Summary of Work:

The Cottage Health leadership team engaged Warbird as a strategic and technical advisor to perform an assessment of Cottage’s existing physician compensation arrangements and develop a new comprehensive physician compensation plan. This new physician compensation plan was required to enhance Cottage’s ability to recruit and retain provider resources and provide Cottage’s executive with a roadmap to strategically expand its aligned provider group. Working in collaboration with Cottage’s system COO and various internal oversight committees, Warbird evaluated Cottage’s current physician compensation arrangements relative to industry standards and best practices. From this assessment, Warbird developed specific recommendations for redesigning Cottage’s physician compensation plan to align with Cottage’s strategic growth objectives. Warbird recommended a new compensation plan design, internal systems to support review and evaluate physician productivity, and developed template provider contracts and physician productivity reporting dashboards.


For over 125 years, Cottage Health has been a not-for-profit health, multi-facility system that has been providing advanced medical care for patients throughout California. Today, the nationally recognized services provide families with the patient-centered care they deserve. Cottage Health was formed in 1996 as the not-for-profit parent organization of Santa Barbara Cottage Hospital and its affiliated Cottage Children’s Medical Center and Cottage Rehabilitation Hospital, Goleta Valley Cottage Hospital, and Santa Ynez Valley Cottage Hospital. The System is establishing provider sponsorship agreements, which are allowed under California’s corporate practice of medicine laws. Cottage is focused on strategically expanding its network of physician practices as part of its competitive growth plans. To realize these growth plans, Cottage’s leadership team identified a need to remove the variability in its physician compensation and benefits arrangements and implement greater standardization to accelerate Cottage’s physician practice growth objectives.

Areas of Focus:

Compensation Design and Clinic Structure:

  • Incentive Design and Restructuring. Evaluated current design of provider incentive arrangements to ensure incentives aligned with Cottage’s community health objectives and Cottage corporate goals. Where incentives were not aligned with these objectives and goals, Warbird provided recommendations for alternative incentive structures to introduce into provider agreements.
  • Revised Compensation Model and Practice Organization. Creation of a final compensation model that tests and validates provider alignment with Cottage goals and objectives, fosters practice growth, and supports new physician onboarding without creating material risk for Cottage Health. In pursuit of this goal, Cottage Health decided that it will create two separate physician corporations, one for pediatric specialty services and a second for hospital-based physicians.

Sustainable Practice Performance and Benefit Design:

  • Sustainable Practice Financial Performance. The newly designed physician compensation plan will ensure that provider clinic financial performance is, at a minimum, financially breakeven. This sustainable compensation plan was realized using a holistic approach to evaluate and measure provider contribution to clinic and system performance.
  • Market Competitive Compensation and Benefit Package. Central to creating this sustainable physician compensation model was including a compensation and benefits package that was market competitive. Compensation and productivity bonuses were set to certain MGMA percentiles, and a market competitive benefits package was created.


Warbird’s assessment provided Cottage with a physician compensation plan, including the necessary organizational structures to support and evaluate physician productivity and related plan documents to execute on that plan. Warbird continues to provide strategic advisory and technical support, assisting Cottage in building the data system that will integrate the physician productivity reports with its electronic health records platform and evaluating additional physician specialty groups.