Dive Brief:
- Mercy Health has adopted a new compensation model for physicians, and some doctors are unwilling to sign the new contracts. A Mercy executive said most physicians have signed, but did not disclose whether the new model means cuts to salary or any other form of compensation.
- The health system said its new pay structure is an effort to standardize compensation for all 2,100 Mercy-employed physicians across its four-state operation. One component is a "relative value unit" measurement compensating physicians based on productivity and type of work; in-hospital work would generate more RVUs than seeing patients in an outpatient setting.
- Mercy's system, which runs 32 hospitals, including three in the St. Louis area, has been facing rising costs in recent years. That led to a 30% decrease in Mercy's operating income for the year ended June 30, 2013, compared with the previous year. In fiscal 2013, its total revenue climbed by 6.5% to $4.4 billion, but its total operating expenses also grew by 7.5% to $4.3 billion—and salaries and benefits, the biggest single source of expenses, increased by 8.7%.
Dive Insight:
"In this challenging environment we felt a need to look at the compensation model," Donn Sorensen, a regional president at Mercy, told the St. Louis Post-Dispatch. Yet some doctors asserted that the new contracts are too restrictive or that pay is based on the quantity of work performed. "We needed more flexibility than the new contract allowed," Dr. Allen Soffer, a cardiologist employed by Mercy who didn't sign the new contract, told the newspaper.
Mercy began revamping the compensation model five years ago, with 100-plus Mercy physicians working two years to develop the framework. Soffer, the cardiologist, cited new restrictive covenants added to the model: If his group had signed the new contract and later decided to leave Mercy’s employment, there would have been constraints around hospital privileges at Mercy and certain patient contact.
A healthcare consultant said health systems, many of which have varying compensation across their operating units, are moving toward standardized pay. RVUs, while not new to the healthcare industry, are an easy way of doing that, he said, and many systems also are adding a quality incentive metric.