Change needed to cope with changes in health care environment
A new compensation plan has been approved for the School of Medicine, giving its departments flexibility to negotiate portions of clinical faculty salaries to match revenues.
The plan was needed to help the school cope with rapid changes in health care reimbursement practices and the research environment, said David Perry, the school's senior associate dean.
"It's really a means by which department chairs in the clinical departments can responsibly manage the resources available to them and do it in a sound and prudent way," said Perry, who helped a faculty committee develop the plan.
"Since faculty salaries comprise such a large proportion of the total expenses in these departments, if there were to occur situations of financial exigency or hardship, it's unavoidable that an area that would have to be looked at is faculty compensation," he said.
The plan affects about 500 of the school's 850 faculty members--those who receive a portion of their salary for treating patients, Perry said.
Approved by the UNC system's Board of Governors in January, the plan was developed by a medical school panel which looked at compensation plans at public and private medical schools across the nation, he said.
"We're probably one of the last schools in the country to develop such a plan," Perry said.
Faculty members were invited to comment on the plan, he said, and some of their ideas were incorporated into it.
Perry said the school hoped to implement the plan by July 1, but its complete implementation depends upon certain changes to campus financial systems that still were under consideration.
Providing incentives
A key feature of the plan is that it allows for rewarding productive faculty members, Perry said.
"This plan is meant to be an arrangement under which departments will have greater incentive to manage their resources prudently and be empowered to reward exceptional performance by members of the department," he said.
Under the plan, affected clinical faculty members will have a guaranteed academic base salary, established by using the most recent three-year average salary of all full-time faculty of equivalent rank at Carolina. Additional salary will be negotiated annually between each affected faculty member and his or her departmental chair or division chief, based upon individual productivity and departmental or divisional financial circumstances.
The two components--the base and the negotiated portion--will make up the faculty member's projected salary. Individual faculty also may receive one-time performance bonuses beyond their projected salaries if revenues are available.
The plan contains a mechanism by which departments will retain from monthly paychecks 15 percent of each clinical faculty member's projected salary. At the end of each quarter, faculty members will receive the withheld portion of their salaries if their department is on a path to meet its annual budget targets.
Those budget targets will reflect the plan's requirement that each department build or maintain a reserve that totals not less than 25 percent of the department's annual clinical operating expenses. If at the end of each quarter, a department has not met its operating budget and reserve requirements, department chairs may take all or portions of each faculty member's withheld salary and put it into the reserve.
Perry said the ability to retain a portion of salary funds was needed to help insulate departments from unforeseen emergencies or rapidly changing economic conditions.
He said he thought the mechanism seldom would be used.
"I think the withholding of that flexible component is going to be a very infrequent prerogative," Perry said. "I would be astonished if in any given year there was more than a handful of individuals who did not get their full salary."
Waiting to see
Many faculty members were taking a wait-and-see attitude concerning the plan, but there didn't seem to be widespread dissatisfaction with it, Perry said.
"Most of the faculty are in constant touch with colleagues elsewhere and are aware that "at risk" compensation arrangements are in place at many medical schools," he said.
At the Department of Family Medicine, Chairman Kenneth Reeb said most faculty members viewed the plan as providing a means for adapting to a changing world--and boosting salaries.
In comparison to doctors in private practice, salaries in his department have been falling behind, he said.
"So we are looking for this to be a mechanism to help us maintain a competitive pay scale for faculty," Reeb said.
Changes in the health-care industry brought about by tighter cost controls imposed by insurance companies and health maintenance organizations are creating a greater demand for generalist physicians, like those in family medicine, Reeb said.
That means greater demand for the department's clinical and instructional services, he said.
"The new compensation plan should give us some degree of increased
flexibility and allow us to respond to these forces," he said.
The plan gives departments a new incentive to save money, Reeb said.
"We're being expected to be much more businesslike in our approach to practice." he said. "Everyone was very conscientious about doing a good job, but cost was not foremost in our thinking at all times. Putting in an element of self-interest will probably be helpful in that regard."
Edward Lawson, vice chair of pediatrics, agreed.
"One of the real problems we have had as a state institution was that there was no clear tying of activities to pay scales," he said. "This will do that to a certain extent."
Lawson said faculty generally were positive about the plan.
"On the other side of the coin, I think faculty are putting at risk a fair amount of their income," he said.
"We are planning to make it so that we minimize the risk to individual faculty salaries and try to maximize the incentive for faculty to do activities that are beneficial to the mission of the department," Lawson said.
Both Lawson and Reeb said their departments would have to find a balance between rewarding teaching and revenue-producing activities, such as clinical service.
"We anticipate we will reward teaching as well as research," Reeb said. "The trick is that the source of funds is patient-care revenues."
Departmental flexibility
Departments have been given a great deal of flexibility in determining how elements of the plan will be implemented, Perry said.
Departmental chairs will work with faculty to establish criteria for performance bonuses and for making other salary adjustments, he said. Faculty members also will be involved in evaluating the compensation plan's overall impact on the school, he said.
"The plan really is meant to be open to many reasonable interpretations of how it best can be implemented," Perry said. "However, there is an expectation that the faculty and the departmental leadership will operate from a shared understanding of what the ground rules are. How they choose to do that is their determination."
In the event a department does not meet its budget targets and the 15 percent portion of salaries is affected, chairs don't have to withhold the same percentage of salary from every faculty member, Perry said.
Besides the University's standard faculty grievance procedures, affected faculty members may appeal salary decisions made under the plan to the dean of the medical school.
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