December 5, 2003

Medicine faculty compensation plan increases clinical productivity

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Dr. Ethan Lee

Medicine faculty compensation plan increases clinical productivity

An innovative performance-based faculty compensation plan has helped the department of Medicine increase clinical productivity and research funding.

That is the conclusion of a report published recently in Academic Medicine. The lead author is Gregg T. Tarquinio, Ph.D., assistant professor and department vice-chairman for administration and finance.

“We wanted to design a faculty compensation plan that would help open up access to care for the community,” Tarquinio said. “With the department struggling financially at the time, we needed a plan that would not only get us to solvency but also facilitate the strategic goals of the department and the medical center.”

The report draws a basic distinction between traditional faculty compensation plans and newer performance-based plans as the difference between “paying for time spent versus work done.”

Clinical productivity per physician in the department’s clinically focused career track grew 40 percent faster during the first three years of the plan (2000-02) than in the previous three years.

Total department research grant funding per physician in the department’s main research career track grew 140 percent faster during the first three years of the plan than in the previous three years.

In fiscal years 1996 to 2001 the department’s NIH funding grew almost two-and-a-half times faster than the average growth rate among the 30 departments of medicine that had been the top NIH recipients in 1996. From 1996 to 2001, while the School of Medicine jumped from 24th to 19th in NIH funding, among departments of medicine Vanderbilt’s jumped from 26th to 12th. Today it’s 9th.

For its varied group of teachers, the School of Medicine recognizes five career tracks, and most of the department’s faculty fall into one of two tracks: clinician-educator or physician-scientist. The compensation plan is built chiefly around these two tracks. The plan defines the clinician-educator track as 80 percent clinical work and 20 percent academic achievement and the physician-scientist track as 80 percent research and 20 percent clinical work. Focus on career track is the essence of the plan.

“Management theorists and health care quality researchers agree that if you do a lot of something you’re likely to get better at it,” Tarquinio said. “Specialization leads to improvement.”

A patient’s ability to pay for services has no bearing on the department’s measurement of clinical productivity. “We have a community service mission here at Vanderbilt that must permeate the desire to pay faculty for work done,” Tarquinio said.

To track clinical productivity the department uses a work scale developed by the government to reimburse Medicare providers. The increments of the scale are called relative value units, or RVUs. The sicker the patient, the more exams and procedures performed, the greater the RVUs.

Scholarship, teaching and research activities are assigned uniform productivity values based on the faculty member’s career track. These assigned values are converted to RVUs, forming an overall measure of faculty productivity. The conversion is done with division-based salary and clinical productivity benchmarks. (For each division, a salary benchmark was originally derived from a survey of 16 peer institutions, and an RVU benchmark was found in clinical productivity data published by the Medical Group Management Association.)

• Since the clinician-educator track is defined as 20 percent academic achievement, these teachers are credited with 20 percent of the clinical RVU benchmark for physicians in their division.

• Since the physician-scientist track is defined as 80 percent research, these teachers are credited with 80 percent of the clinical RVU benchmark for physicians in their division.

• Faculty receive RVU credits for various administrative roles, such as fellowship program coordinator or division compliance expert, again based on the RVU benchmark and how much work they are expected to devote to a given role.

• Contract work originating outside the department, such as a nursing home directorship, is converted to RVUs based on fees received under the contract: dividing benchmark salary by benchmark RVUs provides an RVU value for each dollar received.

All work is thus stated in RVUs. When physicians in the clinical career track exceed a certain number of RVUs, they become eligible to receive quarterly productivity adjustments in salary. Each division’s dollar-RVU value (benchmark salary divided by benchmark clinical RVUs) determines the rate of salary adjustment for the clinician-educator. Adjustments are received when the dollar value of the clinician-educator’s total RVU output (clinical RVUs and credited RVUs) exceeds his or her base salary. Here are examples from the report. “An annual benchmark salary of $120,000 and an annual total RVU benchmark of 6,000 equates to a $/RVU of $20 [120,000/6,000]… If a clinician educator produced 250 RVUs over and above the number of RVUs required to cover his or her base salary during a quarter, a $5,000 QPA [quarterly productivity adjustment] was paid (250 RVUs x $20).”

The dollar-RVU value is irrelevant to the compensation of physician-scientists. These faculty members become eligible for research bonuses when their total RVUs (clinical RVUs and credited RVUs) reach 95 percent of their division clinical RVU benchmark. Bonuses are calculated as a percentage of base salary. Depending on its type, a given grant, award or gift may pay from two to six percentage points. Clinician-educators are also eligible for research bonuses once they exceed 100 percent of their division RVU benchmark.

When calculating salary adjustments, the dollar-RVU values can easily be adjusted across all divisions as warranted by changing market conditions and unexpected jumps in expenses or income.

A database and Web site were created to allow faculty to monitor their RVU output, salary adjustments and research bonuses. The site was introduced a year before implementing the plan, allowing faculty the get a feel for how they would fare. Numerous meetings were held in all divisions to explain the plan and answer questions from faculty.

By fiscal 2002, 80 percent of clinician-educators were receiving salary adjustments and 58 percent of physician-scientists were receiving research bonuses, and under the plan faculty in both tracks have experienced gross salary increases above past levels. In a faculty satisfaction survey, among those faculty who had experienced both the former and present plans and who indicated optimum understanding of the new plan, satisfaction with the plan was measured at 75 percent. For department faculty as a whole, satisfaction with the new plan averaged 56 percent, which is an increase over satisfaction with the former plan.

There was some concern at the start that the plan might tend to distract faculty from teaching, but routine periodic evaluation of faculty by students and house staff indicates the plan has had no ill affects.

Tarquinio’s advice for others who may be seeking to implement performance-based faculty compensation is to use career tracks to focus faculty effort and to use performance criteria that reflect institutional and departmental goals. Also, good communication is indispensable. “Our openness with faculty was absolutely key,” he said.

Tarquinio’s co-writers for the report include Daniel Byrne and Drs. Robert S. Dittus, Allen B. Kaiser, Eric G. Neilson and the Executive Committee of the department of Medicine.