Understanding Physician Compensation and What Influences It

In the past, physician compensation models were known to be complicated and confusing. However, over time they have become far less complicated and easier to manage and understand.

There are 5 types of physician compensation plans:

1. 100% Salary OR 50% or More Salary Plus Incentive: Typically offered by large healthcare organizations, academic settings or physician-owned practices. This model is straightforward as the income level is set and physicians know exactly what they’ll be paid.
2. 100% Equal Share: This model is based on the economics of the healthcare organization. In other words, after expenses the remaining revenues are allocated equally among all physicians.
3. 100% Productivity OR 50% or More Production Plus Incentive: With this model, physicians are paid a percentage of either billings or collections, or on the resource-based relative value scale units assigned to procedures or patient-visit types. The overhead costs of the organization (fixed and variable) are also allocated equally among all physicians.
4. Relative Value Units (RVUs): RVU’s are focused on patient care and reflect the level of time, skill, training and intensity it takes a physician to provide a medical service. Healthcare organizations that focus on RVU compensation establish a predetermined dollar amount that is affordable that each physician will receive per work RVU generated.
5. Stacking: “Stacking” includes multiple compensation arrangements. In other words, compensation stacking is the cumulative effect on fair market value and commercial reasonableness due to various multiple arrangements with a physician, or a single arrangement with many individual components.

According to MGMA, industry trends and changes in the reimbursement landscape can affect compensation plan structures. The study also shows how more practices are moving away from production-based compensation, making the salary-based compensation with added incentive payments the most common plan.

Here are 5 factors that influence physician compensation packages:

1. Practice Setting: As a physician, it’s important to know and understand that your compensation can be affected depending on the type of practice setting you choose to work in. Physicians working under an academic setting tend to make less when compared to a physician working independently or in a private practice. To give you an idea, the median income of physicians working in an academic setting was $164,672 versus physicians working in a private practice which had a median income of $223,456 according to MGMA.
2. Specialty: Physician specialty plays a huge role in physician compensation. According to the University of California, Davis School of Medicine, physician specialists earn twice as much as primary care physicians. The study shows how primary care physicians make the lowest hourly wages (~$60.48) when compared to other specialists and subspecialties. The top three specialists and subspecialties included surgeons at $92 per hour, radiation oncologists at $126 per hour and neurologic surgeons at $132 per hour.
3. Salary: As a physician, you need to do your due diligence when waiting on an offer. Physicians can get an idea of what they should be getting paid (salary) and incentives (i.e. signing bonuses, student loan repayment, reimbursement for relocation etc.) they could be receiving according to their specialty by reviewing “placement salary information” provided by companies such as MGMA.
4. Location: Location and market size play a huge role when it comes to physician compensation. After receiving an offer, physicians should take the time to analyze it along with the location to understand cost of living expenses and to determine how much your salary/income will stretch.
5. Other Factors: Other typical factors that affect physician compensation include individual performance, organizational performance, and patient satisfaction. As you begin to get offers, make sure to review and/or ask the healthcare facility or private practice you are considering, how these additional factors will affect your compensation.

For more information and/or guidance on physician compensation, connect with one of our physician recruiters. And, don’t forget to check out our FREE physician jobs resource.