The following is from Robert L. Jesse's MD, Ph.D (Principal Deputy Under Secretary for Health, VHA) testimony before the Senate Veterans Affairs Committee on June 8, 2011.
"There are two discretionary components of compensation for VA physicians and dentists under the title 38 pay system - market pay and performance pay. Market pay, when combined with basic pay, is meant to reflect the recruitment and retention needs for the specialty of assignment of the particular physician or dentist in a VA facility...the Secretary has discretion to set market pay on a case-by-case basis. Market pay is determined through a peer-review process based on factors such as experience, qualifications, complexity of the position and difficulty recruiting for the position. In many cases, market pay exceeds basic pay." The following guidance is from the Department of Health and Human Services instruction on Title 38 Physician and Dentist Pay.
A. Each physician and dentist covered by this part is eligible for market pay. Market pay is intended to reflect the recruitment and retention needs for the specialty or assignment of a particular physician or dentist at an HHS facility.
B. At least once every two years, the VA Secretary prescribes nationwide minimum and maximum amounts of annual pay (base pay plus market pay) that will be paid under this paragraph. These amounts are published in the Federal Register for not less than 60 days prior to the effective date. The VA Secretary may prescribe different ranges for different specialties or assignments. In determining pay ranges, at least two or more national surveys of pay for physicians and dentists are consulted. National surveys consulted include data that describes overall physician and dentist income by specialization or assignment and benefits in broad geographic scope.
1. When the VA increases the nationwide minimum and/or maximum amounts of annual pay under this paragraph, physicians and dentists are not automatically entitled to a corresponding increase in their individual annual pay rates. Only physicians and dentists whose existing rate of annual pay falls below the newly prescribed nationwide minimum for their designated pay range will automatically receive an increase in market pay to make their annual pay rate equivalent to the new nationwide minimum. Compensation Panels review the market pay rates for individual physicians and dentists on a periodic basis.
2. In the event that the nationwide minimum and maximum amounts of annual pay are reduced under this paragraph, physicians and dentists already on HHS rolls will not experience a reduction in market pay.
C. There may be up to four tiers of annual pay for each specialty or assignment for which a separate range of pay has been approved. Each tier reflects different professional responsibilities, professional achievements, or administrative duties. "See Exhibit 590-1-C."
D. The amount of market pay and appropriate tier for a particular physician or dentist is recommended to the approving official.
E. The determination of the amount of market pay of a particular physician or dentist shall take into consideration:
1. The level of experience of the physician or dentist in the specialty or assignment;
2. The need for the specialty or assignment of the physician or dentist at the facility;
3. The appropriate health care labor market for the specialty or assignment of the physician or dentist;
4. The board certifications, if any, of the physician or dentist;
5. The accomplishments of the physician or dentist in the specialty or assignment;
6. Consideration of unique circumstances, qualifications or credentials, if any, and the comparison of these circumstances to the equivalent compensation level of non-HHS physicians or dentists in the local health care labor market; and
F. Each OPDIV will establish one "Compensation Panel" that will be responsible for PDP Program oversight and guidance. These Panels will ensure that there is consistency and appropriateness of pay determinations within the OPDIV and periodically review physician and dentist pay under the PDP Program.
All Compensation Panel recommendations are taken into consideration by the appropriate approving official. The approving official determines the amount of market pay to be paid a physician or dentist after consideration of the range and tier recommended by the panel. The approving official's decision is final.