Gallagher survey reveals growth in positions with expanded service-line and system-wide responsibilities, increasing the challenge of structuring compensation.

Author: Howard Hellings


Hospitals and healthcare systems are accelerating the number of physicians in leadership roles as both traditional medical directors and physician executives. The complexity of healthcare delivery networks is driving this change, in part, as organizations continue to grow and require more clinical leadership. Further, healthcare systems are seeing more co-leadership roles because sharing responsibilities enables physicians in those roles to maintain their clinical skills and practices.

These insights and others emerged from Gallagher's 2022 Medical Director and Physician Executive Leadership Survey, one of the most comprehensive and robust sources in the industry for physician leadership market data.

Gallagher's Physician Compensation and Valuation Consulting team has seen the medical director role evolve. Responsibilities have grown from serving as a liaison and ensuring accreditation of a service or department, to include administrative services across departments and service lines. Our recent survey documented more physicians assuming leadership of programmatic development, quality improvement, affordability and process improvement. This trend reflects the transition of healthcare organizations to new models of care and reimbursement.

Survey drew data from 248 healthcare organizations

As physician leadership roles expand, organizations must ensure that reimbursement is both competitive and complies with regulatory guidelines. Our survey drew responses from 248 healthcare organizations, revealing 115 distinct medical director positions and 23 physician executive roles. Eighty percent of respondents required contracts for medical director positions.

The contracts outline compensation and services requirements, specifying qualifications, responsibilities, estimated hours and a requirement to log time, among other specifications. Physician executive contracts represent more traditional employment agreements, with only 22.5% of leaders in that role reporting separate contracts for clinical and administrative services.

Time-tracking is key to aligning with market value standards

A significant difference between medical directors and physician executives includes the contractual requirement to log time. Approximately 70% of survey respondents required medical directors to log time, while only about 20% required physician executives to log administrative time.

Organizations that don't specify a required number of working hours or maintenance of a time log may be unable to prove that their compensation arrangement is reasonable and consistent with fair market value standards. Historically, this manual time-tracking process created a burdensome task for busy physicians. In our consulting work, however, we see organizations beginning to invest in more user-friendly time-tracking systems. Online apps and other electronic tools can ease the burden and improve compliance.

We typically see hospitals and healthcare systems limit medical director administrative work to approximately one or two days per week. This time limitation allows physicians to maintain robust clinical practices; therefore, documenting distinct administrative time is critical from a regulatory compliance perspective. Physician executive contracts, on the other hand, often lean heavily toward administrative work. As a result, organizations commonly compensate physician executives with a single payment for administrative services as well as clinical work they may provide.

Finally, our survey demonstrated an expansion of physician leadership positions with more service-line and system-wide responsibilities. Although the scope and number of medical director roles continue to increase, we have seen a stabilization of hourly rates and annual hours worked.

This expansion of positions has led some organizations to follow more traditional human resource principles when establishing compensation, to account for the wider breadth of responsibilities. One such practice uses incentive plans to link pay to performance. More prevalent with physician executives, such use of incentive plans in physician leadership compensation has increased. Indeed, our survey showed approximately 38% of respondents reported offering a performance incentive to their medical director positions.

While market data for establishing physician leadership compensation improves each year, finding the right match for a role can be a challenge. Based on our experience, we recommend healthcare organizations exercise caution when structuring the compensation for a physician leadership position. Leaders must ensure compensation not only is market competitive but also meets regulatory compliance and fair market value guidelines.

Gallagher's Physician Compensation and Valuation Consulting team can help your organization align physician service requirements and compensation with market trends. Let our industry-leading data help to drive your decisions to face the future with confidence.

Learn more about Gallagher's Physician Compensation and Valuation consulting, or talk to us at (800) 821-8481

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Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.