Considerations for Paying Medical Staff Officers

Posted on
May 17, 2018

The medical staff typically makes the decision to pay or not to pay its officers. Historically, positions were voluntary or modest stipends were paid from medical staff dues.

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Every hospital has a medical staff that functions as an indispensable partner in quality oversight, credentialing, accreditation, and operations. The medical staff elects officers to represent its physicians. Payment for medical staff officers varies by facility and position. Although historically positions were funded by medical staff dues, a growing number of hospitals are paying, or splitting the cost of stipends with the medical staff, at least for Chief of Staff positions--an acknowledgement of the time commitment required. Such payments are subject to the same FMV requirements as other physician contracts, yet few benchmarks are available to document market rates.

The medical staff typically makes the decision to pay or not to pay its officers. Historically, positions were voluntary or modest stipends were paid from medical staff dues. However, many factors account for the trend toward higher payments and requests for the hospital to help fund the positions.

A major factor in higher payments is increased time demands of the positions. Joint Commission requirements for review of physician credentials and outcomes, technology and quality initiatives, peer review, dispute resolution, and board and committee responsibilities have all grown while the pool of physicians interested in committing significant time to non-billable duties has fallen.

Another factor is the growing divergence of hospital-based medicine from community/office-based medicine. The traditional role of the medical staff as a social structure and source of referrals and cross-consultations is transitioning as medical groups get larger, inpatients are managed by hospital-based specialists, and insurers or medical groups dictate referrals.

Lastly, economic factors, including lower reimbursements, larger group practices with productivity incentives, more part-time and employed physicians, and competing internal governance demands of a practice are likely reducing the pool of physicians interested in committing time without reasonable payment for their time. More physicians are reluctant to volunteer and run for office if it results in lower revenue and fewer patients, or if duties impinge on either clinical or after-hours activities.

When to pay for a leadership position

As with other physician contract payments, the first question is always, “Is it reasonable to pay for this position?” There are no hard and fast requirements for payment unless the facility’s Medical Staff Bylaws specify payment. However, if finding volunteers to run for office is a challenge, or if the duties of a position involve a significant time commitment that can reasonably be expected to impact a physician’s clinical practice, payment may be justified. Adopting a formal hospital policy that defines which positions are paid and the formula for payment that also is endorsed by the medical staff is advisable. Among MD Ranger subscribers, chiefs of staff are more frequently paid than other positions, hence it may not be necessary to pay for all medical staff officers, or extra documentation may be needed when payment is requested.

Sometimes, a specific initiative or issue, such as a medical staff merger, a major quality initiative, or Electronic Health Record implementation, may warrant a higher than normal payment. Hospital size and complexity also may impact the need for pay and amount of payment. Documentation of the particular circumstances, background, and demands of the position are essential to a strong compliance program.

For certain positions, the time commitment could result in the equivalent of very low or very high estimated hourly payment rates if a fixed stipend is paid. All payments to physicians that are made by health care facilities should comply with Internal Revenue Service, Stark and Anti-kickback rules. Therefore, documentation of the time commitment, commercial reasonableness and FMV of the payments is essential.