Too Many Medical Directors?

It’s easy to get caught up in the details of individual medical directorships.  As you determine how much you should pay each physician depending on the scope of the role and their specialty, it’s easy to miss the bigger picture. How much are you spending on your medical directors, in general, across your organization’s facilities?

For many MD Ranger subscribers, understanding where their facility falls on the spectrum is critical to their bottom line. As our industry becomes more sensitive to rising costs, physician costs will and should be scrutinized. Given that physician contracting costs can be up to 6% of a hospital’s operating expenses (salaried physicians not included), ignoring rising costs of physician administrative roles might cost your organization hundreds of thousands of dollars.

Benchmarking these types of costs helps organizations understand if they are doing better (or worse) than peers, as well as give insights into how to be more efficient. Here’s what we found our subscribing hospitals spending on medical directors in 2013:



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Physicians are Paid a Premium at Trauma Centers

If you’re a trauma center executive, plan on paying contracted physicians more than your non-trauma peers.

According to MD Ranger data, physician contracts at trauma centers are on average at a 23% premium for services.

Why is this the case?  Trauma center physician contract values are higher in both coverage and directorship agreements because of both frequency of coverage needed, as well as the severity of cases received.  Oftentimes, trauma centers have poor payer mix, which impacts physician contracting payments.

The top five services that are paid significantly more at trauma centers are as follows, where the differential is in orange:

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The amount of medical directors is significantly different, too.  On average, there are 65% more medical directorships and administrative positions at Trauma Centers compared to non-Trauma facilities.


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Considering Opportunity Cost for Physician Compensation

When it comes to paying physicians for non-clinical work, it is (too) easy to make mistakes that could cost your organization and could be in violation of Stark and Anti-Kickback laws.

Should you pay highly-compensated specialty physicians for non-clinical positions more than you pay a PCP or a pediatrician?  While it could be argued that their time is “worth more”, it is also true that the administrative tasks you are paying them to do shouldn’t necessarily take their clinical salaries into account.  How should your organization respond?

Considering opportunity cost is helpful.  Opportunity cost assumes that there are other alternatives to the activity you are asking the physician to perform.  It’s easy to see that a neurosurgeon might not want to be a medical director if she could use her limited time to practice medicine–and get paid more for it!  Furthermore, because medical directorships, chiefs of staff, and other administrative positions often require that a certain specialty of physician be in the role, physicians of higher paying specialties have leverage.

So, what does the government say about this challenge?  Not surprisingly, the Office of the Inspector General (OIG) is vague.  While it doesn’t forbid compensating higher-paid physicians more in non-clinical roles, it does warn that convoluted compensation structures could mask kickback payments (from Advisory Opinion No. 07-10).

Ultimately, even if you do not base payments on opportunity cost you should at least consider the physician’s perspective.  Most always, physicians who have been asked to play an administrative role have considered how else they could be spending their time, not to mention, how much more they could get paid.  Depending on your market, this could be highly significant to establishing a fair rate…or it might not.

Experts at MD Ranger recommend that every organization develop policy from their overall goals and clinical service needs.  Consistency, data, and documentation should be the backbone of your contracting process.  Curious to learn more about medical directorship compensation?  Check out our webinar on September 19th at 10:30 am PDT.


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Welcome to the MD Ranger blog

Thank you for visiting the MD Ranger blog. This is a forum for tips and tricks on:

  • Supplying and updating data with the MD Ranger Survey tool
  • Learning more about your spending with the Analytics tool
  • Making the most of MD Ranger Benchmark Reports in negotiation and compliance assurance

Our aim is to continually add content to this site to make this a valuable resource for MD Ranger members. Remember: it’s time to update your contract data! Thank you for visiting.

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