Physician Retention Bonuses: Paying Physicians to Stay Put
Darcy Devine • February 16, 2017
Retention bonuses are becoming more popular with employers both inside and outside of the healthcare industry. Retention bonuses are offered to high-in-demand, easily-poached employees for staying on the job for a certain period of time. Although they sometimes get confused with signing bonuses and forgivable loans, they are different—and therefore appraisers need to analyze them differently when conducting a fair market value determination.
BuckheadFMV conducted online research to determine how many physician employers are offering retention bonuses. We found that the military pays eligible physicians with at least 8 years of service between $12,000 and $60,000 per year for signing multiyear contracts. We also found that a small percentage of the thousands of online job postings in the private sector specifically mention a ‘retention bonus’. Bonuses ranged from $10,000 to $50,000 per year and varied based on length of service and physician specialty. Although they aren’t ubiquitous yet, from our viewpoint, retention bonuses seem to be a growing trend among hospitals that employ physicians.
Given the significant dollars involved, it is important for employers with retention bonus programs to consider these payments when analyzing physician compensation for fair market value. It is also important to consider how the timing of retention bonus payments may impact the analysis. As noted in the infographic, retention bonuses are taxable compensation in the year payment is received. Employers may find that retention bonus payments made at intervals throughout the service period, rather than in a large upfront payment, make it easier to stay within the fair market value range.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple. The lowest reported price to EBITDA multiples (10x or lower, sorted alphabetically) are listed below.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple. The highest reported price to EBITDA multiples (15x or higher, sorted alphabetically) were as follows:
Healthcare services organizations rely on a variety of intangible assets to create business value, including patient and customer relationships, medical records, trade names, assembled workforce, licenses and certifications, non-compete clauses, proprietary technology, software, and others.
For those of you who’ve been involved in a transaction where the only asset transferred is a certificate of need, you’ve probably found that market data is scarce for CON-only deals.
CON Laws, Scope of Practice Restrictions, and Provider Non-Compete Clauses Targeted in New Trump Adm
On Monday, December 3, 2018, the Department of Health and Human Services (HHS) – in collaboration with the Departments of the Treasury and Labor, the Federal Trade Commission, and several offices within the White House – released a report detailing recommendations for improving choice and competition in the healthcare industry.
One of the questions we get asked a lot is how valuations have changed over time.
One of the many benefits of tracking healthcare transactions closely and maintaining a very large database of deals where we can get reliable price to EBITDA and revenue multiples is that it provides insight into profit margins for segments where other financial benchmarking information is sparse.
The most important component of a valuation of an accountable care organization (or other multi-provider network that relies on risk-based shared savings models) is the revenue forecast, which involves “probability-adjusting” future shared savings payments in some manner.
CMS' offers a helpful online tool that shows provider market saturation levels at the national-, state-, and county-levels for the following health services:
