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Stanford Report, October 21, 1998

How the Medical School's pay plan works: 10/98

Compensation primer: How the new plan will work

Here are some of the nuts and bolts of the new faculty compensation plan, which Dean Eugene Bauer, MD, presented last week to a special session of the School of Medicine faculty senate. Bauer said he plans to send all faculty a memo summarizing the plan within the next few weeks.

The new plan for compensating all faculty within the school will be phased in over two years. Faculty paychecks will not reflect any changes resulting from the plan until fiscal year 2000.

Under the new plan, compensation for faculty in clinical departments will be based on three components: a fixed base (known as X under the old system); a variable component (formerly Y); and a bonus (formerly Z). Compensation for faculty in the basic science departments will be based on just two components: a fixed base plus a variable component.

Faculty members with base salaries that are higher than the newly established base will have their base frozen at the current level. Faculty hired or offered positions after Sept. 1, 1998, will have their base salary determined by the new program.

Under the new plan, the base is set at $66,000 for an assistant professor, $84,000 for an associate professor and $110,000 for a full professor. The variable component will be determined both by the faculty member's specialty and by his or her own contribution to the department. For clinical faculty there are five ranges, which have been determined based on market data to reflect competitive salary opportunities.

The ranges encompass both base and variable salary. As an example, an assistant professor in psychiatry is assigned to the lowest range, which is $85,000 to $170,000. The assistant professor has a fixed base salary of $66,000. The variable salary, therefore, can range from $19,000 to $104,000. The two components together are not greater than $170,000 or less than $85,000.

At the high end of the range, a professor of neurosurgery, for example, has a total salary range of $170,000 to $450,000. The professor has a fixed base salary of $110,000. The variable salary, therefore, can range from $60,000 to $340,000. The two components together cannot exceed $450,000 or be less than $170,000.

Under the new program, an individual's base will not change unless the individual moves up in rank ­ for instance, from assistant to associate professor. The combined base plus variable portion, however, may increase or decrease by as much as 10 percent each year based on individual performance and the department's financial resources.

The Compensation Board ­ a group of faculty and staff who will oversee the plan ­ will review the salary structure annually for alignment with market pay levels and will consider revisions to the structure at least every three years.

In addition, faculty members in clinical departments are all eligible for the bonus, which will vary from year to year depending on departmental and overall school income, said Michael Hindery, senior associate dean for finance and administration.

Faculty members in the basic sciences initially were not included in the new compensation program, in part because they are not subject to the same vagaries of the health care marketplace. But some clinical faculty argued for a uniform approach throughout the school, and the revised plan brings the basic science faculty into the new system. Salaries for faculty in basic sciences will be set in the same way, although these faculty won't be eligible for bonuses. Chairs of the basic science departments voted not to implement a bonus plan at this time.

The basic science structure has three ranges, all corresponding with faculty rank. The range for an assistant professor is between $66,000 and $90,000 a year; for an associate professor, between $84,000 and $115,000 a year; and for a full professor, between $110,000 and $200,000.

Benefits will not change at all except to the extent that benefits are based on total salary.

While the school will provide general guidelines for the review process, each department will have the responsibility of developing its evaluation system, which must be approved by the Compensation Board. In the Department of Medicine, for instance, faculty will be evaluated on the basis of a simple, four-part memo outlining goals and accomplishments in the four key categories of teaching, research, patient care and administration, said department chair Judith Swain, MD, the Bloomfield Professor of Medicine. Swain said each faculty member will be reviewed by a committee of six, including herself, the associate chairs and the relevant division chief.

The Compensation Board will oversee the review process, ensure that faculty pay arrangements are in keeping with the school's goals and approve any changes to the system. Board member Kenneth Cox, MD, a professor of pediatrics, said the group also will look after the faculty's interests.

"We will be looking at issues like academic freedom and making sure that teaching and research remain valued within the system," Cox said. -- R.R.