First, he began “open and frank meetings” with the MGOA doctors to alert them to the problems of the group and allow the doctors to express their own viewpoints. Second, Rubash negotiated with MGH to secure a 10% increase in operating room time for the doctors.

statement—to recruit new faculty, to help researchers with pilot projects, to buy new equipment for the laboratory.”

Some Initial Changes

Rubash saw that in order to restore MGOA’s financial status, he would have to act fast to stop the monthly outflows of money. First, he began “open and frank meetings” with the MGOA doctors to alert them to the problems of the group and allow the doctors to express their own viewpoints. Second, Rubash negotiated with MGH to secure a 10% increase in operating room time for the doctors. This was important for the established MGOA surgeons, but also for the new doctors who would soon be joining the group. Third, Rubash made changes to how the group’s administrative functions were handled. Better telephone systems and computer-based scheduling applications were put into place to make the administrative staff more efficient, and billing went from being handled by an MGH-wide department to a newly-created centralized MGOA billing center.

Finally, Rubash directly addressed the problem that while some doctors were bringing in substantial profits for the group, others were actually costing the group more than they were contributing. With these latter physicians, Rubash had “candid discussions” about what he expected from them, and gave them timelines to accomplish these goals. To reward the productive doctors, he paid them bonuses based on the profits they were bringing in. According to Rubash, there were three or four physicians who were “bringing in a heck of a lot more money than they were making,” so he wanted to establish an environment in which that outcome was rewarded appropriately.

A New Idea

By the end of 1999, they had managed to turn a modest profit (see Table C), but the long-term financial health of the department was still far from secure. As they looked over figures from that year (see Table C), they saw that a fourth of the physicians (3 of the 12) still cost the department more money than they brought in. As they stood in Rubash’s office, Herndon turned to his friend. “We’re doing all right for now, but what about five years down the road?” He asked. Rubash understood that the group’s long-term financial health was going to depend on each physician taking a personal responsibility for his or her own financial contribution to the organization. “I think we’re going to have to permanently change the way we pay our doctors,” he replied. “The long-term health of the group depends on the doctors spending more time in the operating room than they currently are.”

MGOA physicians had always been paid a flat salary—historically, this was the standard arrangement for doctors in academic groups. Typically, their salaries were adjusted based on seniority, and very loosely on productivity, if at all. As an example, at MGOA there was a well- respected surgeon who, because of the length of his tenure at MGOA and his reputation in the field, received one of the highest salaries in the group, yet each year his cost to MGOA exceeded the revenue his practice brought in. This was in contrast to private practitioners and other non-academic doctors, who were compensated based on services rendered to patients. These doctors were essentially working under a piece-rate compensation plan.4

4 For several reasons, including the greater benefit of bargaining over prices with a larger group of doctors, many physicians in the 1980s and 1990s joined large physicians groups. This was particularly the case with primary care physicians, and less true with specialists like surgeons. Typically, these groups paid physicians a flat salary, much like doctors in academic groups. Many of these groups later realized that such a pay structure might have contributed to decreased productivity and thus gradually moved away from compensation systems that involved flat salaries.

For the exclusive use of D. Chen, 2018.

This document is authorized for use only by Dongliang Chen in HRM 5030 Comp and Bens-1 taught by MATTHEW SAMEL, Johnson & Wales University from May 2018 to Nov 2018.

Performance Pay for MGOA Physicians (A) 904-028

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