Of all the physician compensation models, how do you choose the best one for your practice or health system? At the MGMA 2009 Annual Conference one concurrent session "Physician Compensation: Not Your Simple Arithmetic" helped to answer this question.
"If you get the money right, everything else will follow," speaker Sidney Welch, JD, MPH said. Along with Deborah Holzmark, RN, MBA, the speakers provided these scenarios for guidance - whether you're looking to tune up your current compensation plan or create a new one.
Scenario 1
A hospital/group practice has determined it needs a family practice physician, so it recruits a primary care physician just out of residency training for direct employment.
Using MGMA Physician Compensation Survey data to benchmark compensation in this and all subsequent scenarios, this model employs a fixed salary with a minimum production requirement. Your numbers will vary, but for the sake of this example, the salary is $164,021 with a minimum of:
- $350,000 in revenue
- 4,000 work relative value units (RVUs)
- A set number of hours per week with appointments
This model appeals to physicians who have a low interest in productivity.
Scenario 2
A hospital has determined it needs a gastroenterologist and has projected the revenue it could generate based on data showing business lost by not employing GI doctor. The organization recruits the physician for direct employment.
This model features a fixed base salary, plus a productivity bonus and a maximum payout. For example, the base salary is $418,139 and the doctor will earn 30 percent of collections over $745,000. So if the physician produces $800,000, he or /she will earn a $16,500 bonus, plus $418,139 for a total compensation of $434,639.
This model appeals to physicians who are moderately interested in productivity and revenue generation.
Scenario 3
A group practice/hospital fills a need for a female primary care provider through direct employment. Over time, she does well on a slight productivity model, but the organization needs to emphasize the incentive aspect of the model.
Holzmark said reducing the base salary 50 percent and creating an incentive model based on wRVUs worked out well for the hospital and provider. For this example, the base was $84,000. Then, the physician was paid according to how many wRVUs she completed:
- $20 for 0-4,000 wRVUs
- $25 for 4,001-4,900
- $30 for 4,901-5,800
Eventually, the hospital would like to move toward a 100 percent production model.
Physicians who have high interest in productivity usually are moderately attracted to this model, according to Holzmark.
Scenario 4
This involves an established group practice of general surgeons with five shareholders, four non-shareholders and five physician assistants.
This production-based compensation model is the most common among group practices:
Production + revenue - overhead split equally or allocated - direct expenses = physician compensation
How you construct your physician compensation model is up to your practice's demographics, location and the fair market value. Regardless of which one you choose, be aware of a possible disconnect between collections and what the physicians actually produce, said Holzmark. Even if providers meet productivity benchmarks, be sure you capture every charge and dollar the practice is owed. And when you choose and stick to a model, the speakers say, ensure your organization has the capacity to maintain it.
What physician compensation plans have succeeded in your organization? Share them in the comments.