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February 5, 2024

Physician compensation models

As health care systems respond to a changing market and payer and regulatory priorities, compensation plans have evolved, too.

For example, according to the MGMA 2022 DataDive Provider Compensation study, 42 percent of medical groups surveyed have added value- or quality-based pay to their physician compensation plans. This reflects a steady climb from just over a quarter of groups surveyed in 2016.

This trend is a predictable response to changes in payer contracts and government programs, which are evolving to emphasize measures beyond sheer production, especially in relation to hospitals and systems. But fee-for-service pay is far from going away completely. Most organizations still see a need to track and incentivize productivity. For this reason, value or quality incentives tend to be an added component of compensation plans that emphasize productivity, typically tracked by RVUs or WRVUs.

Though these newer incentives signal a desire to emphasize more holistic goals (such as patient outcomes, care coordination and patient engagement), the rise of yet another way of compensating physicians serves to make physician pay models more complex (at least for the time being).

The benefits of clarity

When graduating physicians are choosing between competing opportunities, anything that makes how they’ll be paid more confusing could subtly work against your offer. Some physicians - leery of pay that’s unpredictable - may develop a preference for straight salary or salary-heavy offers, even though those positions may ultimately gate their compensation upside. This is frustrating enough, but even more so when the "complexity" of your compensation scheme exists precisely to ensure physicians are appropriately rewarded for excellence and hard work.

Worse, the very physicians expected to prefer more "evolved" payment models may be deterred by the addition of yet another metric to aim for. Unfortunately, what seems opaque to physicians who are just learning the ropes of employment contracts is that different pay programs and incentives can influence organizational culture.

A harbinger of culture

"In many ways, you get the practice that you incentivize," says John Marine, M.D. "If you incentivize a lot of productivity, that may produce a certain kind of practice. If you incentivize more teamwork, incentivize value and quality, that will produce a different kind of practice environment."

To the extent candidates don’t realize that incentives don’t just reflect payer priorities, but also the culture an organization is consciously trying to achieve, both parties miss out.

Strive for transparency in your model

Culture and compensation can be connected in other ways - and not always the expected ways. Graduating physicians may even assume the opposite about one type of model versus another.

For example, some residents and fellows may have internalized a skepticism about productivity-based compensation, especially if they have concerns about predictable pay due to loan repayments. Often, they’re worried about pressure to deliver "numbers," too. But while it may seem obvious that pay based on collections or RVUs will apply pressure to perform, that pressure could be as or more likely in a straight-salary environment.

Ultimately, the burden - and opportunity - for recruiters and recruiting organizations is to help physicians sort through their options without relying on inaccurate assumptions. Those assumptions can be surprisingly counterintuitive. The benefits of that shiny new incentive program might not be misunderstood by the very people who should embrace it. Physicians may also be slow to ask questions (or simply not know what questions to ask to improve their understanding).

Providing as much detail as possible up front, early in the recruitment process, can help head off misunderstandings or hesitation that can cause physicians to decline your offer. And it will go a long way toward presenting a transparent culture that is in itself a selling point for your organization.

Read PracticeLink articles by Laurie Morgan

Laurie Morgan

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