A regional health system (System) sought to enter into physician employment agreements (Agreements) with multiple qualified emergency medicine physicians (Providers) to deliver clinical coverage at system-operated facilities (Facilities). The System engaged VMG Health to review the proposed compensation models and establish a fair market value (FMV) compensation level for the Agreements.
Emergency Medicine Physician Compensation & Recruitment Challenge
The System wishes to move the Facilities away from an externally contracted staffing model to an all-employed provider staffing model. Moving the Facilities to an all-employed provider staffing model will require the Facilities to recruit and retain multiple Providers to the local market.
Because of the difficulty in recruiting and retaining new physicians to the local market, the System proposed a variable sign-on bonus structure, dependent on the number of physician FTEs successfully recruited to date.
As the System successfully recruited and retained additional Specialty physician FTEs to the Facilities, the variable sign-on bonus would decrease with the higher supply of Specialty physician FTEs at the Facilities. Additional Specialty physician FTEs would result in the burden of coverage decreasing for the new Providers, as they would have more support providing the Specialty coverage.
The System also proposed a critical staffing stipend to incentivize additional coverage during the transition, which would also decrease as additional providers are successfully recruited to the System. The System asked VMG Health to provide an FMV compensation level for the Agreements and scenario testing for the variable sign-on package and critical staffing rates.
Fair Market Value Analysis for Emergency Medicine Compensation
VMG Health reviewed the System’s proposed compensation model, coverage requirements provided by the physicians, and locum tenens quotes for the clinical coverage services. Given the unique staffing dynamics across the Facilities, VMG Health could supplement typical market-based approaches with locally available locum tenens data, the only staffing alternative available to the System.
VMG Health relied on the hourly, locum tenens onsite rates provided by the System and adjusted these rates based on a reasonable gross profit margin that would be expected to be incurred for providing the Specialty coverage services.
Lastly, because the Physicians would be considered employed under the Agreements, VMG Health normalized the hourly, locum tenens onsite rates to account for the benefits and malpractice insurance that Facilities would incur if the providers were independent contractors.
After a review of the System’s unique staffing situation, VMG Health provided an FMV opinion that would support the proposed Specialty compensation model, inclusive of the variable sign-on package and critical staffing stipends, which would both decrease as new Specialty physicians are successfully recruited to the Facilities.
Successfully Supporting an All-Employed Emergency Medicine Staffing Model
VMG Health determined the FMV compensation of the onsite clinical hourly rates to be stated in the Agreements. VMG Health then provided an FMV opinion that supported the implementation of an all-employed provider staffing model with a variable sign-on package and critical staffing stipends, which allowed the System to successfully fill the required staffing levels.
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