Thought leadership

Physician Leadership: The Minefields of Medical Directorships

Physician Leadership: The Minefields of Medical Directorships

Medical Staff leaders and health system executives tear their hair out when they think about the risks and confusion of Whistleblowers, RAC Audits, as well as an erosion in clinical care quality or medical staff morale and collaboration. Too often at the center of this confusion and threats to an organization’s financial health are poorly functioning “Medical Directorships”.

Medical directorships can be minefields on the journey to the organizational provision of better heath gain and health care. Physician leadership positions are being embraced as a means to help accomplish important organizational goals, but the risk for overlap and inefficient medical directorship structures can result in wasted resources and increased organizational risk.

Here are some of the priorities that health systems across the country are successfully using medical directorships to help them address:

  • To help ensure the health system’s capabilities to thrive in a challenging market
  • To support the delivery of excellent quality and safe patient care in a seamless system of ambulatory and inpatient care
  • To recruit and support physician leaders to excel in their embrace of a fully integrated and accountable care model
  • To meet rigorous standards of clinical expertise
  • To promote a willingness & capability to lead physician colleagues and staff in medical care that is characterized by continuous quality and safety improvement
  • To support the delivery of cost-effective and efficient care
  • To ensure compliance with modern accreditation guidelines from JCAHO and NCQA
  • To enhance a Medical Staff Model reflecting a need for a more closely integrated design
  • To support elements of a self-governing Medical Staff
  • To clearly define the roles and responsibilities of Section Heads, Division Heads, and other Medical Directors to assure streamlined roles and accountabilities
  • To invest in systems and staff to support the continuous enhancement of our physician leadership effectiveness and development

In the past decade, however, too many physician leaders, boards, and executive teams handed out Medical Directorships as favors in a naïve belief they would build physician loyalty or alignment. Without advance planning and diligence, the promise of these positions are rarely achieved and the excess compensation without merit puts the organization at risk of non-compliance with the important regulatory guidelines governing physician pay.

Recently, one of our clients believed they were not getting a good return on investment of what they believed were about $4 million into “several dozen” Medical Directorships. When asked the “Big Three Questions” they did not have clear or complete answers:

  1. How many Medical Directors do you have?
  2. How much are you in actually spending/investing in these Medical Directorships?
  3. How are you measuring the results from the work of these physician leaders?

To answer these questions, we had to gather information over several days from the Medical Staff office, as well as human resources and finance staff before a clear picture was established. The audit showed this disturbing profile:

  • They had well over 100 Medical Directors, including Department Chairs for Residencies, Medical Staff officers, section chiefs in the medical staff, and a mix of leaders for outreach, quality, service lines, and clinic management;
  • Most continued to maintain an active clinical practice;
  • Over 60% did not have job descriptions, and few recorded their time or levels of effort for their compensation;
  • Several had multiple directorships, which often pushed them over the Fair Market Value (FMV) for their compensation;
  • Most had not received any orientation or education about their duties;
  • There was little staff or systems to support their work;
  • Performance reviews and results were non-existent, and there were few tangible measures of what a good Medical Director was to be accomplishing.

Is it any wonder that their leadership group felt their return on investment for their array of Medical Directorships was so weak?  This pattern of poor medical directorship management is all too common, even after the well-publicized regulatory actions by government regulatory agencies that put your organization at risk for MILLIONS in penalties and fee repayments.

Physician leaders, Boards and Executive teams need to immediately take these five (5) actions to prepare for the threats of poor organizational performance, weak quality, slips in market share and threats of regulatory action and Whistleblower lawsuits:

1.  Audit Medical Directorships: Leaders should conduct regular Medical Directorship audits by addressing “The Big Three Questions”. Boards need to help provide the encouragement for this work and celebrate the well prepared and high-performing physician leaders. Perform a diagnostic of the directorship program as if it were a patient unsure of their malaise. Review the results with your legal counsel to ensure protection while any policy or process weaknesses are removed and improved. The compensation of these positions must also be evaluated1 both independently as well as a component for a physician’s total compensation package.

2.  Establish a Philosophy of Medical Directorships: A compensation philosophy specific to medical directorships should be woven into the fabric of the organization’s provider compensation philosophy, plan development, and review process.

Leaders must also develop a statement of philosophy about why they need physician leaders, and how their work will map directly to the mission of the organization and its goals for quality care and sustainable financial vitality. Consideration should include a culture and systems driven by physician leadership and characterized by these five (5) attributes:

  • Transparency for physicians and hospital staff with a seat at the leadership table;
  • Empowerment and engagement in the processes of developing policies and procedures supporting clinical care and economic vitality;
  • Increased attraction and retention of the best and brightest physicians into leadership roles;
  • Improved physician satisfaction can be an important factor in improving patient satisfaction
  • Accountability to the mission and strategic plans of the hospital.

3.  Invest in Process of Intentional Recruitment: Leaders must not drift into the appointment of weak Medical Directorships. A disciplined process guided by clear competencies and selection criteria will improve the quality of physician candidates. A clearly documented process such as this will align leadership involvement in the intentional recruitment of physician leaders.

4.  Onboarding: Health system leaders can optimize the potential success of Medical Directors by incorporating these five onboarding practices:

  • Formal Position Descriptions with fair and legal compensation drafted with help from HR professionals2;
  • A well designed program that orients each physician to their jobs and support systems within 30 days of taking the job, as well as commits them to participate in elements of a “Physician Leadership Academy” 3;
  • Signed Compact or “Agreement of Participation” in which the physician leader acknowledges their commitment to the job, the mission of the organization, the welfare of patients and the support of their physician colleagues
  • Relevant resources including experienced staff and IT support systems for the discharge of their duties; and
  • Annual work plans with clear measures of process, results, expectations, and annual review

5.  Performance Management: Physician leaders pursue excellence in all that they do and hope to impress their colleagues with actions that support improved patient care practices. High performing organizations invest in the systems, education, staff support, and the rigor of evaluation to empower Medical Directors to accomplish their work and results. Performance systems and regular performance evaluations must be fully supported at the highest levels of leadership in order to encourage strong execution of these important tasks. 

For additional information about how to strengthen your Medical Directorship investments and results contact us at


James A. Rice

Jim Rice, PhD, FACHE is the Managing Director & Practice Leader with the Governance & Leadership service line of Gallagher’s Human Resources & Compensation Consulting practice. He focuses his consulting work on strategic governance structures and systems for high performing, tax-exempt nonprofit, credit union and health sector organizations and integrated care systems; visioning for large and small not-for-profit organizations; and leadership development for Boards and C-Suite Senior Leaders. 

Dr. Rice holds masters and doctoral degrees in ...

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