Split-Dollar Life Insurance: Risks, Benefits and Key Considerations

Health care organizations are facing increased pressure as they try to recruit and retain top talent. At the same time, the onset of the 2017 Tax Cuts and Jobs Act and the introduction of a 21% employer-paid excise tax on compensation over $1 million for top-paid executives has left some hospitals and health systems asking the following question: Is there a more cost-effective way to deliver compensation and benefits?

These challenges have triggered renewed interest in split-dollar life insurance, although limited adoption rates have been observed to date based on SullivanCotter’s 2018 Benefits Practices in Hospitals and Health Systems Survey. While, under certain circumstances, split-dollar life insurance has the potential to reduce costs for the employer while delivering a similar or greater benefit for the executive, it is a much more complex approach than cash-based compensation structures and carries risks that must be carefully evaluated.


INFOGRAPHIC | 2018 Hospital-Based Physician Compensation and Work Effort Survey

Emerging Trends in Hospital-Based Physician Compensation and Work Effort

Featuring data from 45 health care organizations, this survey provides insight into the issues specific to hospital-based specialties, clinical work effort and the related compensation structures.

View highlights from this year's results and learn more about our Hospital-Based Physician Compensation and Work Effort Survey.


INFOGRAPHIC | 2018 Physician Compensation and Productivity Survey

Infographic | 2018 Physician Compensation and Productivity Survey

As health care organizations nationwide look to optimize clinical care and ensure financial stability in a highly complex environment, physician compensation programs are evolving to address changing models of care, the need for organizational alignment and a competitive market to talent.

View highlights from SullivanCotter’s 2018 Physician Compensation and Productivity Survey, featuring data from nearly 750 organizations covers more than 167,000 individual physicians and advanced practice providers.


Employers Choose Bonuses Over Raises

SullivanCotter Featured in the Wall Street Journal

In today's competitive talent market, organizations are looking for ways to attract and retain talent while controlling costs. The increasing use of incentives over traditional raises in base pay is trending across all industries. As health care organizations continue to focus on driving performance and enhancing organizational alignment, incentive compensation remains a key component of competitive total rewards programs. SullivanCotter was proud to contribute to this recent article, published in the Wall Street Journal, highlighting this shift in pay practices.


INFOGRAPHIC | Physician Executive Compensation

Emerging Compensation Trends for Physician Executives

Health care leaders with strong clinical backgrounds are in high demand as the focus on value-based care intensifies. As a result, there are more opportunities than ever before for physicians to move into executive positions at hospitals, health systems and medical groups across the country.

Gain additional insight from SullivanCotter's Physician Executive Compensation Survey and Medical Group Executive Compensation Survey.


INFOGRAPHIC | 2018 Manager and Executive Compensation in Hospitals and Health Systems Survey

Market Uncertainty and Change Requires Good Business Judgment

In today's unprecedented health care environment, organizations remain focused on two fundamental issues: optimizing clinical care and ensuring financial stability.  These new performance priorities are setting the agenda for executive talent and rewards, and require good business judgment when designing and implementing “best fit” pay programs and setting compensation.

Learn more and view highlights from our 2018 Manager and Executive Compensation in Hospitals and Health Systems Survey.


Modern Healthcare | Annual Executive Compensation Article

Providing high-quality care and driving greater value for patients while also keeping costs in check remains one of the greatest challenges for hospitals and health systems nationwide - placing a premium on top executive talent with the skills and experience necessary to lead such efforts.

Amid these ongoing cost-containment initiatives, organizations continue to prioritize executive pay and new performance-based incentive strategies in order to attract, retain and engage leadership and keep pace in a world where the demand for talent outweighs supply.

Learn more from Modern Healthcare's annual executive compensation analysis, featuring data from SullivanCotter's 2018 Manager and Executive Compensation in Hospitals and Health Systems Survey and insights from Kathy Hastings, Managing Director, and Tom Pavlik, Managing Principal.


Q&A | What Comes After Physician Compensation Design?

As health care revenue sources continue to shift from volume to value and organizations take on more risk, new physician and advanced practice provider (APP) compensation strategies are emerging. The health care industry is adapting to new payment and care delivery structures with increasingly complex compensation models to match. Organizations must now consider a growing number of components when developing these plans, including recruitment, retention and engagement, patient satisfaction, access, quality of care, governmental regulations and more.

You’ve put time and effort into designing an effective physician compensation plan. How can you make your implementation equally transparent, accurate and successful?


PODCAST | Governing Health - Director Compensation in Nonprofit Health Systems


PODCAST: Governing Health - Director Compensation in Nonprofit Health Systems

In an industry that continues to undergo unprecedented change, the role of the nonprofit health system director is now more important than ever. Engaging employees at this level is a major concern as their scope of responsibility grows more complex. In a seller's market for director services, devising competitive compensation packages is critical and can be used as a key talent development, recruitment and retention tool.

In the most recent edition of the Governing Health Podcast Series, Michael Peregrine, Partner, of law firm McDermott Will & Emery, welcomes two of the leading voices on executive compensation trends and practices in health care: Ralph DeJong, Partner, McDermott Will & Emery and Tim Cotter, Chairman and Managing Director, SullivanCotter.

Higher Stakes: Boards Play Pivotal Role in Hospital Direction

As hospitals and health systems learn to navigate an increasingly consumer-driven marketplace for health care, the scope of the board's responsibility continues to expand in kind.

To help organizations align with the industry's new value-based performance goals and guidelines, trustees are now tasked with providing greater insight into emerging areas of focus such as consumer engagement, data analytics, information security and recruitment and retention.

Featured in the June 4th edition of Modern Healthcare, SullivanCotter discusses the evolution of boardroom activities from traditionally transactional into something much more complex.

In addition to overseeing executive compensation programs, boards are also taking the lead on other important issues such as cultural integration, leadership diversity, pay equity and more. Many are even diving deep into performance benchmarking and analyzing key quality metrics to help ensure alignment with and progress towards overall organizational goals.

Read full article

Fundraising Talent Strategy in 2018 and Beyond

As the saying goes, you need money to have a mission. Whether through in-kind donations or the receipt of funds from public or private sources, most not-for-profit organizations rely to some degree on philanthropy to obtain the funds needed to sustain their mission.

For some not-for-profits, the fundraising professionals vital to this process are considered the lifeblood of the organization, and the loss of key talent could mean a loss of momentum and/ or continuity in donor relationships.

In developing a fundraising talent strategy for this year and beyond, consider proactive strategies to attract and retain high-performing and high-potential professionals, while also enhancing the capabilities of existing staff.


PODCAST | Governing Health - Executive Compensation Trends Update


With the new provisions set forth by the Tax Cuts and Jobs Act and recent trends associated with pay equity, the use of clawbacks and the expansion of incentive compensation goals and objectives, the governance of executive compensation remains a critical boardroom concern.

In the most recent edition of the Governing Health Podcast Series, Michael Peregrine, Partner, of law firm McDermott Will & Emery, welcomes two of the leading voices on executive compensation trends and practices in health care: Ralph DeJong, Partner, McDermott Will & Emery and Tim Cotter, Chairman and Managing Director, SullivanCotter.

CMS Star Ratings Highlight Need to Compare Performance by Hospital Type

As the marketplace for health care grows increasingly complex, organizations must develop a greater understanding of what drives performance to remain competitive.

The Centers for Medicare and Medicaid Services (CMS) recently published its newest Star Ratings, designed to measure and report hospital quality. These ratings have provoked a number of questions and concerns as more than 3,600 hospitals - regardless of size, breadth of services, or geographic location - are benchmarked against a collective average.

SullivanCotter was recently featured in a Modern Healthcare article which addresses these differences. As organizations use these ratings to help drive improvement efforts, it is important to consider the following:

  • Using national benchmarks like the CMS Star Ratings can be a great way for hospitals nationwide to help drive quality improvement, but only if they understand the nuances and complexities in the data and how to best analyze it.
  • Not all hospitals are the same. To truly identify areas of meaningful improvement, hospitals must be compared to like hospitals.
  • Organizations cannot improve what they cannot measure, and the new CMS Star Ratings continue to provide transparency in health care quality and performance as the industry shifts from volume to value.
  • To drive improvement efforts and help organizations more effectively benchmark performance against their direct peers, the market requires a standard set of national quality metrics that is stratified by hospital type.


Using CMS Star Ratings to Drive Improvement at Specialty Hospitals

As the marketplace for health care grows increasingly complex, organizations must develop a greater understanding of what drives performance to remain competitive.

While enhancing patient satisfaction, improving quality and reducing the cost of care remains the overall aim, specialty hospitals operate under a very different set of circumstances than their more mainstream counterparts.

Using national benchmarks like the CMS Star Ratings can be a great way for specialty hospitals to help drive quality improvement, but only if they understand the nuances and complexities in the data and how to best analyze it. SullivanCotter was recently featured in a Modern Healthcare article which addresses the new ratings.

Not all hospitals are alike. Specialty hospitals must benchmark themselves against their direct peers or regional competitors in order to identify areas of meaningful improvement.

Learn more about the new CMS Star Ratings in a recent article by SullivanCotter.


INFOGRAPHIC: 2017 Hospital-Based Physician Compensation and Work Effort Survey

With the demand for hospital-based physicians on the rise, organizations must understand emerging trends in compensation and clinical work effort standards that are unique to this practice setting.

Learn more and view highlights from our 2017 Hospital-Based Physician Compensation and Work Effort Survey,  which includes data on 13 specialties from more than 30 different health care organizations.



INFOGRAPHIC: 2017 Advanced Practice Provider Compensation and Pay Practices Survey

The role of the advanced practice provider (APP) is changing to reflect increasing specialization and variation by practice setting as care models evolve. Hospital-based roles continue to grow, primary care practitioners are starting to function more independently, and roles in medical and surgical specialties are helping to improve patient access and efficiency of service lines.

This diversity of roles means a 'one size fits all' compensation model is no longer effective and can create obstacles to delivering high-quality and effective care.

As the demand for APPs continues to grow, compensation strategies should be tailored to align with overall provider optimization and organization strategies.

Learn more and view highlights from the 2017 Advanced Practice Provider Compensation and Pay Practices Survey.


INFOGRAPHIC: 2017 Physician Compensation and Productivity Insights

Physician Reward Strategies Evolving to Align with Performance Drivers and Organizational Goals

In a rapidly evolving health care environment, organizations are faced with a number of key industry trends affecting the way in which health care is delivered and accessed - including a growing interest in population health, physician alignment, continued industry consolidation and more. These activities are scaling the industry in unprecedented ways.

Understanding how these trends impact organizational strategies and their effect on the design of physician compensation programs, including fair market value and commercial reasonableness, is critical as hospitals and health systems nationwide continue to navigate the transition from volume- to value-based care.


INFOGRAPHIC: Designing Health Care Executive Compensation

Drive Performance and Engage Leadership

As health care undergoes unprecedented change and the marketplace for talent grows increasingly competitive, hospitals and health systems must design executive compensation programs that effectively support the organization's talent management strategy. The same trends impacting care delivery, such as ongoing industry consolidation and integration, the focus on population health, and the shift to value-based reimbursement, also have significant implications executive and leadership positions. Aligning compensation with organizational goals in a way that drives performance and engages leadership is critical in such a highly competitive environment and requires the proper tools and programs to help build, buy and protect key executive talent. Learn more about the right questions to ask and actions to consider to help ensure your programs properly support the executive talent strategy.


WEBINAR | A Board Imperative: Designing Executive Compensation to Drive Performance and Engage Leadership


While ensuring the stability of current executive talent is important, board members need to build a strong pipeline for future leadership. Executive roles are becoming increasingly complex as health care organizations nationwide focus on integration, care delivery redesign, value-based care and, ultimately, improving population health. Hospitals and health systems face a number of challenges when it comes to recruiting, retaining, motivating and engaging the right people.

Supporting the next wave of health care leaders through comprehensive talent management, leadership development and succession planning strategies is imperative. As health care continues to evolve, executive compensation programs are also changing to support these goals.

View a recording of this November 14 webinar, hosted by the Health Forum/American Hospital Association, where industry experts from SullivanCotter discussed how to effectively design executive compensation programs that support your organization’s leadership talent management strategy.

Key Learnings

  • Understand current trends in executive compensation and emerging talent requirements based on the changing health care environment
  • Insight into the specific actions and tools organizations are employing in response to ensure the development of a robust leadership pipeline
  • How effective performance measurement in annual and long-term incentive programs can be used to align with organization strategies, support executive engagement and promote leadership development
  • The potential implications of overlooking executive talent management, leadership development and succession planning strategies

Attracting and Retaining Physicians Through Benefits

Hospitals and health systems are increasingly employing physicians in an effort to enhance physician alignment, improve quality, grow market share and increase revenue. This labor market trend has focused attention on physician benefits, which may differ from benefits offered to other employees.

Employers of choice establish differences between themselves and competitors in key benefits, such as life insurance, disability, paid time off and retirement, as well as certain physician-specific benefits, such as continuing medical education (CME) expenses, licensing and medical malpractice. This article explores the types of benefits being used by hospitals and health systems to attract and retain employed physicians in today’s marketplace.

Findings in this article reference SullivanCotter's 2017 Physician Compensation and Productivity Survey Report and the 2017 Benefits Practices in Hospitals and Health Systems Survey Report. Survey results were supplemented with SullivanCotter’s extensive knowledge and experience with physician compensation and benefits.


The pace of hospital and health system employment of physicians has sharply increased in recent years. Three-quarters of health care organizations surveyed by SullivanCotter said they plan on increasing the number of employed physicians and Advanced Practice Clinicians (APCs) by 8% to 11% within the next 12 months. This development is being driven by several notable factors:

Medicare physician reimbursement: Complex new rules implemented under the Medicare Access and CHIP Reauthorization Act (MACRA) will work to the advantage of systems that can accommodate bundled payments, adapt features of (or transition to) accountable care organizations and avoid penalties for such outcomes as preventable hospital readmissions. Hospitals view physician employment as a way to prepare for reforms shifting reimbursement from fee-for-service to reimbursement based on patient outcomes and quality of service.

The desire to capture market share, and to improve quality and efficiency. Consolidation is rapidly occurring in the marketplace, and acquisition of physician groups and practices is one way hospitals and health systems can garner a bigger share of the market. In addition, the expectation is that physician employment can facilitate quality improvement by encouraging better integration of care and communication among clinicians.

Changing market dynamics. Both private-practice physicians and hospitals and health systems are facing an environment of decreased utilization by privately-insured patients, a changing payor mix, and downward-trending reimbursement rates. At the same time, the cost to maintain a contemporary physician practice is increasing. To adjust, physicians in private practice may see more patients with loss of personal time and an increase in stress. Employment with a hospital or health system may offer a better work-life balance and relief from the burden of operating and managing a difficult business enterprise.

As the employment of physicians by hospitals and health systems increases, strategic decisions regarding physician benefits must be made. Key considerations include program costs, market competitiveness and the ability of programs to attract, motivate, reward and retain physicians.


The foundation of a competitive benefits program is a strong basic benefits package. Core physician benefits include medical and dental insurance, with competitive cost sharing, short- and long-term disability insurance, life insurance, paid time off, qualified retirement, CME/professional dues and malpractice coverage:

Medical and dental coverage. Typically, physician health care coverage is the same as the coverage provided to the general workforce (i.e., no special provisions), and generally, newly hired physicians are immediately eligible. Many organizations offer several medical plan options; PPO/POS plans are the most common, followed by HMO/EPO plans. High Deductible plans, continue to rise in usage. Most organizations require a contribution for physicians and dependents. Typical cost sharing is an 80-20 employer-employee split (70-30 split for dependents). Dental coverage is also typically provided (with typical cost sharing being a 70-30 employer-employee split or a 65-35 split for dependents). Despite health reform related changes, most surveyed hospitals and health systems say they remain committed to providing health coverage to employees.

Paid leave. The market trend is to provide a single bank of paid time off (PTO) that may be used for any purpose (rather than providing separate leave for vacation, personal days, holidays, short-term sick leave and continuing medical education). Typically, annual PTO benefits provided to physicians range from 25 to 35 days, and may vary by length of service. Carryover and cash-in amounts are typically limited to control liability and ensure that time off is being appropriately used.

Short-term disability. Employer-paid coverage is typically provided in the event of short-term illness. Around half of organizations provide a different short-term disability benefit for physicians than other employees, which may include full salary continuation. The method of coverage varies by employer, and may include paid leave, separate sick leave days, short-term disability insurance or a combination of paid leave and insurance.

Life and long-term disability (LTD) coverage. Employer-paid basic group life and LTD coverage is provided to physicians by most employers. Higher levels of life insurance and LTD coverage may be needed when the basic group coverage does not adequately meet the unique coverage needs of the physicians. Employers often address physician needs through a carve-out classification in the basic group plan (if amenable to the insurance carrier). Where supplemental life and LTD coverage is provided, coverage is typically employee-paid.

Qualified retirement. A strong qualified retirement benefit can make a real difference with recruiting, and can help reduce turnover. The market norm is a defined contribution plan (e.g., 401(k) or 403(b) plan) with employer-matching and/or non-elective contributions and salary deferral opportunities. On average, contributions range from 3 percent to 7 percent of salary (limited to the pay cap, $270,000 in 2017). Although organizations are not allowed to discriminate in favor of physicians, some organizations use Social Security integration formulas to deliver a higher retirement contribution to their physician group (e.g., a contribution of 5 percent of pay, up to the Social Security taxable wage base, plus 10 percent of pay over the wage base). Defined benefit plans, which have experienced a decline in use in recent years, are still seen in the marketplace (particularly account-based programs like “cash balance” plans).

CME/professional dues. Most organizations provide an allowance and time off for continuing medical education (CME) activities. Annual allowances for CME typically range between $3,500 and $5,000, with paid time off between five and ten days. The majority of organizations pay for a portion or all professional dues and medical licensure fees (either through separate reimbursement or as part of the CME allowance).

Malpractice coverage. Employer-paid claims-made malpractice insurance is usually provided to physicians. If newly hired physicians had claims-made malpractice policies at their previous practices, they will need to pick up tail coverage to protect against potential lawsuits that may arise after leaving, which can be expensive. Although not common, employers may offer to pay for tail coverage to recruit and retain doctors; this can be an effective negotiating tool.


In addition to a strong basic benefits package, other components of a competitive physician benefits package may include the following:

Nonqualified retirement. Qualified retirement contributions for physicians are limited by the statutory pay cap ($270,000 in 2017) and qualified salary deferrals are limited to by federal limits as well ($18,000 in 2017). One way employers can address these issues and increase retention is to provide  supplemental nonqualified retirement programs. Unlike qualified plans, eligibility for nonqualified retirement plans must be limited to higher-paid physicians and other highly compensated personnel. Currently around one-quarter of employers provide physicians with some form of nonqualified supplemental retirement contribution. Common approaches include a restoration plan (i.e., one that “restores” qualified benefit amounts limited by statutory caps) and a fixed-percentage contribution of salary (i.e., 3 percent, 5 percent, 7 percent). Typically, vesting requirements apply to employer supplemental contributions (i.e., future service is required before benefits are earned). In addition, most employers offer physicians the opportunity to make salary deferrals to a nonqualified plan (for not-for-profit employers, the maximum annual deferral is limited to $18,000 in 2017).

Long term care (LTC).  Although LTC premium costs have risen in recent years, adding LTC coverage to the benefit package can make for a more attractive overall program. Many employers do offer access to LTC insurance, but typically coverage is only available if the employee pays. However, given the importance physicians place on retirement planning and asset protection, employers may wish to give employer-paid LTC coverage a second look. Employers can specifically target physicians with this benefit because LTC is a nonqualified benefit, and is not subject to ERISA or employee discrimination rules.

Repayment of student loans. Medical school debt is a significant problem for many physicians. However, less than 20 percent of employers offer programs to relieve student loans. Providing a loan repayment program to new hires can be a very effective recruitment and retention tool. This option can be particularly attractive in medically underserved areas; some physicians may even be willing to sacrifice a portion of salary for a structured loan-repayment system. When provided, such loan-repayment benefits typically range from $15,000 to $30,000 per year and are usually subject to a lifetime maximum amount (i.e., $100,000, $150,000). Employers may require that this benefit be repaid should the recipient leave the organization within a stipulated period (i.e., three to five years after receipt of the benefit).

Relocation assistance. Most organizations cover the expense of moving household goods and provide a travel allowance. Temporary housing allowances are provided by some employers in addition to relocation expense reimbursement. A few organizations offer guaranteed purchase of a home if it doesn’t sell within a certain time period. The total value of relocation assistance generally ranges from $8,000 to $15,000. The value of the relocation package is typically independent of the physician position level (although this amount does vary by position in some organizations).

Flexible work schedules. Today, new physicians are just as likely to be female as male, and more tenured physicians have postponed retirement due to the recent economic downturn. With these workforce changes have come greater interest in work-life balance and flexible, part-time employment schedules. Forward-thinking organizations recognize that they can do more to attract and retain today’s physicians by creating options for flexible work schedules. 

Sabbatical. Less than 20 percent of organizations provide physicians a sabbatical benefit. However, providing a sabbatical leave can have a very positive impact on both physicians and employers, as physicians usually return revitalized and ready to provide better quality of care. Where sabbatical leave is provided, physicians are typically eligible only after several years of service to an organization (e.g., five or 10 years). Leave may range from one month up to a full year. During a leave period, compensation ranges from a percentage of salary to full salary and benefits (depending on the duration of the sabbatical). 

Other benefits. Other benefits that may round out a benefits package may include insurance coverage for catastrophic medical events, prepaid legal services, wellness programs, discounts at local businesses and a physician lounge. As organizations look for ways to reduce stress and physician burn-out, physician lounges have been cited as a meaningful way to improve the work environment. Physician lounges are also great places for new practitioners to meet colleagues, and provide a place where collaboration can occur.


Providing physicians with a competitive and well-rounded benefits package can go a long way toward creating an engaged workforce. Yet, building a benefits package that is appreciated by the physician population requires informed decision-making by human resources and proper communication:

Know the needs of your physicians group. Depending on the demographics of the group, some benefit options will be more appealing than others. To understand which options physicians favor, employers may wish to consider surveying their physician group. In addition to group preferences, employers should also take the time to get to know the needs of individuals. Although many benefits offered have to be the same for all employees by policy or law, some benefits, such as CME leave, CME expenses and vacation, can be adjusted to meet individual needs.

Get the support of physician leadership. Human resources leadership should meet regularly with physician leaders to ensure benefit programs are perceived as being adequate, market competitive and meeting the needs of the physician group. Physician leaders may have insight into simple changes that can make benefits packages more effective. 

Communicate the real value of your benefit program.  While having a well-designed benefit program is important, programs won’t provide meaningful retention value unless they are well-communicated. It is critical that organizations carefully educate and communicate with physicians about the value of their benefits programs. An excellent way to do this is through a total compensation statement. A simple summary of a physician’s individual benefits and what they cost can be a very powerful communication device, and it can highlight the real value of the benefits that may otherwise be taken for granted.

Understand the applicable regulations.  When designing a physician benefits program, employers must keep in mind that total compensation (value of benefits and cash compensation) must fall in line with physician fair market value standards. In addition, non-discrimination laws restrain employers from offering special benefits to physicians in certain areas (e.g., health coverage and qualified retirement).

As employment of physicians continues to grow, benefits programs will have an increasing impact on recruitment and retention. Well-designed and well-communicated benefits programs can give hospitals and health systems a meaningful edge in the competition for top medical talent.