Massachusetts General Orthopaedic Associates (MGOA) has been operating under a direct compensation plan for since its inception and has been suffering from huge debts.
Dr. James Hendon was transferred in the hospital to try and turn the situation around. He discovered the compensation plan for the hospital was the problem and the doctors needed to be motivated to become productive as put in (Singer and Francisco, 2009).
PROPOSED COMPENSATION PLAN
Under the new plan the doctors pay would be directly commensurate to their financial performance. According to (Barro et al., 2005a) the plan had four factors it would take into consideration to obtain adjusted pay for each physician.
The factors included the base pay for each physician which was pegged on salaries from the year 1999 but be subject to adjustment after every six months. A tax development fund which would be deducted at five percent from each physician and be used to finance the group’s activities such as research and to compensate physicians whose patients were poorly funded by insurance companies(Barro et al., 2005a). A bonus received at end six months at fifty per cent but was subject to adjustments and finally reviews of base salary after six months depending on the physician’s performance.
STRENGHS OF THE PLAN
According Singer and Francisco (2009) an organization compensation plan determines productivity of employees. The plan helped increase productivity of physicians in general. It also helped the hospital when reviewing individual performance for each physicians and increase accountability by the physicians who were used to hiding behind the group performance according to (Barro et al., 2005b).
Research and academics flourished under the new compensation plan as new labs and research programs were put up using the development fund as put in (Barro et al., 2005b). Unproductive doctors left the facility because they could not handle the pressure and improvements were done on exciting infrastructure making MGOA a better place to work.
WEAKNESSES OF THE PLAN
The plan did not address issues arising from reimbursement of physicians whose revenue were not so high because they patients were not well covered by insurance as put in (Barro et al., 2005c).
The more productive physicians felt that they should not have to cater for the reimbursement because they worked so hard to earn their money. The physicians whose patients were not well covered by insurance felt that they should be benefitting from other physicians hard work as argued in (Barro et al., 2005c).
After deducting the fifty percent benefits above the set limit from each physician the benefits did not flow back to the physician raising concerns among the physicians about how the money was being spent to benefit them directly.
The compensation plan should adapt a more transparent manner as put in Cotterman (2010) to show the physicians how they are benefitting from the fifty percent deduction and use alternative funds to finance the difference arising from physicians whose patients were not well covered by insurance.
There are two major compensation plans are the direct compensation plan and the indirect compensation plan according to (Beam and McFadden, 2001).
According to Singer and Francisco (2009) sometimes compensation exceeds the determined fixed limit. The direct compensation pays the employee a salary and employment benefits while the indirect compensation plans allows employees to share in the effort they put towards the companies turnover.
Organizations can use this compensation plan to motivate employee whose performance can be measured directly such as in marketing.
Barro, J. R., Bozic, J. K. & Zimmerman, A. M (2005), Performance Pay for MGOA Physicians (A)
Barro, J. R., Bozic, J. K. & Zimmerman, A. M (2005), Performance Pay for MGOA Physicians (B)
Barro, J. R., Bozic, J. K. & Zimmerman, A. M (2005), Performance Pay for MGOA Physicians (C)
Beam, B.T. & McFadden, J.J. (2001) Employee Benefits 6th ED Dearborn Publishing Inc USA
Cotterman, J. D. (2010) Compensation Plans for Law Firms 5th ED Altman Weil Inc.USA
Singer, P.M. & Francisco, L. L. (2009) Developing a compensation plan for your library American Library Association USA