Is Your Bonus Attainable or Just a Tease?

Leigh Page


November 17, 2016

In This Article

Bonuses Based on a Hospital's Expenses

A more draconian but rare approach is to base the bonus on collections minus the hospital's expenses for each particular physician. Under this arrangement, which isn't even measured in the 2016 Merritt Hawkins report, the doctor gets a bonus only if collections exceed expenses. Michael Sergeant, MD, a neurologist in the Chicago area, was subjected to this bonus calculation when he was employed at a local hospital, which he didn't wish to identify.

Dr Sergeant reports that during 3.5 years at the hospital, neither he nor almost all of the other employed physicians at the hospital got a bonus. According to the hospital's calculations, which he disputes, his expenses always exceeded his earnings by a whopping $100,000-$200,000 per year, he reports.

"The message was, 'We're really in the red with you,'" Dr Sergeant says, adding that it was impossible to win under this arrangement, for several reasons.

As a specialist, he was dependent on referrals from the hospital's network of primary care physicians, and those referrals had to be split among three neurologists—Dr Sergeant and two colleagues. Before coming to the hospital, they ran a practice together, and the deal was that the hospital had to hire all three. The hospital agreed to this, but there wasn't always enough work for them. Indeed, scarcity of referrals is a problem for any productivity-based bonus model.

When counting up Dr Sergeant's earnings, the hospital wasn't including referrals of patients for such services as MRI. Dr Sergeant says he did a lot of this, earning $5000 per scan for the hospital, but by not counting it, the hospital was putting him further into the hole. However, Andrew Knoll, MD, JD, an attorney in Syracuse, New York, who helps physicians review contracts, says it wouldn't have been possible for the hospital to include this income because it would have violated the Stark law, which prohibits paying for referrals.

Meanwhile, as an employee, Dr Sergeant had no control over his expenses, which the hospital was racking up against his earnings in the bonus formula.

"They counted everything as expenses," he says. "The rent for the office space, the lights, any staff associated with me."

Dr Sergeant says he and the two other neurologists hired an attorney to negotiate a better deal with the hospital, but it refused to meet with the attorney. Shortly afterward, Dr Sergeant resigned from the hospital and returned to private practice. The other two neurologists stayed.

"I won't say it's going well," he says of his private practice, "but at least I have my self-respect." He makes a living by taking work outside the area and making rounds at a nursing home.


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