Compensation for Anesthesia Group Leaders: Who, When, How Much and Why

Will Latham, MBA
President, Latham Consulting Group, Inc., Chattanooga, TN

The question of whether and how to compensate anesthesia group leaders is a subject of spirited debate among anesthesia practices. This article covers the spectrum: some of the arguments used for not compensating leaders, justification for why groups should compensate their leaders, who is typically compensated and options for compensation.

When groups discuss compensating their leaders, there is often an outcry from those who don’t think it is appropriate. Not surprisingly, the arguments against compensating leaders typically come from those who do not participate in the work of governance/leadership (those who are “getting the milk for free”).

When we work with groups on governance issues, here are the usual arguments against compensating leaders:

1. “The leaders will do it for free; see, they already are.” Many group leaders perform an enormous amount of uncompensated work for the group. If that sacrifice in terms of time and lost earnings goes unrecognized for too long, the leaders will burn out or the group will be unable to find members willing to take on the work.
2. “The leaders benefit from the work they do.” While this is true, the other group members also reap the benefits of this work while making no sacrifices themselves to achieve the results.
3. “We should all contribute equally.” Equal contribution in leadership responsibilities is rare. We only see it in very small groups (for example, of three physicians) where the administrative workload is divided fairly equally. Those who use this argument are often the first to avoid the work or not do the work they sign up for.
4. “We don’t want to pay so much that someone will want the job for the money.” This almost never happens. The only time we have seen groups over-compensate a leader is when the leader was a founding member or very good at dealing with conflict and negotiating their way into compensation higher than the market rate.
5. “We will end up having to pay everybody for everything.” This is another smokescreen to avoid compensating those doing the hard work. All groups can identify the roles that consume significant physician time and develop plans to reward those who fulfill those responsibilities.
6. “We don’t know how to compensate someone.” Many groups have developed leadership compensation systems that work well. We discuss some of these options later in this article.
7. “I don’t want to get paid. It will make me feel responsible.” Occasionally, group leaders don’t want to be paid because they believe if the group pays them they will be expected to perform. Not being paid helps them avoid responsibility. However, the work done by the leaders is very important. They should be held responsible.

With all these arguments against compensating group leaders, why compensate them? We see several reasons:

1. Fairness. Leaders do extra work that is extremely valuable for the anesthesia group. Leaders should be compensated for this work.
2. Sustainability. As previously mentioned, leaders can burn out from the extra work, and are quicker to burn out if the group doesn’t recognize their sacrifice.
3. Time to do the work. In many cases, the work of leadership must be done during the clinical day. Leaders often need time off to meet with others, which often reduces their productivity, and hence, their compensation. In other cases (especially cases in which compensation is equalized) leaders’ clinical responsibilities must be covered by others in order to allow the leaders to meet their leadership responsibilities.
4. Responsibility. Compensating individuals for their work increases the likelihood that they will fulfill their leadership duties more effectively and conscientiously.

Who is Typically Compensated?

In our experience, the following roles are often compensated in anesthesia groups: president; other officers, if their role is significant (such as the treasurer, who often leads the Finance Committee and performs other functions); board members; committee members; and other significant roles, including schedulers, medical directors and department chiefs (which are sometimes compensated by hospitals or other organizations).

Compensation Options

Unfortunately, there is no definitive source of information on the amount anesthesia group leaders should be compensated.

The Medical Group Management Association produces a Medical Directorship and On-Call Compensation Survey that provides information on equitable compensation based on duties. However, this survey appears to be more focused on negotiating directorship fees with hospitals and other organizations.

In most cases, groups try to make their physicians economically whole for their work on governance. As a result, compensation typically takes the form of money; time off from clinical duties; vacation time; or other benefits, such as reduced call responsibilities.

For those who spend a large amount of time on leadership issues (typically the group’s president, and possibly the treasurer), groups can consider systems based on:

Productivity. In a productivity-oriented compensation environment, the leadership work can reduce a physician’s productivity, and, therefore, reduce their compensation. In these cases, such groups typically estimate the potential loss in productivity and pay a stipend to make up for this loss. For example, if a leader devotes 25 percent of their normal clinical time to practice management, they may be paid 25 percent of an average shareholder compensation (on top of what they produce) to make up for that loss of productivity.

Sometimes the work of leadership is performed after hours. In these cases, we often see groups estimate that amount of work and agree on a stipend for it.

Equal Share. In equal share compensation situations, groups typically deal with leadership by providing administrative time for the leaders to do the work or providing a stipend for work that is done after hours. Some groups compensate leaders with reduced call responsibilities or additional vacation time. Often, we see groups set stipends (discussed below) for board and committee positions.

In other cases, the group pays an established amount for board or committee meetings up to a certain amount. For example, the group may say “We expect the Finance Committee to meet monthly, and we will pay members $250 per hour for a maximum of three hours per month.”

For other roles, such as schedulers and medical directors, the group often establishes a stipend amount.

In setting stipends or hourly meeting rates, we have seen many groups calculate an average hourly clinical compensation rate (average physician compensation divided by 2,080 hours), and then estimate the time that people will spend on leadership activities. Typically, some negotiation is involved regarding the amount of time to be spent on such activities.

Occasionally, groups discount the calculated rate because administrative work is not directly income-generating. However, we believe that this work is just as important as clinical work, and, therefore, should be equally compensated.

From time to time, important projects may consume a significant amount of physician time. In such cases, groups use some combination of the options described above to reward these physicians.

Compensation Matters

In today’s environment of rapid change, capable and effective leadership is critical for anesthesia groups to successfully navigate the murky waters of a marketplace that is far less predictable and more competitive than it was a few years ago. Careful consideration of fair compensation for group leaders whose income may be affected by the time and effort required to perform these crucial roles effectively is a cornerstone of a strong and sustainable organization.

For more than 25 years, Will Latham, MBA, has worked with medical groups to help them make decisions, resolve conflict and move forward. During this time he has facilitated over 900 meetings or retreats for medical groups; helped hundreds of medical groups develop strategic plans to guide their growth and development; helped over 130 medical groups improve their governance systems and change their compensation plans; and advised and facilitated the mergers of more than 135 medical practices representing over 1,300 physicians. Mr. Latham has an MBA from the University of North Carolina in Charlotte. He is a frequent speaker at local, state, national and specialty healthcare conferences. He can be reached at WLatham@LathamConsulting.com.