Medical Direction

5 Misconceptions about Medical Director Agreements


Medical directors play a key role in health care facilities. Their clinical knowledge ensures strong oversight and quality that is critical to accreditations, outcomes and success in the market. Roles and responsibilities, as well as the minimum and maximum expected and paid time should always be outlined contractually.

Despite the ubiquity of these arrangements, there are some common misconceptions about medical directorships. While it’s easy to assume that selecting the best physician for the job and having an agreement in place will keep your organization compliant, the devil is in the details.

MISCONCEPTION #1: As long as payment rates and hours are outlined in the contract, you don’t need a detailed job description.

The job description must explicitly define the duties and role of any medical director to meet compliance standards. Typical functions include developing clinical practice guidelines, overseeing program development, helping with accreditation surveys, budgeting, reporting to the hospital management and  training/supervising APPs, nurses, and other clinical providers, and  quality assurance. If you have a sense of the time commitment per month or per year for different elements of the job description, include those as well. Many systems develop a template for medical director agreements to simplify compliance, but each contract should be reviewed to ensure the description matches the requirements of the program.

MISCONCEPTION #2: It’s never OK to negotiate a rate over the 75th percentile for a Medical Directorship

Your organization should set a policy for the appropriate range of market rate benchmarks for FMV compliance. The 25th to 75th percentiles are often considered the appropriate range.  However, there are situations that warrant higher payment – exceptional credentials, unique program or market features, high time commitments due to program complexity or stage of development, etc. If you decide that a contract requires a rate above the 75th percentile for a medical directorship, be sure to document the reasons why it is necessary. For example, if the hourly rate is compliant and the job duties are extensive, a higher annual rate may be justified. We recommend having an “exceptions policy” in place that outlines the approval process and type of documentation needed for a rate outside of your organization’s definition of “Fair Market Value”.

MISCONCEPTION #3: As long as each medical directorship meets FMV criteria, it’s okay for a physician to have multiple medical directorships at the same time.

While there may be scenarios where this is true, negotiating multiple contracts with the same doctor is fraught with compliance risks. Although individual contracts may be compliant, if the cumulative payments or hours exceed a reasonable rate, you could have a problem.  When taken together with other directorships payments could be greater than the 90th percentile, or, in the context of the physician’s clinical practice, the total commitment may be more hours per year than full time equivalency.  This is called “stacking“ physician agreements and can occur when a physician has multiple directorships and a robust clinical practice. When a physician has multiple medical directorship agreements, the need for diligent time tracking and documentation becomes even more imperative.

MISCONCEPTION# 4: Once you have an executed contract with a rate that is FMV, you don’t need to worry about the directorship until renewal.

The fun doesn’t stop when the agreement is signed.  If anything, once you have a signed contract, your organization must do even more work to ensure that payment is made only for duties and time that fall within the scope of the agreement.  Diligent time tracking and reporting is critical.If a medical directorship is paid hourly, ensure that the hours worked are consistent with the signed contract. Accounts Payable should know the payment limits so that they do not pay for more hours than defined in the contract.

Lastly, don’t forget that a low or reasonable hourly rate could mask an unreasonable number of hours that drives up total annual payments.  Contract terms should include hourly rates, maximum hours and annual maximum payment limits.

MISCONCEPTION #5 : Time tracking for employed medical directors or faculty physicians at AMC’s doing administrative or directorship duties isn’t necessary.

Compensating employed physicians for clinical care is different from compensating them for administrative duties. It should be standard practice to keep time logs even for employed physicians who serve as medical directors. If your facility is a teaching hospital, hours for teaching and residency are critical to both benchmark and track. If you are not tracking hours for these types of roles, you are not meeting acknowledged compliance standards; in the event of an audit or investigation your organization may be at risk of non-compliance with Stark.

Hours and payment for administrative services should be defined  within a PSA (Professional Services Agreement)., Different specialties and services may be worth different rates even when the same physician is involved (e.g. a surgeon may be paid one rate for clinical care and another for serving as a committee chair for peer review).

Do you have questions about medical directorships?  Want us to help you myth bust common misconceptions about these types of arrangements? Email us at This email address is being protected from spambots. You need JavaScript enabled to view it. today to see a demo of how the MD Ranger platform could help streamline the FMV documentation process at your organization.

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When Should Hospitals Use Per Episode or Per Activation Payments?


If market data benchmarks for physician call coverage appear too high for your hospital, it may be appropriate to compensate physicians only when services are provided, i.e. on a per episode or per activation basis.  These rates can either be in lieu of the more common per diem rates paid to physicians providing coverage to a hospital’s emergency department or in some situations as a combination of per diem and per episode or activation.  Sometimes for small hospitals or specialties with a low volume of actual calls a periodic payment may be appropriate and less costly than a higher per diem rate. This Bullseye explains what these rates are and how they are typically used.

Per Activation Rates

An activation fee is a rate paid to an on-call physician only when they are required to respond to a call from the emergency department. The hospital continues to maintain a coverage schedule that requires availability of a specific physician (who “carries the beeper”) but if that physician does not get called, they receive no compensation for that day. Activation rates often only apply to instances when a physician must come to the hospital, though sometimes physicians are paid on a ‘per telephone consult’ as well. Often hospitals place a daily limit on the total number of activations that can occur during a single day.

Per Episode Payments

Per episode payments are made when an on-call physician sees a patient in the emergency department, or provides a procedure to a patient originating in the emergency department. A payment is made for each patient that is examined or treated by the on-call physician. Some per episode compensation arrangements cap the overall daily payment. This payment type is most often used for services that may result in a procedure like obstetrics, ENT, or GI, and for low volume specialties like ophthalmology or urology.

Combined Payment Types

Some hospitals pay per diem rate plus per activation or episode rates. In these situations, the per diem rate is generally set well below standard per diem market rates. This approach may reduce coverage costs in some hospitals with lower volume or in response to demands for pay increases. Some physicians may be more receptive to this compensation structure than a strictly per activation arrangement, since they receive some compensation for “carrying the beeper”, regardless of whether they respond to an on-call event during the day.

Effect on Fair Market Value

The FMV of per activation and per episode payments should take into account market rates for those payment types as well as the total annual cost of the coverage services.  In addition, it is useful to compare your institution’s annual coverage costs for a specialty to the total annual costs that would be incurred if more common per diem payments were made.  This algorithm can be applied to combination rates as well. For example, for ophthalmology coverage, the following comparison could be made, assuming the Median Per Diem Coverage Benchmarks from MD Ranger’s 2018 reports:

Median Per Diem Rate ($300) x 365 days = $109,500 annual cost for ED coverage

Option One: Proposed payment rate:  Median activation rate ($500) x Number of activations/year (45) = $22,500 annual cost

Option Two: Per Diem Rate ($150) x 365 days + $500 per activation (45) = $77,250

Both per episode and per activation rates are higher for surgical specialties than medical specialties, with the exception of procedure-based specialties such as GI and cardiology.

Fair market value, and the method and amount of payment for coverage services should take into consideration a number of factors that go into the ‘burden’ of call such as:

  • Frequency of activation (both by telephone and onsite)
  • Frequency of call duties (fewer physicians increases the burden)
  • Payer mix
  • Complexity of patient mix (trauma or uninsured cases may require more time)
  • Coverage requirements, such as response time, onsite hours, etc.

Profile of Hospital Coverage Payment Arrangements

Hospitals across the country are being asked to develop emergency coverage payment for a growing number of specialties. Using a combination of payment methods may present a middle ground with physicians that addresses the physicians' need to be recognized for their time and service and the hospital's need for coverage.


According to MD Ranger's database of more than 33,000 physician contracts, more than 70% of call coverage contracts pay physicians exclusively per diem rates.

Only 3% of coverage contracts use per episode and per activation payment structures, partly because these methods are most commonly used for less common paid coverage services. Nonetheless, using these payment methods may provide cost-savings and result in greater physician satisfaction in many situations.


MD Ranger collects and reports market rate benchmarks for both per episode and per activation emergency coverage payment rates that can be useful in finding compliant solutions.

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How Children's Hospitals Differ from General Acute Care Facilities

Physician contracting programs at Children's Hospitals contain a number of key differences that distinguish these specialty facilties from General Acute Care hospitals. Pediatric facilities understandably have a specific set of patients and, as a result, they have different physician contracting needs than most hospitals.

MD Ranger's physician contracting benchmarks collect data on position count at hospitals, broken down by type of physician contract. As the graph shows, Children's Hospitals contract for significantly more Medical Direction positions than a general acute care facility.


One major reason for this differential is the need for medical directors of pediatric service lines. Children's Hospitals are also frequently affiliated with Academic Medical Centers, and AMCs typically contract for more administrative and direction positions to help oversee education and research programs.

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Medical Director Contract Considerations

Selecting a strong medical director to oversee a service, specialty, or program can advance the clinical agenda or provide a foundation to build clinical service lines. Key tasks may include clinical oversight, policy development, staff training, quality review, regulatory compliance, committee participation, protocol development, budgeting, and program development.

Choosing the best physician for the job is important for both the hospital and the program. When reviewing candidates, consider the physician’s training, technical expertise, experience, and relationships with physicians and community members. The roles, responsibilities and time commitment should be spelled out in a contract, as required by federal regulations.

Defining the Duties of a Medical Directorship

The job’s specific requirements must be carefully considered at the start of the agreement and with subsequent renewals. The job description should help achieve the organization’s clinical agenda, and each duty should be described as specifically as possible.

For example, if the job description states “physician will support community outreach”, consider being more specific:

Physician works with leadership to represent hospital at community events supporting heart health, including events hosted jointly with the American Heart Association and the hospital’s “Heart Healthy” program. Physician will be paid for time at event and travel time to and from the event.

Such clarifications will help avoid misunderstandings and conflicts.

When and How Much to Pay

Commercial Reasonableness

Before compensating a physician, you must determine if payment for the service is “commercially reasonable”. MD Ranger reports the percent of subscribers paying for a position, as well as the distribution of the number of paid positions by specialty. If the percent paying is low, it is particularly important to document why payment is necessary.

It is common to have two or more medical director positions in some specialties, such as cardiology, whereas in others it is rare.

Payment Methods

Most medical directorships pay by the hour, with the minimum and maximum number of hours per week, month, or year outlined in the contract. Some administrative or medical staff leadership positions, particularly roles like chief of staff, pay monthly or annual stipends without a defined hourly rate. It is typical to have contract language that allows for periods of high and low activity to account for vacations, holidays, JAHCO surveys, etc.

If a medical directorship is paid hourly, ensure that all components of the contract are compliant (hours, hourly rate, annual pay) and that actual payments are consistent with the signed contract. A low or reasonable hourly rate could mask an unreasonable number of hours worked, resulting in exceptionally high annual payments. If the physician’s hours vary significantly from benchmarks, review the job duties and determine if the scope is greater or less than a typical hospital. It may be reasonable to require more hours for a new program, a program undergoing review, or a center of excellence with a large referral program, significant outpatient components, or a large medical staff. In addition, if a physician has exceptional credentials such as a national recruitment for a large regional program, higher payments may be justified. Documentation of exceptional differences like these is essential to maintaining a strong compliance program.

Fair Market Value (FMV) Considerations

Most FMV experts suggest that payment rates below the 75th percentile of market rates are generally compliant, however many organizations choose to pay closer to the median, especially if they are not in an area with high cost of living or they are not a large tertiary medical center. If you must pay a rate above the 75th percentile, be sure to document the reasons why it is necessary and the steps taken to negotiate a lower rate. You may also consider obtaining a formal FMV analysis and opinion. If the hourly rate is compliant and the job duties are extensive, a higher annual rate may be justified.

Physician Qualifications

Some but not all directorships require a physician of a particular specialty. While the director of the cardiac cath lab needs to be a cardiologist, the director of EHR implementation or the chief of staff could be a physician of any specialty.

Specialty may or may not influence payment. Although it may seem logical that an orthopedic surgeon should be paid more than a pediatrician serving in the same role, most market data do not support a pay differential unless the directorship or leadership position significantly reduces the physician’s practice commitment and clinical income. This is often referred to as “opportunity cost”, and it is only relevant in some situations. An independent valuation may be advisable if payment rates exceed standard benchmarks for the particular position.

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Considerations for Paying Medical Staff Officers

Every hospital has a medical staff that functions as an indispensable partner in quality oversight, credentialing, accreditation, and operations. The medical staff elects officers to represent its physicians. Payment for medical staff officers varies by facility and position. Although historically positions were funded by medical staff dues, a growing number of hospitals are paying, or splitting the cost of stipends with the medical staff, at least for Chief of Staff positions--an acknowledgement of the time commitment required. Such payments are subject to the same FMV requirements as other physician contracts, yet few benchmarks are available to document market rates.

The medical staff typically makes the decision to pay or not to pay its officers. Historically, positions were voluntary or modest stipends were paid from medical staff dues. However, many factors account for the trend toward higher payments and requests for the hospital to help fund the positions.

A major factor in higher payments is increased time demands of the positions. Joint Commission requirements for review of physician credentials and outcomes, technology and quality initiatives, peer review, dispute resolution, and board and committee responsibilities have all grown while the pool of physicians interested in committing significant time to non-billable duties has fallen.

Another factor is the growing divergence of hospital-based medicine from community/office-based medicine. The traditional role of the medical staff as a social structure and source of referrals and cross-consultations is transitioning as medical groups get larger, inpatients are managed by hospital-based specialists, and insurers or medical groups dictate referrals.

Lastly, economic factors, including lower reimbursements, larger group practices with productivity incentives, more part-time and employed physicians, and competing internal governance demands of a practice are likely reducing the pool of physicians interested in committing time without reasonable payment for their time. More physicians are reluctant to volunteer and run for office if it results in lower revenue and fewer patients, or if duties impinge on either clinical or after-hours activities.

When to pay for a leadership position

As with other physician contract payments, the first question is always, “Is it reasonable to pay for this position?” There are no hard and fast requirements for payment unless the facility’s Medical Staff Bylaws specify payment. However, if finding volunteers to run for office is a challenge, or if the duties of a position involve a significant time commitment that can reasonably be expected to impact a physician’s clinical practice, payment may be justified. Adopting a formal hospital policy that defines which positions are paid and the formula for payment that also is endorsed by the medical staff is advisable. Among MD Ranger subscribers, chiefs of staff are more frequently paid than other positions, hence it may not be necessary to pay for all medical staff officers, or extra documentation may be needed when payment is requested.

Sometimes, a specific initiative or issue, such as a medical staff merger, a major quality initiative, or Electronic Health Record implementation, may warrant a higher than normal payment. Hospital size and complexity also may impact the need for pay and amount of payment. Documentation of the particular circumstances, background, and demands of the position are essential to a strong compliance program.

For certain positions, the time commitment could result in the equivalent of very low or very high estimated hourly payment rates if a fixed stipend is paid. All payments to physicians that are made by health care facilities should comply with Internal Revenue Service, Stark and Anti-kickback rules. Therefore, documentation of the time commitment, commercial reasonableness and FMV of the payments is essential.

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When Do You Have Too Many Medical Directors?

Physician contracting is a complex process and it is challenging to engage physicians to assist in administrative and quality initiatives that benefit health care facilities. From properly leveraging market data to composing legal agreements, it is resource-intensive. A dimension that often gets overlooked is evaluating whether your organization has too many physician contracts. An annual or periodic review of all contracts against industry benchmarks can help identify risky situations or opportunities to save costs. It also helps to document commercial reasonableness of the positions you have in place.

How do hospitals end up with too many medical directors?

Hospitals don’t intend to have too many medical directors, but a lack of checks and balances can result in such a situation. Some examples of situations that could lead to too many medical directors:

  • Negotiating individual contracts without considering the organization’s broader goals.
  • Challenging physician relationships that lead to expectations for pay.
  • Not having a centralized physician contracting process.
  • Not requiring timesheets or having poor coordination with accounts payable.

How many is enough?

MD Ranger collects data on all of a subscriber’s physician contracts which allows us to produce a distribution of the number of paid administrative positions per hospital by service. Some services have a higher frequency of multiple positions than others, as illustrated by this sample from 81 administrative benchmarks reported by MD Ranger:

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A good compliance practice is also to review the total number of paid medical directorships and administrative positions at your organization. Larger and more complex organizations generally have more positions, and there may be times when more is justified, such as during an EHR implementation. However, if you are on the high end of the scale, you may want to review your list of positions more carefully.

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How much is too much?

Too many medical directors could put your organization at a compliance risk based on either paying too much or not meeting a commercial reasonableness test. Many organizations have a handful of contracts that are paid at or above the 90th percentile, due to the hours required or the credentials of the individual physician. However, if individual or aggregate payments are routinely high and/or there are a larger than average number of positions that is a compliance red flag. MD Ranger publishes total spending by contract type to provide organizations with some guidelines of reasonable payments. Based on MD Ranger’s 2017 Facility Totals Benchmarks, the total expenditure on medical direction and administration is:

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Ways to Avoid Having Too Physician Administrative Contracts

A few best practices to minimize the risk of paying too much for administrative positions:

Require and check timesheets

Be meticulous about collecting and reviewing physician timesheets. Take the time to cross-reference the duties outlined in the contract with the duties listed on the timesheet.

Centralize the physician contracting process

By keeping track of your physician contracts in a single location and having a team responsible for drafting, negotiating, documenting, and renewing these contracts, you lower the risk simply by knowing what’s going on. Think critically to ensure that duties are not being duplicated amongst physicians.

Conduct Periodic Audits

Annually or more frequently review all physician contracts for compliance with market rates and hours. MD Ranger provides reports and tools that allow subscribers to easily identify more risky contracts compared to benchmarks, review number of positions by service and compare total expenditures for a hospital or a system to other subscribers.

A Case Study

MD Ranger can be extremely helpful to organizations who might suspect they have a systemic compliance issue. One subscriber suspected it had too many medical directors. We showed them how to use our tools and benchmarks to compare their administrative positions with comparable organizations.

The organization found that they had 120 medical directors across the organization compared to comparable organizations which were closer to 70. That’s a lot of medical directors! The number alone does not make them non-compliant, but we advised them to further investigate and document the need for so many positions.

We strongly recommend that organizations perform this kind of analysis. Our whole hospital, service line specific and specialty specific benchmarks that can help with this. There are some services that by nature will have more than 2 or 3 medical directors – for example, cardiology of has directors for different program components. However, there are many other services where multiple positions are not typical, hence documentation of hours and rationale is important to comply with commercial reasonableness standards. We help our subscribers investigate situations like these so they can better mitigate compliance risks.

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Research/Data Management Paces Leadership and Administrative Roles for Most Hours Worked

Last time, we tracked which medical directors worked the most hours annually by using MD Ranger’s 2017 Physician Contract Benchmarks. Let’s take a look at agreements for physician leadership and administrative roles and examine which services reported the highest median hours worked per year.


This graph shows the top six leadership and administrative roles with the highest number of annual hours. They are Chief of Staff, Utilization Management, Information Technology/EHR, Residency/Teaching, Case/Care Management, and Research/Data Management. Comparing the number of hours to benchmarks from previous years, you can see that there have been increases for several physician administrative roles in 2017, such as Residency/Teaching, Case Management, and Research/Data Management. However, after two years of increases, Chief of Staff hours have decreased from 2016 to 2017.

The set of leadership and administrative positions with the most annual hours remained relatively stable from 2016 to 2017. Quality Initiatives saw its annual hours dip in 2017 and is the lone service to no longer appear on the chart.

With the notable exception of Chief of Staff, most administrative and leadership positions have seen either a stabilization or a slight increase in the number of hours worked annually. This drives the trend in slight growth in annual payments made for these physician leadership and non-director administrative positions.

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Emergency Medicine Medical Directors Top the Charts for Most Hours Worked

Previously, we have investigated key trends in call coverage arrangements using MD Ranger’s 2017 physician contracting benchmarks. Now, let’s look at medical directorship agreements and examine which services reported the highest median hours worked per year.


This graph shows the five medical directorships with the highest median hours reported per year. They are Emergency Medicine, Ambulatory Services, Pathology, Trauma Surgery, and Cardiology - Heart Center. Comparing to the benchmarks from the past four years, you can see where hours have increased or decreased in scope. As you can see, the most dramatic changes are in Emergency Medicine, especially over the past two years.

The list of medical directorship positions with the highest reported hours remained mostly the same as last year, when Emergency, Trauma Surgery, Pathology, and Cardiology-Heart Center all also featured. Ambulatory Services, the only new service in the top 5, replaced Pediatric Surgery from the 2016 list.

One major trend we see is a continuing spike in hours worked in medical directorships in Emergency Medicine, well beyond the other top 5 services by hours per year. This stands in sharp contrast to the rest of the top services where the trends are leveling off or even decreasing.

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Hospital Characteristics Impact Physician Compensation Rates

Since we published new benchmarks in April we’ve analyzed over 24,000 contracts in our database to uncover key insights. Though rates at the individual service level remain relatively stable year over year, overall physician costs paid by hospitals have skyrocketed in the last decade.

At the individual contract level, several factors consistently correlate with higher contract rates:

  • Trauma centers pay a 32% premium for call coverage contracts.
  • Larger hospitals, for every 100 bed increase in ADC, hospitals payments are 22% higher for call coverage and 15% higher for medical direction annual payments (hourly rates are no different).
  • Multi-campus arrangements, for both call coverage and medical direction, save money:
    • 33% less for call on a per campus basis
    • 18% less for direction on a per campus basis, with the difference related to higher hours not higher hourly rates
Physician Expenses per ADC by Beds

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What is the Best Payment Method for Non-Clinical Administrative Contracts?

Payment and hours of service benchmarks for medical directorships are available from several sources. However, in today’s health care environment, facilities need physicians for a number of reasons, and it can be difficult to convince a physician to give up time to sit on a committee, serve as a medical staff officer, train for CPO or EHR, help with peer review or participate in quality initiatives. Establishing a fair and compliant payment rate for a position that does not need a particular type of specialist can be a challenge!

What is the Best Payment Method for Non-Clinical Administrative Contracts?

Hourly payment rates may not be the best method to pay for one-time events or short-term assignments like training, meeting attendance, or task forces. Per meeting payments or monthly stipends may be easier to administer than keeping and submitting time records for some initiatives or training sessions. If the per meeting payment is reasonable, the need for a one-off time card may not be as crucial if minutes or other records of participation are kept.

Distribution of Payment Methods for Non-Directorship Positions

To learn more about methods for paying non-director administrative services, email our team at This email address is being protected from spambots. You need JavaScript enabled to view it..

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How Do Hours Differ for Leader and Non-Leader Roles?

Payment and hours of service benchmarks for medical directorships are available from several sources. However, in today’s health care environment, facilities need physicians for a number of reasons, and it can be difficult to convince a physician to give up time to sit on a committee, serve as a medical staff officer, train for CPO or EHR, help with peer review or participate in quality initiatives. Establishing a fair and compliant payment rate for a position that does not need a particular type of specialist can be a challenge!

How Do Hours Differ Between Leaders and Non-Leaders?

Median annual payments are higher for leaders (committee/initiative chairs and directors) than for non-leaders. For Case/Care/Utilization Management, the annual payments for chairs and directors are more than double the annual payment for non-chairs in Case/Care/Utilization Management. These differences reflect the time and effort required for managing or leading a process compared to members of a committee or task force, or one-time training compensation.

Annual Payment Ranges for Leaders and Non-Leaders

Are Payments Increasing Over Time?

Payments in 2015 are higher than either 2013 or 2014 across all quantiles.

Non-Clinical Administrative Annual Payment Rates

To learn more about paying leaders and non-leaders, email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Non-Directorship Administrative Roles Have Unique Payment Challenges

Payment and hours of service benchmarks for medical directorships are available from several sources. However, in today’s health care environment, facilities need physicians for a number of reasons, and it can be difficult to convince a physician to give up time to sit on a committee, serve as a medical staff officer, train for CPO or EHR, help with peer review or participate in quality initiatives. Establishing a fair and compliant payment rate for a position that does not need a particular type of specialist can be a challenge!

Be Wary of Opportunity Cost

In positions where specialty is not a requirement for the role, such as EHR implementation, quality initiatives, utilization review, or chief of staff, many valuation experts advise that opportunity cost should not be considered a factor in physician payment rates, and FMV for clinical services may differ from administrative services.

Federal Register comments on Stark III regulations state:

A fair market value hourly rate may be used to compensate physicians for both administrative and clinical work, provided that the rate paid for clinical work is fair market value for the clinical work performed and the rate paid for administrative work is fair market value for the administrative work performed. We note that the fair market value of administrative services may differ from the fair market value of clinical services.

Hours Vary

Many hospitals and health systems set a standard hourly rate for all physician administrative contracts, sometimes paired with a FMV opinion on that rate. This can be an effective policy, however, it does not negate the need to define and monitor the hours associated with each position since total payments must also be reasonable. Ensuring that the job description justifies the hours, and that time records are kept, collected, and reviewed is essential to a robust compliance process.

Hours among non-director positions tend to vary since the variety of assignments is broad. Meeting frequency, residency or teaching duties, nature and scope of quality initiatives or intensity of training for IT, POE or other training programs each vary by institution, subject and physician role, hence good recordkeeping is essential. Committee chairs and administrative/initiative leaders of non-clinical initiatives often require more hours than non-leaders as well.

The graph below shows the variation between types of non-clinical administrative positions:

Annual Hours of Service for Non-Clinical Administrative Positions

To learn more about paying for non-director administrative positions, email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

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MD Ranger’s 2015 Reports: How Many Physician Administrative Positions Do You Pay?

Before deciding to pay a physician for a service, it is important to determine if it commercially reasonable to pay for the position. One area to be careful of hidden overpayments is in paying too many medical directors.

Hospitals often sweeten the deal for physicians by offering them a medical directorship. However, they don’t always look at how many other physicians they have also given this same deal. For example, if your facility has nine cardiologists and is giving each one a medical directorship; they are probably not all commercially reasonable positions to pay.

Because MD Ranger collects comprehensive contract information from our subscribers, we are able to determine the percentage of subscribers who report paying for the service. For Obstetrics/Gynecology, 16% of our subscribers report paying for medical directors. Of those, the graph below shows how many positions of Ob/Gyn medical direction they pay.

If you have more questions about whether your organization is paying too many medical directors, reach out to us at This email address is being protected from spambots. You need JavaScript enabled to view it..

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MD Ranger's 2015 Reports: Most Time Intensive Medical Directorships

Medical Directorships vary in the number of hours they require to complete the required duties. The number of hours often depends on the specialty of the medical director. The specialties with the highest number of hours reported did not change between MD Ranger’s 2014 Benchmark Report and the 2015 Benchmark Reports. However, in most of the specialties, the number of hours decreased.

Across the top five most time intensive medical director specialties, they average just over 460 hours per year, or nearly 40 hours each month.

To find out more about the hours reported for medical directorships of other specialties, email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

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MD Ranger’s 2015 Reports: Annual Hours of Service for Medical Direction, Non-Director Administration, and Leadership Positions

MD Ranger collects information on the annual payments and hourly rates for medical direction, non-director administrative positions, and medical staff leadership positions. Tracking the number of hours a physician dedicates to administrative positions is not only a Stark Law best practice, it allows a hospital to see if they have hidden overpayments. In some cases, a medical directorship may have a completely reasonable hourly payment, but the physician may be working a large number of hours which results in an overall payment above fair market value.

How have the number of hours changed over MD Ranger’s last four years of reports? They have remains fairly stable especially at the 25th percentile and the median, as shown in the graph below:

The number of hours does vary by the type of service. Hospital-based services consistently demand more hours than other type of administrative services while leadership positions generally require fewer hours to perform duties.

Annual Hours of Service for Administrative Positions Graph

If you are interested in learning more about MD Ranger's number of hours benchmarks, email This email address is being protected from spambots. You need JavaScript enabled to view it..

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Aggregate Facility Medical Director Payments

While determining the fair market value of individual contacts is important, it is also a great idea to take a step back and look at the bigger picture.  By looking at your facility’s total physician expenditure or the expenditure by type of service (i.e. call coverage, medical direction, hospital-based services) and comparing to your peers can allow you to see whether you are in the same ballpark range.  These aggregate numbers can help highlight if you have too many medical directors or if you are consistently paying on the high end.

The graph below shows the percentiles for Total Annual Payments for Medical Direction.  It seems that hospitals, especially at the higher end, are paying less in aggregate for medical directors at their facilities than in 2013


If you want access to more of these total facility benchmarks, email This email address is being protected from spambots. You need JavaScript enabled to view it..

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Paying for More Physician Administrative Positions Than You Think?

Because MD Ranger collect holistic data from hospitals, we are able to report the number of paid administrative positions by service.  While many services within a hospital necessitate only one paid administrative position, sometimes the hospital structure or the specific service dictate a need for more than one paid position.  If you don’t have justification for having multiple paid administrative positions, it may not be commercially reasonable to pay.  This could be a compliance red flag.

In the graph below, we can see that 45% of MD Ranger subscriber facilities pay just one administrative role for pathology while 32% have two paid positions, 18% pay three positions, 3% pay four positions, and 2% of facilities pay five or more positions.


Where does your facility fall in this pie chart?

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MD Ranger’s 2014 Reports: The Most Time Intensive Medical Directorships

In October, we wrote about the Medical Administrative Roles with the Highest Median Hours Worked.  Hours worked are just as important as the amount paid in determining whether rates are fair market value.  It is no surprise that some medical directorships are more time intensive than others. In the graph below, you can see the top five most time intensive medical directorships for 2013 (blue) and 2014 (green).  These numbers are the median values from all hospitals.  The three services that appear in both 2013 and 2014 saw an increase or no change in the number of annual hours worked. The number of hours on the upper end of the spectrum seems to be increasing.  The number of hours required in order to make the top five in 2014 increased by 70 hours over the number of hours required to make the top five in 2013. We can see in the graph below that while three of the top five time intensive specialties remain the same from 2013 to 2014.


If you have questions or want access to more medical directorship and administrative position benchmarks, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

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MD Ranger’s 2014 Reports: Annual Hours for Administrative Positions

MD Ranger collects not only information on the hourly rate and annual payments for medical directorships, leadership, and administrative services but also the number of annual hours.  Knowing the annual hours a physician works is important because two directors who have the same annual compensation for their role may work vastly different hours.  If one physician works many more hours, it can lead to an annual payment rate which looks like it is compliant but, when the hourly rate is computed, the payment is in fact very high.


Annual hours at the 25th and 50th percentile have remained the same over the past three years of data.  At the 75th and 90th percentiles, there has been a decrease in the number of hours.  This may suggest a downward trend in the number of annual hours for medical directors, administrative, and leadership services. For more information or if you have questions, email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Physician Administrative Roles with the Highest Hours Reported


According to our database, trauma surgery medical directors and pathology medical directors spend the most hours working in administrative roles.  The above graph is based on median hours collected from over 300 facilities across the US.

Other physician administrative roles that command more hours are occupational health, teaching/research, heart center, and ambulatory services.


Too Many Medical Directors?

It’s easy to get caught up in the details of individual medical directorships.  As you determine how much you should pay each physician depending on the scope of the role and their specialty, it’s easy to miss the bigger picture. How much are you spending on your medical directors, in general, across your organization’s facilities?

For many MD Ranger subscribers, understanding where their facility falls on the spectrum is critical to their bottom line. As our industry becomes more sensitive to rising costs, physician costs will and should be scrutinized. Given that physician contracting costs can be up to 6% of a hospital’s operating expenses (salaried physicians not included), ignoring rising costs of physician administrative roles might cost your organization hundreds of thousands of dollars.

Benchmarking these types of costs helps organizations understand if they are doing better (or worse) than peers, as well as give insights into how to be more efficient. Here’s what we found our subscribing hospitals spending on medical directors in 2013:



Considering Opportunity Cost for Physician Compensation

When it comes to paying physicians for non-clinical work, it is (too) easy to make mistakes that could cost your organization and could be in violation of Stark and Anti-Kickback laws.

Should you pay highly-compensated specialty physicians for non-clinical positions more than you pay a PCP or a pediatrician?  While it could be argued that their time is “worth more”, it is also true that the administrative tasks you are paying them to do shouldn’t necessarily take their clinical salaries into account.  How should your organization respond?

Considering opportunity cost is helpful.  Opportunity cost assumes that there are other alternatives to the activity you are asking the physician to perform.  It’s easy to see that a neurosurgeon might not want to be a medical director if she could use her limited time to practice medicine–and get paid more for it!  Furthermore, because medical directorships, chiefs of staff, and other administrative positions often require that a certain specialty of physician be in the role, physicians of higher paying specialties have leverage.

So, what does the government say about this challenge?  Not surprisingly, the Office of the Inspector General (OIG) is vague.  While it doesn’t forbid compensating higher-paid physicians more in non-clinical roles, it does warn that convoluted compensation structures could mask kickback payments (from Advisory Opinion No. 07-10).

Ultimately, even if you do not base payments on opportunity cost you should at least consider the physician’s perspective.  Most always, physicians who have been asked to play an administrative role have considered how else they could be spending their time, not to mention, how much more they could get paid.  Depending on your market, this could be highly significant to establishing a fair rate…or it might not.

Experts at MD Ranger recommend that every organization develop policy from their overall goals and clinical service needs.  Consistency, data, and documentation should be the backbone of your contracting process.  Curious to learn more about medical directorship compensation?  Check out our webinar on September 19th at 10:30 am PDT.


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