What Boards Should Know about Physician Compensation

By Daniel M. Grauman

Hospitals and health systems generally employ more physicians than executives. At the same time itʼs likely that the board of directors spends far more time on compensation issues in the C-suite than on physician compensation and its associated regulatory and business risks. As physician employment grows, itʼs time to give physician compensation the attention it deserves.

Even when healthcare organizations arenʼt paying physicians on a full-time basis, total payments for physician compensation arrangements may be considerable (see box, “Follow the Money”). These compensation arrangements expose the organization to significant risk, but they also present an opportunity Regulatory Risk While tax-exempt hospitals are not covered under the Sarbanes-Oxley Act, many of the practices required to align physician compensation with strategic goals.

This article reviews regulatory and business risks associated with payments to physicians by a hospital or health system, and lays out an approach to effectively manage those risks and align compensation with strategy.

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