops $30,000 annually and might even be double that amount. Benefits’ value is likely to be the equivalent of between 10% and 20% of total cash compensation, depending on the physician specialty. Data from the American Medical Group Association’s 2018 Medical Group Compensation and Productivity Survey found that employer-sponsored benefits’ value commonly ranges from 12% to 18% of cash compensation.
“Specialties with higher cash compensation usually have a lower benefits expense as a percentage of compensation,” said Wayne Hartley, MHA, chief operating Officer of AMGA Consulting. That means that the percentage is less meaningful across specialties than within them, because benefits will account for a higher percentage of a pediatrician’s salary than a neurosurgeon’s.
Ms. Heymans cites, as an example, a typical primary care physician compensation range. Her company’s 2017 Integrated Healthcare Strategies/Arthur J. Gallagher & Co. National Physician Survey Report found that median benefit expenditures for a physician earning $250,000 is 18.92%, which equates to $47,300. “This is the amount the employer pays on the physician’s behalf,” she said. For comparison purposes, the benefits component typically includes medical, dental, and vision coverage, life insurance, short-term and long-term disability coverage, a retirement plan, and payroll taxes including Social Security and Medicare.
Jennifer Moody, an associate principal with the ECG Management Consultants in Dallas, reports that her firm has seen a continuing increase in the dollar value of physician benefits packages in recent years. The average in 2015, per ECG research, was $47,780; last year, it was $50,626. “We’re seeing a lot of benefits going from ‘nice to have’ to ‘must have,’” she said, citing the example of more employers offering and subsidizing both short- and long-term disability, including private groups. “Those groups have had to step up their benefits to compete in this market.”
What’s up, what’s down, and what’s changed?
From a big-picture perspective, physicians considering hospital or health system employment can expect comprehensive benefits coverage across the board, from health and disability insurance to retirement benefits, paid vacation, and payroll taxes. Life insurance is frequently offered as a benefit, and like health insurance, its value varies. A competitive life insurance benefit would be at least as much as but ideally two times the physician’s salary (or provide the ability to buy up to that amount), in Ms. Heymans’ view. “I’ve seen some packages where employers are offering only $50,000, and that’s definitely too low,” she said.
On the perks side, sign-on bonuses and education-loan repayment remain common and can be generous, especially in hard-to-recruit-to locations. Both tend to have serious strings attached. The bonus might be repayable if the physician leaves employment before a specified time; likewise for the education-loan repayment. “Loan forgiveness is more common in very rural markets than in urban ones,” Mr. Hartley, said noting that it “usually includes a ‘claw-back’ or pay-back period of several years of service — typically three to five years.”
The recent Merritt Hawkins survey of physician incentives found that loan forgiveness offerings ranged from $10,000 to a high of $260,000 for physicians, with a three-year payout term most common (72%) and one-year payout almost unheard of (5%).
Angie Caldwell, a principal with the health care consulting and accounting firm PYA in Tampa, Florida, advised job-searching physicians to expect that a signing bonus will be predicated on the contract term or a specified period, typically three to five years, and that the money will likely have to be paid back proportionally if the physician leaves early. “That bonus is essentially ‘earned’ through the contract,” she said, “so it’s important to look at the payback terms.” For example, if a physician receives a $30,000, three-year signing bonus and leaves at the end of two years, she or he might have to repay the employer $10,000.
Overall, Mr. Hartley observed, there is continued movement toward using benefits as a retention tool. For example, retirement or pension options might include five-year or longer vesting periods, he said. “Many organizations have continued to add wellness benefits such as gym memberships,” he added.
Paid CME and relocation-expense allocation remain prevalent, too, but both are generally flat — with CME topping out in the $4,000-annually range and relocation increasingly subject to a cap of around $10,000 in many organizations. It’s worth noting that relocation reimbursement is now taxable to the physician, regardless of the amount. In evaluating CME benefits, physicians should ask whether the benefit includes associated paid time off and travel expenses.
In terms of new or relatively new benefits, many physician employers now offer Section 125 flexible-spending plans for managing health and childcare expenses through payroll deductions. There’s also a trend toward offering long-term disability coverage at reduced group rates if it’s not fully employer paid — rare these days, several sources said.
The AMGA survey data found that typical long-term disability protection covers 60% to 66% of the physician’s salary, Dr. Rumans noted, and that only 28% of organizations offer full salary continuation.
PTO: More generous but less flexible
One area where things are shifting is paid time off, or PTO. “PTO has become much more clearly defined in recent years,” Ms. Caldwell said. Organizations today are stating the exact number of permitted days off (four to six weeks annually is the common range now), defining what constitutes paid vs. unpaid leave, and being firm on what happens with accrued leave that isn’t taken.
Things used to be more negotiable in the PTO area, but that’s no longer the case with most large physician employers, Ms. Caldwell observed. “Fewer employers are offering PTO buyout anymore,” she said, referring to the option of converting unused PTO days to cash. She added that the current generation of millennial physicians also tend to want to use their PTO, not bank it.
“It’s more common to see ‘use it or lost it’ PTO systems now,” Ms. Heymans said.
Several sources cautioned that rich PTO benefits are less common in independent physician groups than in hospital- or health system-employment models. Mr. Hartley noted that AMGA has seen some movement away from PTO or vacation pay for physicians who work in production-based compensation plans.
Another area where there’s potentially wide variation among employers or groups is physician retirement plans. Although most organizations that employ physicians offer some defined-contribution (employee funded through deferrals) retirement plan – 76%, according to SullivanCotter survey data – employer matching might be either rich or nonexistent, depending on the organization. Last year, 22% of organizations SullivanCotter surveyed provided an employer-funded nonqualified benefit of between 3% and 7% of salary.
Physicians who work in government-employed positions for county, state, or national organizations will have access to potentially richer retirement benefits than their private-sector counterparts, possibly including a defined-benefit plan, which is effectively a pension plan. However, physicians in academic centers generally earn lower salaries – sometimes far lower – than those working for hospitals, health systems, or large physician groups.
At the outside, most financially attractive end of the retirement-plan spectrum, Mr. Hartley pointed out, are employer-sponsored deferred-compensation options or supplemental retirement benefits, designed to help earners reduce their tax burden. “Those are still available in some organizations and can be very valuable over the long run,” he said. Ken Sammut, vice president of recruiting at Cejka Search, a national firm, noted that such options are far more common in private groups than in health systems.
Comparing packages? Be thorough, and ask questions
Young physicians who are evaluating and ultimately comparing practice opportunities’ compensation packages tend to be too focused on the cash component and too casual about the benefits, all sources agreed. That’s inadvisable for two reasons. First, the total value and availability of benefits might vary significantly from one employer organization to another. In addition, the details and minutiae matter, and can make a big difference in areas such as health coverage and retirement plans.
Although few prospective employers provide complete financial details on benefits unless they’re prepared to make an offer, organizations should be willing to provide a comprehensive listing of all benefits, according to Ms. Moody. “If they’re not, that’s a potential red flag,” she said.
Mr. Sammut advises physicians to be somewhat assertive, ideally toward the end of a successful onsite interview, about obtaining an opportunity to review benefits. “A good way to handle this is to say, ‘should things go well, is there someone who can walk me through the benefits that you offer?’” he said. He cautioned that the first site visit is not the time to try to negotiate benefits.
Following are other issues physicians should keep in mind when they review or compare benefits in the context of an employment offer:
Request a pro forma document that details the benefits’ monetary value. This document, Ms. Moody explains, should provide full details on the value of the individual benefits and any out-of-pocket costs that physicians will or might have to absorb. “If the physician is expected to assume high costs for health insurance or other benefits, that usually means the organization isn’t competitive,” she said.
Understand how much employers would pay on your behalf. Even if an organization offers a wide array of benefits, it’s important to look at the employer’s outlay for those benefits. That amount might vary considerably from one organization to another, Ms. Heymans said.
Keep employers’ constraints and economic considerations in mind. In a highly competitive market, physicians might be tempted to request benefits adjustments or more perks, but that might not be feasible. For one, employers might be prohibited legally from offering anything deemed above fair market value. Also, employers don’t want to risk political fallout from an arrangement that smacks of unequal treatment or favoritism.
Mr. Sammut urges young physicians to keep in mind that benefits’ total value and, to some extent, composition, tend to be very regionally based and driven by market factors. In the Northeast, where large numbers of physicians train and many want to remain, benefits packages, like cash compensation, are generally less rich than in rural areas, for example, or the Southeast. The same goes for incentives. A signing bonus of $10,000 to $20,000 is a common range, but he has seen bonuses as high as $50,000 in recruitment-challenged areas.
Finally, Mr. Hartley reminds physicians that groups, hospitals, and health systems operate in a somewhat volatile revenue and reimbursement environment, and they don’t necessarily have the “deep pockets” that some physicians might think they have. “There is cost pressure everywhere. Employers attempt to be competitive for their local and national market, but they have limits on what they can offer physicians,” he said.