HLT 520 Week 3 Discussion 2

What do you see as the pros and cons of obtaining fair market value analyses on the compensation paid to physicians, especially when the market rates are benchmarked against national standards? How could this information be used in negotiating rates with physicians?

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The pros and cons of obtaining fair market value analyses on the compensation paid to physicians

Introduction

The practice of obtaining fair market value analyses on the compensation paid to physicians has been gaining momentum in recent years. Doctors may want to know if their salaries are above or below the industry average, how much they’re making compared to other specialties, and how much they should be charging for their services. Unfortunately, this method comes with its own set of challenges: there’s no standard methodology for determining fair market value, data can be difficult to obtain and there are some questions about how accurate it is at all.

Pro 1: Data to support market pricing.

The first pro is that data is available. This means that you can use the data to support compensation decisions and market pricing, respectively. As a result, it saves time and money for companies who want to use fair market values as their basis for making decisions about what their doctors should earn.

Pro 2: Data provides support for compensation decisions.

Pro 2: Data provides support for compensation decisions.

Data can help you understand the market and competitive landscape, as well as how to set an appropriate salary range. For example, if you have a fair market value analysis supporting a higher base salary than what is currently being paid by other employers with similar job responsibilities, it provides evidence that physicians are underpaid relative to their peers in comparison markets (i.e., private practice). This information may also be useful when negotiating base salaries with individual physicians during negotiations or considering how much total compensation will be paid in exchange for taking on new patients at the clinic where your physician works—and perhaps even whether or not those new patients are worth paying at all!

Con 1: Data may not be available.

One of the biggest downsides to obtaining compensation data is that it may not be available. This can happen for a number of reasons, including:

• Data may not be reliable because it was gathered from different sources and therefore isn’t consistent. For example, if you obtained your physician’s compensation data from one source but used a different one for the next year, your data would no longer be valid. It could also be inaccurate because the information was gathered using outdated methods or materials (e.g., surveys conducted on paper rather than electronically).

• Data may not be relevant since it only includes those physicians who have been practicing medicine at least ten years (or are older than 65). This means that younger doctors who have just started working full time have less chance of getting fair market value analyses than their older colleagues who have been in practice longer or retired earlier due to age restrictions placed upon them by state laws governing physician income figures.”

Con 2: Fair market value may be subjective.

Fair market value is not always objective.

Fair market value is often subjective, and it’s based on data that are inherently flawed. For example, the average physician salary in your town might be different from the average in another city or state. If that were the case, fair market value analysis could be problematic because it would only be comparing apples to oranges!

Con 3: Variations in data.

One of the most common sources of variation in data is the way it was collected. Some compensation data comes from an anonymous survey, while other compensation information may come directly from provider-specific databases. For example, some states collect their physician pay information using a survey that asks providers to self-report what they earn; others collect salary information by checking medical school transcripts against licensing records or billing statements.

Another source of variability is geographic location: physicians can be located anywhere in the United States (and even worldwide), but many factors affect how much someone makes—including where they practice medicine and which health system employs them. The differences between these two types of analyses are important because not all doctors have equal bargaining power when negotiating with hospitals about their paychecks.”

Con 4: Reliance on industry data can have its shortcomings.

In the previous chapter, you learned that there are several different types of compensation data sources. Some sources are better than others, but even industry-specific data can have its shortcomings. For example, if you’re trying to determine whether a physician’s market value is fair market value, it may be worth considering how the compensation structure in your own organization compares with what’s going on in other similar organizations. As an example: If your organization has a high-cost reimbursement model and pays more than fair market value for some services performed by physicians, then this may give you a reason for concern about whether or not your compensation structures are appropriate—and thus whether or not they’re being paid according to their true worth.

Outcome and recommendations.

Fair market value is a useful tool for determining compensation. However, the fair market value analysis should not be used as the only tool in determining physician compensation. In some cases, it may not be available and/or appropriate. For example:

• The data presented in the fair market value analysis are based on assumptions about what other hospitals pay their physicians or other inputs that may not reflect local market conditions (such as salary increases). This can lead to inaccurate results when compared with actual data from other sources such as surveys or pay surveys of practicing physicians conducted by organizations like American Medical Association (AMA) which provide more accurate information on physician salaries than survey responses alone.

Takeaway:

The takeaway is that fair market value analyses can be used to support compensation decisions. However, there are many factors to consider when doing so, such as data availability and the reliability of industry data.

Conclusion

The good news is that you can use a fair market value analysis to understand how physicians are compensated across their career. The bad news is that there may be some inherent limitations in the data available. This means that you should use caution when interpreting the results of a fair market value analysis, as there are always factors outside of those discussed here that could impact your conclusions about the compensation physicians receive for their services.

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