The Stanford School of Medicine Department of Medicine is a national leader in high quality care and cutting edge research. As a national thought leader, we strive to develop practices that will reduce the growing cost of healthcare and excel in a value-based compensation structure. This includes ensuring that our team of over 550 physicians has competitive compensation structured to incentivize the highest possible quality care and research. Towards this end, we are exploring moving from a compensation structure centered on bonuses to one based on salaries. We seek to map out what such a compensation structure would look like, how it would incentivize care and research, and what its impact would be if the Stanford payor-mix were to include more Value-Based and Capitated pay.

Specific Aims:

  1. Interview all relevant stakeholders to understand exactly how total compensation is calculated in each division and broad areas of need/improvement moving forward.
  2. Interview division chiefs and physicians to understand satisfaction with current compensation structure and identify division-specific pain points.
  3. Use statistical analysis to understand and visualize trends in amount and composition of compensation for each division.
  4. Develop a discrete simulation model that allows hospital administrators and leaders to understand the financial risk of moving to a more salaried compensation structure. Present our findings and recommendations for compensation structure, transparency, and other areas of need.

Key Conclusions:

  1. Incentive compensation as a percentage of total compensation shows high variance between different divisions.
  2. A general upward trend in contribution of metric bonus to total compensation and a downward trend of clinical productivity contribution as base salaries have increased.
  3. Different compensation structures for different divisions.

​For example, the three research divisions are primarily salary-based, with bonuses tied to grant productivity. Clinical divisions will have more compensation tied to clinical productivity bonuses.

Next Steps:

  1. Continue to learn about hospital funds-flow model to give a more accurate picture of financial risk.
  2. Build a more robust discrete simulation model that can allow administrators to vary more inputs.
  3. Interview more physicians, rather than division chiefs, to get a more complete picture of satisfaction and transparency of compensation structure.
  4. For divisions that expressed a desire for more transparency, develop programs to increase transparency.

Alex Lee

B.S. student, Economics

Sarah Stebbins

M.S., Management Science and Engineering

Antoine Barge

M.S. student, Management Science & Engineering

Jacqueline Vallon

PhD student, Management Science & Engineering