Healthcare remuneration plans have changed over the years. Today, the trend in law and HR policies regarding remuneration is based on performance rather than competencies. Earlier, managers rewarded healthcare workers based on longevity and not on performance. Nowadays, employers in the healthcare industry are pursuing competency-based payment. However, some medical doctors prefer a minimum guaranteed salary based on their specialty. In this model, doctors know how much they earn thus it is considered as a straightforward remuneration model. Although this model is beneficial to physicians, it is a worry-free policy that offers doctors a sense of security. However, without the bonus incentive that is considered critical, it might discourage employee creativity. Lack of such incentives discourages entrepreneurship and also discourages minimum-effort work standards.
Large medical facilities offer employees benefit through employment agreement that provides numerous advantages over self-dependence on the private specialty. These agreements are in most cases immune to fluctuation in practice volume or payer mix (Kaye, Fox and Urman 140). The financial implications of such deals are immense. For instance, ST. Joseph health care has to keep money aside to guarantee doctors’ salaries irrespective of the business conditions. Guaranteed minimum wage at the 75th percentile means that the organization’s policies regarding physicians will remain inflexible over a period of five years. Before considering the feasibility of doctor’s compensation, management has to consider financial implications and the probability of reporting losses due to business uncertainty. Risk is inevitable regardless of the nature of the business an enterprise operates.
The contractual agreement with doctors necessitates the firm to guarantee workers a minimum salary that might be attractive to physicians since it offers job security. However, to an organization, such agreements are bidding and might reduce funds available for capital investments depending on the basis of practice and economics (Simone 81). Managers should accept such a deal after considering what they want and the maximum acceptable basic pay. Negotiation must be based on a ‘win-win’ solution to ensure the business remains flexible in the long run.
According to Hekman, the minimum guaranteed agreement has caused financial indigestion in major hospitals (136). In fact, according to a survey by the Medical Group Management Association, hospitals that offered minimum guaranteed salaries generated $206,000 in losses. These losses are a result of business fluctuation due to the nature of demand and government policies that are detrimental to private healthcare firms. In the global market today where risk is inevitable, it will not be possible for ST. Joseph health care absorbs all guaranteed physicians’ economic risks (Olson and Stanley 56). Many healthcare facilities in the United States believe they can be able to recruit, renew and motivate health care doctors. However, in practice, managing doctors’ remuneration policies require proper logistics and politics to realize financial profits. Hospital managers will need pluralism, transparency and risk evaluation skills to execute this model.
Competition determines the ability of a business to make profits. Considering the rising of large regional and multinational healthcare dominating these sectors that continue to grow means ST. Joseph’s revenue will decline. The minimum guaranteed salary model does not offer competitive compensation that making it difficult for the firm to retain and attract physicians. Moreover, the model will cost ST. Joseph real money in terms of lost revenues, increased legal fees and lost referral sources. This model can potentially reduce entrepreneurship and debt to the firm if business revenues are less than the actual expenditure. In short, the guaranteed minimum salary is increasingly becoming difficult to support due to decreasing reimbursements and higher operational costs.
In legal terms, signing such a deal will mean that ST. Joseph is legally responsible for the contract fulfillment. The firm can be sued in case of failure to abide by the rules laid down in the contract. The company cannot pay physicians below the minimum agreed-upon salary. Irrespective of the nature of services provided by a doctor, the company is bound by law to pay specified minimum wages (Johnson and Keegan 98). Regardless of the legal and business implication of this model, it is beneficial to both physicians and the ST Joseph business enterprise.
A guaranteed minimum salary agreement ensures physicians receive their pay as and when they fall due. Irrespective of the fact that this model has reduced benefits, it guarantees workers a minimum wage from their employers for five years. The best argument in favor of this policy is that it is easy to administer since doctors are paid in accordance with a regular payroll policy. Moreover, a minimum guaranteed salary agreement allows ST. Joseph managers have control over participating doctors since they must follow the company’s policies (Solomon 24). This allows managers to determine rules and regulations governing the code of conduct within the firm. This way the organization can increase individual productivity by encouraging desired behavior thus increasing productivity. A guaranteed salary agreement is a worry-free policy that motivates doctors since they are assured of a minimum wage irrespective of the nature of the business environment. Furthermore, the plan offers a competitive edge over other models by retaining and attracting new specialists. ST. Joseph Healthcare will gain a competitive advantage compared to other firms through increased customer satisfaction and referrals. Referrals ensure a business grows in terms of increased revenues and customer base. In fact, Johnson posits that guaranteed salary agreements encourage loyalty, commitment and support entrepreneurial culture within an organization thus reducing business risk (93). Depending on the nature of the contract, minimum guarantee agreements allow healthcare facilities to impose restrictive covenants. Many states in the United States support employers to impose restrictive covenants on their employees. This means doctors leaving the organization will not be able to operate within a specified period of time and geographical scope. Most states protect healthcare from employees soliciting former patients and referrals after leaving ST Joseph. Therefore, ST. Joseph’s management should consider signing the guaranteed minimum salary since it is beneficial to the business.
The compensation model has become more simplified than in the 1990s since they allow flexibility to both physicians and firms. The minimum guaranteed salary model is beneficial to doctors since is a worry-free policy that offers doctors a sense of security. However, without the bonus incentive that is considered critical, it might discourage creativity. Moreover, the minimum guaranteed salary model does not support competitive compensation that making it difficult for a firm to retain and attract new physicians. This model also exposes the company to potential business risk especially when reported revenue is less than total expenditure. Nonetheless, this model enhances the competitive advantage of an enterprise by restricting doctors from leaving the organization from soliciting former customers.
Works Cited
Hekman, Kenneth M. Physician compensation: models for aligning financial goals and incentives. Dubuque, Iowa: Kendall/Hunt Pub. Co, 2002.
Johnson, Bruce A., and Deborah W. Keegan. Physician compensation plans: state-of-the-art strategies. Englewood, CO: Medical Group Management Association, 2006.
Kaye, Alan D., Charles J. Fox., and Richard D. Urman. Operating room leadership and management. Cambridge, UK New York: Cambridge University Press, 2012.
Olson, Eugene E., and Kay Stanley. Physician recruitment and employment: a complete reference guide. Sudbury, Mass: Jones and Bartlett Publishers, 2007.
Simone, Kenneth G. Hospitalist recruitment and retention building a hospital medicine program. Hoboken, N.J: Wiley-Blackwell, 2010.
Solomon, Robert J. The physician manager’s handbook: essential business skills for succeeding in health care. Sudbury, Mass: Jones and Bartlett Publishers, 2008.