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Learning the Rules of the Road: How to Compensate Physicians for Drive Time

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Whether it’s directorship duties, call coverage, or network outreach, physicians are commonly paid for activities performed at service locations that are many miles away. Paying for physicians to travel is standard practice, but it often prompts the question…should it be considered administrative time or clinical time?

The answer to this question could have significant financial ramifications, since clinical and administrative activities are valued differently. Buckle up while we consider the issues.

Detour Ahead

Categorizing drive time is an inherently thorny issue, given that driving to a service site is neither administrative nor strictly clinical. Benchmarks aren’t very helpful; clinical service benchmarks concern patient care, while administrative benchmarks relate to all sorts of activities—none of which include operating a motor vehicle. Nor does the market provide much guidance; models to pay for transportation time do exist, but they vary widely.

So how does the healthcare industry address the issue? Despite the lack of relevant data, health system leaders can take two sound approaches to pay for drive time—one based on legal precedent, and another on a comparison of compensation paid to employed physicians who do outreach.

Know the Law

Precedents set in legal cases are the best available source of information for drive-time compensation rates. The judgments are related to the value of time acknowledged by federal courts for professionals while traveling. ECG has reviewed a number of relevant court cases, the majority of which use a standard measure of 50% of the professional’s normal hourly rate. Applying this approach, the hourly rate would be based on the clinical service rate and discounted to 50%.

Be Aware of Other Drivers

Another approach is to consider employed physicians who do outreach to clinics and medical groups throughout the market, which often entails visiting those sites. These physicians are commonly paid a total annual salary that allows them to classify their drive time as worked hours toward their defined FTE status. However, travel time generally takes place in the early morning or at night. In other words, the physician dedicates time outside normal business hours to travel.

For example, four hours of drive time might overlap with two hours of normal patient care hours (i.e., driving to a remote site from 7 a.m. to 11 a.m., while the physician is typically in clinic from 9 a.m. to 11 a.m.). In that instance, the physician would effectively be paid 50% of the standard hourly rate for the driving time.

The US Department of Labor also offers guidance that would apply to the ability to pay for travel time. Reviewing this guidance can provide clarity for your internal compensation policies.

Stay in the Right Lane

Applying any discount lower than 50% of the prevailing clinical hourly rate is not advised. But if your organization has previously compensated above the 50% mark, you wouldn’t be alone. We have counseled clients with myriad reimbursement models. However, there is no reliable data to support paying for every hour of drive time at a full hourly rate, particularly if the outreach work itself is paid at a premium.

Drive safe out there…

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The ECG Valuation team is often asked by our clients and colleagues to respond to challenging matters of healthcare valuation and physician compensation. Occasionally, answers to these questions are clear and uncomplicated, but frequently a nuanced and specific response is necessary. If you have any questions about the valuation process, please contact the ECG Valuation team.