1. The Challenge of Fair Faculty Compensation Plans Carol R. Bradford, M.D., F.A.C.S. Charles J. Krause, M.D., Collegiate Professor and Chair

2. Departmental Faculty Compensation Model: Recent History Prior to 2009 –Time and rank based compensation program –Modest incentives, time and rank based Post 2009 –Time and rank based compensation program (goal is 50 th AAMC percentile according to rank) –10% promotional salary increases –Metric-based annual merit program –Productivity-based incentive program Post 2012 –Added Academic Bonus Points for education, scholarship, service and citizenship ($50/point, up to 200 points)

3. Faculty Merit Salary Program Guidelines Transparent metric-based criteria Guideline for Clinical Faculty Merit Increases –Eligibility based upon ability to cover expenses –Criteria include excellence in clinical care, teaching and education, scholarship, service, and citizenship Guideline for Research Faculty Merit Increases –Faculty generating > 75% salary from grants will qualify for a merit increase, those generating 35-75% salary from grants will qualify for a merit increase at the discretion of the Chair/Associate Chair for Research –Newly hired faculty members have no external salary support expectations for the first 2-3 years and will receive a merit increase based upon performance

4. Incentive Redesign Work Group (IRWG) Charge: “Design a sustainable incentive program that is consistent with the mission and goals of the Department of Otolaryngology - Head and Neck Surgery Mission : “The Department of Otolaryngology-Head and Neck Surgery at the University of Michigan is committed to providing exemplary clinical care, training the next generation of leaders in the field and shaping the future of research and patient care in otolaryngology.”

5. Incentive Redesign Work Group Composed of clinical and research faculty and administrators Advisory to Chair Principles and Recommendations Include: Faculty must cover costs Faculty support all missions Faculty are expected to be good institutional citizens Pay 50% of margin generation to clinical faculty as incentive pay

6. Incentive Program Contribution margin statements reflect individual profit loss statements Direct and “allocated” (overhead) costs wRVU model 50% of the contribution margin is provided to faculty as incentive pay twice each year The other 50% of the margin is retained by the Department to foster research and educational missions (e.g. global health, cost shares, resident travel, etc.)

7. Incentive Model: Contribution Margin Statement Current state: higher wRVU rate $69.63

8. Incentive Model: Contribution Margin Statement

9. Incentive Model: Contribution Margin Statement

10. Incentive Model: Contribution Margin Statement Current state: 50% of contribution margin is shared

11. Reflections Incentive model has increased productivity and financial stability of the department Transparency has the advantage of all faculty “knowing the rules” New faculty have time to grow clinical and academic mission and still receive merit increases Faculty who do not cover costs have salary reductions Chair discretion (lump sum payments) for faculty making meaningful contributions not reflected in present model, e.g., landmark research, outstanding citizenship, research funding gaps