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Health Care Industry

Negotiating Compensation Packages

Physician Executive, July, 2001 by Sue Cejka

Bargaining to get the best offer

MOST PHYSICIAN executives will negotiate a compensation package at some point in their careers.

Understanding what is customary and the outer limits of what is possible will help you negotiate an attractive package. A few ground rules will help you strike the best long-term deal:

* Be candid about what your compensation is now and how it is computed.

Many candidates feel they are undervalued in their current positions. It's fair to point this out, but inflating your compensation ranks right up with placing false statements on your resume. It's one of the deadly sins of recruiting.

* Negotiate for the long term.

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You will work with these people for years (hopefully). If you attempt to squeeze every last penny from the deal you may jeopardize your long-term relationship. On the other hand, there is no reason to accept a position for less than your true value.

* To arrive at a win-win situation you may need to be creative.

Most candidates think of compensation as salary. In reality, it takes many forms. Look at all aspects of a package in order to understand your true economic benefit. If the prospective organization has rigid guidelines, you may need to help them allocate compensation into different buckets to meet your needs and theirs.

Factors at work

Compensation packages vary with three factors:

1. Type of position

2. Type of organization

3. Your own qualifications

Type of position

If you are just embarking on your career in medical management you will have much less flexibility than physician executives with three to five years of experience. This is true no matter how much clinical experience you bring. These early positions tend to have narrow compensation ranges. As you gain experience, the compensation not only grows but the range widens.

In general, compensation varies with position and location. The more desirable the location or the position, the lower the compensation. A tough job or a small candidate pool will lead to higher compensation.

An executive with well-developed turnaround skills will often command a higher salary than one with equally well-developed quality skills. That's because turnaround is a less desirable job and fewer candidates possess these skills.

Type of organization

Large organizations have less flexibility in compensation than small organizations. Large organizations often have salary bands, or ranges. These are linked to title and experience. Compensation is fixed within these bands. While cash compensation is less flexible, benefits are usually better in a large organization.

Your qualifications

This is probably the single most important factor for compensation. If you possess a unique area of expertise you will command a higher salary. A physician with extensive financial, operations or marketing experience will usually be able to negotiate a better compensation package.

Your clinical specialty will not matter. Whether your background is in cardiology or pediatrics, it will not impact your compensation. It's your skills as a medical executive that matter most.

Salary and bonuses

Cash is the most important part of the compensation package.

Standard cash compensation packages are usually comprised of a base salary and bonus. Generally, as you progress to more senior the positions you will have more compensation in the bonus. Bonus compensation is linked to performance. And you have the ability to increase compensation dramatically by meeting your goals.

If you are recruited into the position, you can usually expect an increase of 20 percent in total cash compensation. If you seek out the position--either because you're terminated or want a career change--you will probably make a lateral move.

The standard compensation package for medical director positions looks something like the chart above:

Aggressive organizations are asking physician leaders to risk significantly more. This is common in senior level positions. Generally, the higher you are in the organization, the higher the percentage of compensation that is a performance-based bonus. While the risk is higher, so is the upside.

Bonuses are based on the results for areas under your control. In the case of a CEO, performance of the entire organization will determine the bonus. Financial goals usually carry the most weight followed by quality and service.

Signing bonus

Organizations will often offer a signing bonus to make up for inadequacies in a compensation package. In an organization with tight salary ranges, the signing bonus may be used to fill out an offer when the range has no flexibility.

One-time signing bonuses are also used to adjust for cost of living or housing differentials. Candidates moving into expensive markets often can't afford housing. The signing bonus can get them extra cash to move into the market.

As an alternative to a signing bonus, an organization may guarantee a portion of the first year's bonus.

For example, if a candidate has a $40,000 bonus target, $20,000 might be guaranteed for one year. This guarantee is usually used when there is uncertainty in the market or other outside factors that may cause a candidate to fail to meet their goals.

Health Care Industry

Negotiating Compensation Packages

Physician Executive, July, 2001 by Sue Cejka

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