Healthcare Practice Strategies - Fall 2015 - Signing Bonuses: The Icing on the Recruitment Cake
Incentives and signing bonuses are certainly nothing new. As far back as 1922, Babe Ruth was receiving $500 for every homer he hit. In 2011, right hand pitcher Gerrit Cole became the first player to receive an $8 million-dollar signing bonus when he was signed by the Pittsburgh Pirates.
These days, it seems physicians are going the way of top athletes. The most recent MGMA Physician Placement Starting Salary Survey shows that more physicians are receiving signing bonuses — 60.3 percent of physician respondents, in fact. Amounts differ substantially among physicians and regions, but the median signing bonus was reported $20,000.
Mid-levels have gotten in on the act as competition for these professionals increases. In 2014, 50 percent of non-physician providers were offered a signing bonus, compared to 11 percent in 2013, according to the annual provider placement summary performed by physician search consultancy The Medicus Firm. The firm reports that the average signing bonus for a PA or NP increased from $3,000 in 2013 to $7,500 in 2014.
A Carrot with Win-Win Potential
Structured properly, a generous signing bonus can be a key differentiator in a tight labor market — and a real boon for newly minted physicians struggling to get on solid financial footing after years of expensive training.
For the practice: Signing bonuses provide a recruiting leg up for practices competing for a finite pool of providers — primary care physicians in particular. With hospitals, health systems and physicians groups all competing for the same talent, anything that a potential employer can do to stand out is a good thing.
Adjusting compensation through a signing bonus can also provide employers with some negotiating flexibility. For example, if an annual salary of $160,000 has been approved, adjusting it might require a new vote of the board. A one-time signing bonus might just seal the deal without the administrative hassle of adjusting annual salary.
For the physician: For newly minted physicians, signing bonuses can establish some financial stability — helping with down payments on houses and tackling student loan debt. The upfront money can also help physicians get through the interim period while they ramp up and begin earning production- or productivity-based incentive compensation.
Seal the Deal
If incentives will be part of your recruitment plan, consider these steps for structuring an attractive signing bonus:
Offer what you can afford. Given the competitiveness of the market, physician recruiters suggest stepping forward with your best offer as opposed to starting low and negotiating higher.
Design with retention in mind. Consider devising a bonus structure with elements of a retention incentive. So, for example, physicians joining the practice might receive an initial signing bonus of 5 percent of their first-year total compensation. At the beginning of year two, they would receive a slightly larger percentage. The largest chunk is then paid out at year three.
Spell out the details. Sign-on bonuses are often pro-rated. If that’s the case, clearly spell out in the employment contract what happens if the recruited physician leaves before the time stipulated.
Finding the perfect match for your practice can be a challenge. But a well-structured signing bonus can help get ink on paper and your next great hire in the door.
How the Benefits Play Out
Recruitment incentives go well beyond paid health insurance and signing bonuses, according to Merritt Hawkins’ annual Review of Physician and Advanced Practitioner Recruiting Incentives, now in its 21st year:
Relocation Allowance — Some 90 percent of recruitment searches involved an allowance for moving expenses, travel and other relocation expenses.
Low = $1,000 High = $25,000 Average = $9,849
Housing Allowance — An allowance to offset the loss of selling a home for less than its purchase price was offered to 4 percent of relocating physicians.
Loan Forgiveness — Paying off part or all of a new physician's student loans — typically spread out over three years — was an inducement in 26 percent of job searches.
Low = $4,000 High = $336,000 Average = $77,000
CME Allowance —In 91 percent of searches, employers offered to pay continuing medical education.
Low = $1,000 High = $15,000 Average = $3,515
Healthcare Practice Strategies - Fall 2015