Achieving Provider Compensation Parity Considerations of Fairness Within Fair Market Value

Achieving Provider Compensation Parity Considerations of Fairness Within Fair Market Value

August 02, 2023

Overview

Concerns of compensation discrimination remain a persistent issue across industries, including the healthcare 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 amongst 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 a survey conducted by AAMC 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 healthcare sector, women earn an average of 24% less than men, despite the fact that women account for 67% of healthcare 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 years, 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, then, does one begin?

Establish Working Definitions and Visions of ‘Equity’ and ‘Fairness’

Recognize that without a distinct, clear vision surrounding 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

Healthcare 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, EHR 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 healthcare 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 re-assessment, hospitals can help lay a strong foundation for compensation parity and eliminate indefensible biases.  A growing body of evidence suggests vast opportunity 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.


  1. "New report finds wide pay disparities for physicians by gender, race, and ethnicity," Gabrielle Redford, AAMC, October 12, 2021.
  2. "Table B-3: Total U.S. MD-Granting Medical School Enrollment by Race/Ethnicity (Alone) and Gender, 2019-2020 through 2023-2024," AAMC, November 14, 2023.
  3. Redford, supra note 1.
  4. "The gender pay gap in the health and care sector: A global analysis in the time of COVID-19," World Health Organization, July 13, 2022.
  5. "Marriage, Children, and Sex-Based Differences in Physician Hours and Income," Lucy Skinner, et al., JAMA Health Forum, March 24, 2023.
  6. Id.
  7. "Female Physicians Earn An Estimated $2 Million Less Than Male Physicians Over A Simulated 40-Year Career," Christopher M Whaley, et al., PubMed, December 2021.
  8. "Gender Pay Disparities in Medicare Reimbursement Impact Neurosurgeons," Victoria Bailey, TechTarget, October 12, 2023.
  9. Id.
  10. "Physicians adopt plan to combat pay gap in medicine," Kevin B. O'Reilly, AMA, June 13, 2018.