A Guide to Understanding Physician Compensation Models

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Understanding your compensation is critical before you decide to accept a job. In the world of medical practices or groups, however, this understanding is even more essential, because a wide variety of compensation structures for physicians exists. These compensation models can dictate not only what a physician will make in the near future, but also what his or her long-term opportunities may be.

Different types of structures can work for different physicians, depending on the applicant’s experience, skills and goals. To ensure a model is suitable for your professional goals and expectations, you should understand the different compensation models available and critically evaluate the type offered by an employer before accepting a job.

Types of Physician Compensation Models

A wide array of physician compensation models exists. These models include:

100% salary—Under this model, the physician will receive a prearranged, fixed salary. This structure is easy to administer, because the physician will be making the same amount each pay period without any fluctuation. It is also extremely predictable for physicians, which can be enticing for less-experienced physicians. This type of structure may lead to increased internal collaboration, teamwork and teaching, because productivity is not a factor in the model.

However, a fixed salary also provides little incentive for physicians to bring in new patients or put in more effort building a practice. That means it’s not necessarily the best model for creating a long-lasting and growing practice. Because of this, it may not be the best choice for a hardworking physician who wants to be rewarded for bringing in new patients or increasing a practice’s revenue.

Salary plus incentive—This model guarantees the physician a minimum base salary, which could then be supplemented with additional compensation in the form of a bonus based on personal productivity, behavior and work. The model incentivizes certain behavior; the bonus can be tied to different factors the practice values including quality of work, patient satisfaction, productivity or any combination of factors. This can help promote a practice’s specific mission or values, while also giving physicians some security that they will be receiving a specified minimum amount. However, because of the subjective nature of the incentive structure, physician satisfaction may be difficult to predict unless the model design is clear and fair, which may be complicated to design and implement.

Equal shares—This model is easy for practices to administer. It takes the money the practice earns and, after expenses are paid, divides the remainder among the practice’s physicians. Under this model, there is great growth potential; physicians may become more invested in the practice than they would otherwise because of their personal stake in the practice’s growth and success. However, this model can be complicated to implement when physicians have varying levels of experience or skills, and it may not be an option for less-experienced physicians.