Women's Network—Achieving Provider Compensation Parity: Considerations of Fairness Within Fair Market Value

• January 01, 2024

• Rebecca Langford , HealthCare Appraisers Inc.
• Katia Shapovalova , HealthCare Appraisers Inc.

Concerns of compensation discrimination remain a persistent issue across industries, including the health care industry, with the most prevalent claims of disparity centered around gender, race, and seniority. The Association of American Medical Colleges (AAMC)—whose membership includes representation from 170 accredited medical schools and over 400 teaching hospitals, health systems, and Veterans Affairs medical centers—has conducted surveys revealing that gender and race are the most significant characteristics associated with pay disparities among physicians.¹ In 2019, during the first academic year in which women comprised more than 50% of total enrolled students in U.S. MD-granting medical schools,² an AAMC survey reported that women earned between $0.72 and $0.96 for every $1 paid to men across various departments and specialties.³ In the AAMC study, the greatest correlation to pay disparity remained gender, even after accounting for factors such as rank, tenure, specialty, and training. A 2022 report published by the World Health Organization (WHO) and the International Labor Organization (ILO) determined that within the health care sector, women earn an average of 24% less than men, despite that women account for 67% of health care workers across the globe.⁴

In a study including over 95,000 physicians and focused on gender-based pay disparities, the Journal of the American Medical Association (JAMA) Network discovered that male physicians earned an average of 21% to 24% more per hour than their female counterparts.⁵ Interestingly, the study also found that these male-female earning gaps grew as physicians aged. When accumulated from age 25 to 64, these disparities totaled approximately $1.6 million for single physicians, $2.5 million for married physicians without children, and $3.1 million for physicians with children.⁶ These findings are echoed in a separate study performed by the National Institutes of Health, which studied over 80,000 full-time physicians in the United States. This study found that “over the course of their careers, female U.S. physicians were estimated to earn, on average, more than $2 million less than male U.S. physicians after adjustment for factors that may otherwise explain observed differences in income, such as hours worked, clinical revenue, practice type, and specialty.”⁷ More recently, two separate reviews of Medicare claims-based data revealed gender-related disparities in total billings, number of beneficiaries treated, and unique service codes billed, after excluding high and low individual outliers.⁸ Total reimbursement remained considerably disparate after controlling for volume and years of experience.

The demonstration of a relationship between gender and compensation is merely a beacon: the hard work of identifying causal factors and establishing a framework of actionable recommendations and best practices remains. Advisors should encourage hospitals and physicians to proactively consider assessments of compensation parity, and to incorporate reviews of fairness and equity as a supplement to reviews of consistency with fair market value.

Where to begin?

Establish Working Definitions and Visions of ‘Equity’ and ‘Fairness’: Recognize that without a distinct, clear vision of what is meant by ‘equity’ and ‘fairness’, these are simply aspirational concepts. A goal requires a road map.

Assess Potential Inequities: Conduct realistic reviews of potential inequity among provider compensation structures and plans. This should involve an assessment of potential perceived inequities and a plan to resolve both perceived and actual inequities.

Create and Foster Transparency: Ensure that all key stakeholders are on the same page with respect to how ‘equity’ and ‘fairness’ are defined, why they matter, and how stakeholders can work together to achieve them.

Conduct Internal and/or External Compensation Evaluations: Health care institutions can establish processes to conduct regular internal evaluations or engage external experts to conduct regular evaluations of provider compensation structures.

Regular Compensation Reviews: Hospitals should establish a systematic process and regular cadence for reviewing and updating compensation plans.

Identify and Address Variability in Coding and Billing Practices: A thoughtful review of variability in provider billing and coding practices can lay the groundwork for how to address both over- and under-utilization concerns, as well as reveal opportunities for provider education and training.

Provide Educational Interventions Where Appropriate: Stakeholders may require additional training or remedial education to narrow gaps in knowledge regarding coding and billing practices, electronic health record utilization, or medical recordkeeping.

Explore Support Systems to Encourage Practice to the Top of Licensure: Are adequate support systems or mechanisms in place such that all providers are able to practice at the top of their license? A lack of peer support, reduced leverage within the practice community or environment, disparate interaction with payer negotiation, and less administrative support⁹ may all—directly or indirectly—drive disparity.

Equal Pay Policies: Hospitals should adopt explicit, well-structured, and adaptable policies that promote equal pay and transparency for equitable compensation models.¹⁰

Conclusion

Hospitals and health care organizations should regularly evaluate provider compensation policies and practices to mitigate any potential gaps related to pay equity. Certain data could inadvertently serve as prima facie evidence of compensation discrimination. However, with appropriate, thorough business documentation and sound, third-party guidance, coupled with an actionable plan that includes routine compensation reassessment, hospitals can help lay a strong foundation for compensation parity and eliminate indefensible biases. A growing body of evidence suggests vast opportunities for counsel and other advisors to hospitals, providers, and health systems to foster an environment that upholds fairness and equity for all providers, regardless of their backgrounds.

Rebecca J. Langford is a Manager for HealthCare Appraisers Inc. Ms. Langford assists in a wide variety of provider compensation arrangements. She has valued hundreds of various compensation arrangements that may have Stark and/or Anti-Kickback implications, including physician employment and independent contractor arrangements, recruitment arrangements, compensated call coverage, and medical directorships. She holds a Bachelor of Business Administration in Finance from Baylor University.

Katia Shapovalova is an Associate at HealthCare Appraisers Inc. She assists in a wide variety of projects, including the analysis of health care provider compensation valuation. While in college, Ms. Shapovalova completed several internships, she previously held roles such as Pharmacy Revenue Charge Analyst Intern, addressing inaccuracies in medication reimbursement and pharmacy revenue operations. Her experience also extends to serving as both a Small Group Sales Support Specialist and Change Management Strategy Intern at a Fortune 500 company, where she played a pivotal role in health insurance sales success and shaping the change management community. Ms. Shapovalova earned a Bachelor of Science in Health Information Ma nagement and Systems from The Ohio State University.

ARTICLE TAGS

• Women's Leadership
• Diversity, Equity, and Inclusion in Health Care Hub