Earlier in the year, MedCenterToday received a call from an experienced faculty physician who was offered a new position at an up-and-coming academic institution in a neighboring state. After brief conversation about the academic stature of the courting institution and possibilities for clinical practice expansion, the ultimate question became "what is the correct compensation for a general Ophthalmologist like me". As expected, this is not an unusual question - physician faculty interest is first in patient care and research which leads to Medline know-how but little knowledge of compensation and productivity resources.

Let's first distinguish between total compensation and base salary. A strict definition of base salary is money guaranteed by the School of Medicine or related Institution within the Med Center and is paid to you monthly. Compensation is a broader and more ambiguous term because it means different things to different people. However, a working definition of compensation can be considered "salary plus all indirect and quantifiable amounts of resources that accrue to, and are related to the efforts of the faculty member". This will include bonuses, incentives and all non-guaranteed money paid to you and is reportable income to the internal revenue service. Rather than try to figure out what might be added to base salary and calculate a total compensation number, it is helpful to use your actual or expected total taxable income and compare it to compensation tables which are designed to capture base salary, bonus and incentive components of income.

There are many sources of compensation survey data available and they include the American Association of Medical Colleges (AAMC) Report on Medical School Faculty Salaries and the American Medical Group Association Compensation and Productivity Survey compiled with RSM McGladrey, Inc. One of the easiest data sources to use is the Medical Group Management Association (MGMA) Academic Practice Compensation and Production Survey. The benefit of this particular survey is its comprehensiveness - including academic data, selected private practice data, chief and chair data, faculty rank, and regional data. Not only does the MGMA survey provide comprehensive data for a specific type of faculty member, it also provides data such as visits, charges, collections and relative value units (RVU) generated. For this discussion, we will rely on the MGMA 2005 Academic Practice Compensation and Production Survey Report.

First, determine the type of data which is most closely related to the offer being made to you. This means that if it is a flat salary and the offer is being made based on rank such as professor, look at the rank tables in the MGMA 2005 Academic Practice Compensation and Production Survey Report. If the host Institution is offering a position based on productivity, look at the tables in the Survey that identify charges, collections, RVU production and get several ranges.

In order to use the correct slice of data within the various tables, you will need to have a pretty good idea of what your current charges, collections, and Work RVU production is for your practice. The best of these data points are the Work RVUs you generate on an annual basis. There is a difference between Work RVUs and Total RVUs. The difference is that Total RVUs are an aggregation of three components: an office overhead component that is adjusted for regional costs, a liability insurance component which also varies by region and the physician work required for the daily activities that unique types of physicians perform. By using Work RVU data, the potential differences associated with unique costs of practice for office overhead and malpractice is eliminated as well as vagaries of institutional charge pricing and collection performance. Another benefit of using Work RVUs as a data point is that the actual Work RVUs generated can be adjusted either higher or lower depending on what you might do at the new Institution. If you will generate more Work RVUs at the new Institution, make an adjustment in your analysis by increasing the number of RVUs you actually generate to reflect the planned change in your work life.

Let's review an actual example by revisiting the situation of the associate professor and general Ophthalmologist that called MedCenterToday earlier in the year. (For this exercise, you will need a copy of the MGMA 2005 Academic Practice Compensation and Production Survey Report - if you would like to order it, click here).

This particular Ophthalmologist was well experienced and produces approximately 8,000 Work RVUs annually. However, he currently spends one day per week out of five at the Veterans Administration Teaching Hospital but does not plan to attend at the VA if he makes the change to the new Institution. An adjustment must be made for this potential change in work life. Consider that the number of Work RVUs he is capable of producing at the new Institution is approximately 25% greater than the 8,000 actual Work RVUs he typically produced when he attended at the VA (4 days of clinical practice plus one new day by eliminating the VA day: 1 divided by 4 = 25%). The Work RVUs he is capable of producing if he accepts the new position could be estimated at 10,000 (8,000 plus 25% = 10,000).

While the original 8,000 Work RVUs is almost exactly equal to the 7,966 Work RVUs shown for the 75th Percentile of Ophthalmologists surveyed, the adjusted Work RVUs of 10,000 falls close to the Work RVU 90th percentile of 11,183 for Ophthalmologists (see MGMA 2005 Academic Practice Compensation and Production Survey pp. 112).

Turning to the page in the MGMA Survey which identifies percentile levels of compensation, the 75th percentile of total compensation for Ophthalmogists is $246,127. However, the 90th percentile of total compensation is $340,337, nearly a $100,000 difference (see page 64 of the MGMA 2005 Academic Practice Compensation and Production Survey).

Try this strategy to allow some flexibility in using these tables and lessen the variation of nearly $100,000 to something more manageable. First, calculate an approximate dollar value of compensation for each RVU generated. Survey methodologists may take issue with calculating this derivation, but the goal here is to get ranges and approximations of salary not test statistical knowledge. If we extend our case study of the Ophthalmologist, we can see that a dollar value of compensation can be derived for each of the Work RVU levels we identified. For the 75th percentile of Work RVUs produced, the calculation is: $246,127 / 7,966 = $30.90; and similarly, the 90th percentile calculation is: $340,337 / 11,183 = $30.43. As you can see by using this min-max methodology, the amount of compensation for every Work RVU differs by about .47cents - on 10,000 Work RVUs, this would amount to an immaterial difference of $4,700. Getting back to our Ophthalmologist, the estimated compensation level for the 10,000 Work RVUs he is capable of generating, ranges from a low of $304,300 to a high of $309,000. A much more useful range when having salary conversations than the $100,000 difference identified at the beginning of this example.

The faculty member and Institution alike should not focus on "flat salary" but rather think about production potential. If the Institution that came calling is offering a flat salary of $275,000, the faculty member may want to consider a counter offer of a guaranteed base salary of $275,000 and each Work RVU produced above 9,000 will be paid in the form of a bonus at a rate of $30.55 (picked 9,000 Work RVUs at random and calculated the $30.55 in the following manner: $275,000 / 9000 = $30.55. The $30.55 also happens to fit nicely between the $30.43 and $30.90 calculated above). This level of understanding could be significant money for the faculty member. If the Ophthalmologist does not develop an agreement with the recruiting Institution about increased work levels beyond expectation, he may accept the position at a flat salary of $275,000 and then produce 10,000 work RVUs, leaving $30,550 on the table! (10,000-9,000 * 30.55 = $30,550).

Another point of reference that is available to you within the MGMA 2005 Academic Practice Compensation and Production Survey is salary by rank (page 83). In the example of the Ophthalmologist we have been reviewing, the 75th and 90th percentile of compensation for an associate professor is $252,718 and $391,156, respectively. The one problem with using rank data is that the range is broad and academic medical centers are focusing more on productivity to determine compensation and less on academic rank.

The last thing to cover for developing salary commensurate with specialty and productivity level is the local marketplace. Although sometimes difficult for an outsider to get this information, there is usually an opportunity to converse with local physicians and ask what the ball park compensation level is for the specialty. If there is difficulty in getting accurate local data, another source of information is your subspecialty association salary survey.