Determining the Fair Market Value of Early Commitment

October 11, 2016

 

As residents and fellows, physicians earn a small fraction of the money they will make in future years. According to the most recent Association of American Medical Colleges' Survey of Resident/Fellow Stipends and Benefits Report (2014-2015), residents and fellows earn averages of $51,586 in their first post-MD year and $67,236 in their eighth post-MD year.

 

Hospitals and other organizations that employ physicians realize that the residency/fellowship years are a great time to recruit. The candidate pool is large, and many residents and fellows are willing to commit early to an organization that provides financial support to them while they finish their training. These stipends seem especially reasonable if they help fill hard-to-fill vacancies on the medical staff, shorten the time these vacancies are left open, and/or lower the organization's over-all physician recruitment costs. 

 

To date, most (if not all) of the major physician compensation surveys do not provide benchmarks for early commitment stipends. Further, at least one of the major surveys states that "stipends" should not be included when respondents submit signing bonus data to the survey. We also note that since early commitment stipends are paid prior to employment, in many situations, including them in first year compensation for benchmarking purposes may not be appropriate from a comparability standpoint.

 

Despite an apparent lack of benchmarks, these stipends are being paid across the country, and there is a need to assess them for fair market value. (The employment exception under the Stark Law requires compensation be fair market value.) One way to begin this process is to assess whether the amount being offered or paid is consistent with what other, similar organizations are offering/paying. A recent BuckheadFMV review of recruiter ads and online classifieds for physician services shows that the typical early commitment stipend is $1,500 to $2,500 per month. These stipends are available to physicians in their last 1 to 2 years of training. There was no significant difference between the amounts offered to physicians in different specialties.

 

In addition, as part of a fair market value review, we suggest adding together all pre-employment compensation (early commitment stipends, signing bonuses, etc.) and comparing the aggregate amount to signing bonus benchmarks. While the signing bonus data may not include early commitment stipends, in certain circumstances, the comparison may still be meaningful. 

 

There are several physician compensation surveys, including the Medical Group Management Association (MGMA) survey, that include benchmarks for physician signing bonuses. Also, several physician recruiting firms, including Merritt Hawkins and Delta Physician Placement, publish reports (often online and free of charge) identifying the average signing bonus offered to physician candidates over an identified time period.      

 

 

 

 

 

 

 

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