Physician Compensation

Form Follows Finance

At the end of the day, many elements of practice, organization and working relationships can be well in place, but if physicians don't believe their compensation is fair and adequate, long-term stability and performance will be lost.

Defining Compensation

The first challenge in establishing a physician compensation plan is assessing the competitive landscape, both internal and external. That is, are planned compensation levels, competitive and equitable? While this may sound simple, in reality, the components that can comprise physician salaries can vary greatly among different types of organizations, different national jurisdictions, and often different national regions or areas. That leads to the question, what is compensation? Defining compensation for the medical community can take time and tact to redirect typical physician thinking, from if a certain amount is charged for a procedure or medical service, and that physician is aware of certain direct expenses associated with that procedure or service, then the fee minus those direct costs should be physician compensation - right? In an organizational environment, No... That's why defining compensation is vitally important.

Compensation Models

I once hired a highly respected group of compensation specialists to develop a sophisticated compensation model for our medical staff. It was highly lucrative for the physicians, but somewhat convoluted to understand. With the model in place for less than a year, I experienced a near mutiny among the medical staff because the model's complexity defied simple understanding. The physicians demanded a return to the old simple production model that guaranteed them far less income over the long haul, but was easy to calculate and understand.

Therefore, the first order of any compensation model is that it must be understandable.

However, generally speaking, there are two types of compensation models, those predicated on production and those that are not and simply follow a defined salary.

Beyond that, is when modeling can get complicated. Various factors that can be in addition to direct monetary compensation may include:

Paid time off
Payments for providing call coverage
Payments for the costs of continuing education and training
Contributions to retirement plans
Bonus compensation for meeting certain organizational or practice objectives
Bonus compensation for providing education or mentoring for other physicians
Additional compensation for providing administrative services, meeting attendance, committee work, etc...