How to design incentives at a non-profit academic medical center

Our hospital is a non-profit academic medical center. All the staff including medical doctors have fixed salaries. Clinical department or any unit of the department may apply for an annual bonus program where they can propose the objectives themselves. The top management of the whole university hospital picks maximum one bonus program for each of the 15 centers. Additionally, the employees of the whole center may gain another annual bonus if the performance and economic goals, which are same for all the 15 centers and determined by the top management of the university hospital, are reached by that center. Altogether the amount of these bonuses is at best 1.5% of the annual salary of an employee. For top management directors the variable component is 20% of the salary.

My questions are:

  • Does anyone of you have a fixed and annually variable component of salary for your physicians or whole personnel at your non-profit academic medical center? If yes, what is the ratio between these components? If no, what kind of ratio do you think would best serve to maximally improve the performance of academic medical center? Should the whole team including nurses and other personal receive the same variable component i.e. the same percentage of their annual salary as bonus? What percentage of the annual salary would be big enough to incite economically?
  • Do you have any other incentives at your hospital? If yes, what kind of incentives? If no, what kind of other incentives would you create to get the best professionals?
  • Would you in any circumstances pay bonus for an individual instead of the whole team? At which level would you award the team: ward, department, center or other?


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Participant comments on How to design incentives at a non-profit academic medical center

  1. In my previous employer, we have successfully implemented base+ RVU-based bonus program. At the beginning of the fiscal year, we looked at the previous year numbers and made 90% of that as base level. If you were above 15% more over base, you were eligible for bonus-about 10% of annual salary prorated and pain quarterly. However, we never discussed the system prior to implementation, neither had a feedback sessions after implenetation, so not sure how people responded or liked it.

  2. Our organization has implemented gainsharing programs for inpatient commercial and CMS BPCI (bundled payment) cases. The program incentivizes attending/operating physicians based upon quality and cost metrics. In order to qualify for an incentive, the physician needs to pass quality metrics first- regardless of how efficient the physician is on the cost side, they are ineligible for payouts without achieving quality standards. Assuming the physician passes quality, their cost efficiencies determine the payout. For our larger gainsharing program, we look at the standard deviation of the physician’s direct costs compared to national benchmarks in similar hospital types to measure efficiency. Benchmarks are grounded in same DRG, severity and patient age. The bundled payment program is similar, though cost comparisons are for a 90 day episode of care (rather than just the inpatient stay), and are tracked against a DRG only based benchmark that is based upon our organization’s historical performance. Each program has limitations/caps on what can be earned, based on the premise that we look to incentivize efficiency and not a reduction in care.

  3. In our organization we have only fixed and no variable component of staff salaries. We do not match individual performance with financial rewards. The only incentives are at the team, department or organizational level and the rewards are small (like financing an extra day out for the team).

    We stimulate innovation and cost reduction via specific innovation subsidies and teams, departments who safe money are allowed to use it for innovation.

  4. we have a fixed base salary and RVU based bonus program every month. Each individual gets their own bonus. It’s paid out every month.

  5. I am not sure there is perfect percentage to be paid out for achieving metrics. The biggest issue in my mind is does it resonate with the physician? You can have the best metric in the world, but if it means little to the physician or seems arbitrary, it will not achieve the goal you want to achieve.

  6. Is a financial incentive really necessary ? People working in a non-profit academic center are probably better motivated by having an excellent research environment. Good facilities, research support on IT, administration, regulations (IP), etc. Also the ability to hire an excellent staff is probably more important than getting a bonus. But maybe I’m naive, coming from outside of the US ……

  7. We use mostly fixed salaries, but with the option of around 2-4% extra pay for personal properties. There are no bonuses in any way related to productivity in the clinic or research.
    If I get rewarded with a bonus this month for doing my job, the next month I would want the same – and a little extra. THereby I change my focus from academics to production.
    In stead of bonuses, let people how contribute positively develop their skills. Support them with a little guidance…

  8. Dave

    from looking into different systems I think the best way is to have a fixed base salary and on top of this 30% on targets.
    First the basic should be on specific jobs an responsibilities.
    second, you can divide the targets for the bonus on the personal. departmental and strategic targets.

  9. In our academic hospital the variable component of compensation is only 1-2%.
    I don’t think this is right, many people feel why should do something extra to move organization up, if this is hardly recognized and renumerated.
    I would start with top 5% of leaders, which have abilities to make changes happened. They need to be part of the project team to implement relevant metrics for whole organization and ward/section as well. In any case I don’t recommend to set up individual goal but rather organizational / ward objectives. After the pilot test you can spread it further.
    In my experience bonus lower than 10% would have little effect on their daily work.

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