Medical directors working in nonhospital-owned group practices receive higher compensation than their counterparts working in hospital-owned group practices, according to a recent study conducted by the Medical Group Management Association. "Medical Directorship/On Call Compensation Survey: 2009 Report Based on 2008 Data" reveals that nonsurgical specialists in nonhospital-owned practices received $27,400 more annually than those who work in hospital-owned practices, among other pay discrepancies.
Vast pay discrepancies between medical directors may be in part due to the role's shady history in hospitals. In the past, medical directors received generous salaries yet had vague job descriptions. "That's a big Stark no-no," says William Cors, MD, CMSL, president of medical staff services at The Greeley Company, a division of HCPro, Inc. in Marblehead, MA. Regulators cracked down on such arrangements, which often disguised a hospital's efforts to secure the allegiance of a physician or group of physicians, he explains.
Often, medical directorships were given to senior physician who were well liked, and their primary responsibilities were to smooth over medical staff issues and deal with disruptive physicians, adds Donald Thomas, CEO and CMO of Mentat Systems Inc., a healthcare consulting and direct management firm in St Petersburg Beach, FL. "[Hospitals] would pay them an out-to-pasture salary and didn't ask much of them."
Most hospitals have learned their lesson (let's hope) and are careful not to pay medical directors above and beyond fair market value, but the role of the medical director is still hazy in the hospital setting—hence the continued pay discrepancies. Nonhospital-owned physician groups have given medical directors executive-level responsibilities from the get-go, says Thomas, which means they get paid more because they do more.
Despite the medical director's historically unclear role in hospitals, Cors argues that properly designed medical directorships can serve as the backbone of an effective medical staff. "As more docs have less to do with the organized medical staff, quite frankly, someone has to do the work. One option is to have medical directors." However, for this model to work without tripping the Stark alarms and tarnishing a hospital's reputation, the hospital needs to define the medical director's responsibilities, create systems for assessing his or her performance, pay fair market value, and establish accountability (you know, like any other job).
"If hospitals were to require that the [medical director] be skilled in executive duties and hold their weight on the executive platform, they would get an ROI that far exceeds the amount they spend to pay them," says Thomas. He adds that the definition of a medical director should be no less clear than the role of a CIO, CEO, or COO and that the role should carry real and definable responsibilities. Those responsibilities should include the ability to read a basic balance sheet, create a budget, manage personnel issues, and "…all the stuff needed to manage an operating unit."