Blog Post

What the future might hold for physician compensation

February 5, 2018

    Across the last decade, most health system-owned medical groups have evolved how they pay employed physicians, shifting from compensation based purely on productivity to incorporate incentives for other imperatives necessary to succeed in a value-based world.

     

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    While compensation models vary around the edges, most groups today put about 80% to 90% of physician pay at risk for production, with the remainder based on non-productivity metrics such as quality, patient satisfaction, or access expansion. With real reimbursement risk slow to materialize, many are reluctant to move any farther away from productivity-based pay for fear of jeopardizing volume-based revenue.

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    Yet among a growing handful of medical groups, a new compensation trend is emerging: increased interest in paying based on guaranteed salary rather than per-unit production. This interest is driven not so much by changing reimbursement but rather by a belief that salary-based compensation will make it easier to meet three increasingly important goals:

    • Reward physicians for time spent on care management activities that are not directly reimbursed but are crucial for building patient loyalty in an era of consumerism;
    • Reduce patient "hoarding" among individual physicians and encourage overall service line access and growth; and
    • Shift away from transactional pay models in order to decrease burnout and incentivize the creation of a collaborative group culture.

    For example, Pennsylvania-based Main Line HealthCare recently revised its specialist compensation model to base 90% of pay on a guaranteed salary, with the remaining 10% based primarily on group growth. The bonus also incorporates incentives for quality, patient experience, and other leadership priorities.

    This new model is not totally divorced from wRVU performance, in that salary guarantees are conditional on maintaining individual production at 95% of the previous year; if production drops, the salary guarantee is revised downward the next year. However, the model meaningfully changes how physicians are motivated, encouraging teamwork to enhance access and signaling the group's desire to provide stability in an age of burnout.

    Many groups that have shifted from per-wRVU pay to a salary guarantee have done so only recently, so the impact of this change remains to be seen. But it does seem likely that any further move away from volume-based reimbursement will only enhance this trend—those few groups that function in a heavily capitated environment frequently rely on salary guarantees, with productivity expectations set primarily as a condition of employment rather than linked directly to pay.

     

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