One of the most critical functions within a medical group’s organizational structure is the administration of compensation. A compensation administration department, typically composed of a director, manager, and team of analysts, is responsible for reconciling a provider’s employment contract financial schedule with the actual work performed and advising payroll staff on the correct funds to disburse.
These activities can directly impact providers’ confidence and satisfaction. To ensure that providers receive the right payment amounts for their services, having accurate and up-to-date compensation documentation is essential.
Leading the Pack with Effective Documentation
Thorough compensation documentation achieves two key goals:
- Helps to set expectations for the providers regarding their compensation
- Ensures standards are in place related to adjudication
Without this documentation, the team will likely be inconsistent in administering compensation and unable to meet the expectations of stakeholders, missing opportunities to improve provider satisfaction and confidence.
Although most medical groups will have some elements of compensation documentation, it is often outdated, incomplete, or fragmented across multiple stakeholders. High-performing compensation administration departments, by contrast, are differentiated by the quality, comprehensiveness, and organization of their documentation.
The five types of documentation typical of compensation libraries maintained by these high-performing organizations—and the risks of not having them—are detailed below.
1. Employment Contracts
All providers within the medical group should have a formal employment agreement or contract that is housed in an accessible contract management system. A provider’s compensation structure and rates should be detailed in this contract and should serve as the “source of truth” regarding their individual compensation.
Risks Associated with Failing to Document Thoroughly
In addition to the contractual risks of incomplete employment documentation, simple pieces of compensation information, such as annual salary and bonuses, can be ambiguous if not properly documented.
It is common for medical group shareholders to exclude themselves from formal compensation documentation, but all providers within the group should have up-to-date compensation contract documentation.
2. Policies and Procedures
Policies and procedures related to the group’s compensation should be up to date and accessible, ideally housed in a policy management system. High-performing medical groups typically review policies and procedures at a Compensation/Human Capital Committee on a regular cadence (e.g., biannually).
Risks Associated with Failing to Document Thoroughly
The lack of high-quality documentation of policies and procedures will, over time, result in lack of compliance. Noncompliance with policies and procedures adversely affects the necessary precision and consistency in compensation administration that high-performing medical groups deliver.
3. Compensation Manual
The compensation manual is a provider resource that details the group’s compensation plan and typically serves as the source of truth on group compensation. This document should give providers a clear understanding of the group’s compensation plan, including methodologies for setting compensation, payroll and bonus schedules, references and context to policies and procedures, and information about reporting and available resources.
Risks Associated with Failing to Document Thoroughly
The absence of a resourceful provider compensation manual has two key adverse implications:
- Providers will lack common understanding of the compensation plan, resulting in fragmented application and management of the plan.
- Fragmented understanding will cause providers to burden their operational leaders, physician leaders, and compensation administration with generic questions that could reasonably be answered through accessible documentation.
4. Compensation Administration Guide
A compensation administration guide is an instruction manual for how to administer a group’s compensation. This should primarily include technical instructions on the calculations and processes required for adjudicating compensation, and is typically composed of three elements:
- Where/how to access and abstract the necessary input data and information
- Instructions for translating those inputs into compensation outputs
- Guidelines for the actual distribution of compensation, including interfacing with payroll and compensation reporting.
Risks Associated with Failing to Document Thoroughly
Errors in compensation payments are the foremost concern when there is a lack of information regarding how to adjudicate compensation.
High-performing medical groups understand that errors in compensation carry a direct impact on the confidence a medical group has in its administration. As such, they invest heavily to ensure compensation is adjudicated correctly and consistently. This starts with sound documentation and instructions.
5. Change Log
While there are no specific standard formats or frameworks for tracking changes in compensation, high-performing groups keep careful track of the progression in compensation for their providers. This is intended to “tell the story” of each provider’s compensation during their tenure. This resource is particularly important for tracking leave-of-absence and one-off compensation situations.
Risks Associated with Failing to Document Thoroughly
The absence of a well-kept compensation change log can inhibit the group’s ability to audit, validate, and answer simple questions regarding historical compensation. High-performing medical groups use the change log as assurance regarding compensation assumptions and rationale.
Groups that have clear and complete compensation documentation not only mitigate the risks detailed above, they also enjoy an array of benefits:
- Increased provider confidence in group administration
- Ability to unify the medical group through standard processes, information, and expectations
- Opportunities for both process improvements and compensation plan enhancements that are otherwise difficult to isolate without detailed information
- Understanding of resource requirements and needs, including staff and potential technology solutions
- Safeguarding against loss of institutional knowledge and information through staff attrition
Build Your Compensation Documentation Library
Compensation documentation can be organized and managed in various ways. Ultimately, though, focusing on processes to keep the information up to date and centralized will ensure the library is a beneficial resource for the group. If your organization lacks some of these documents, consider building one of them today and develop a roadmap to establish a documentation library for your organization. A comprehensive documentation exercise will be worthwhile in achieving the benefits outlined here and will likely uncover areas to improve processes and reduce variability for your medical group.
Published March 17, 2021