Understanding physician compensation models is a lot easier than it used to be. Small comfort, perhaps, for some physicians navigating the world of contracts, performance bonuses, patient loads and more. But old models used to rely on formulas that would scare anyone long-removed from calculus. They would attempt to quantify the slippery concepts of corporate citizenship, committee duty, or governance responsibilities. In short, they were a mess.

Today’s compensation models are relatively simple by comparison. They are based on typical salaries per region, or on physician surveys conducted by management organizations, like the American Medical Group Association. There is a salary or revenues, and there are potentially incentives or bonuses. The question becomes – what are these incentives? How are bonuses arranged and distributed? Are the criteria reasonable and/or attainable? How does productivity and efficiency, the new buzzwords, come into the picture? In this article we look at typical compensation packages and their components. We will also analyze the advantages and disadvantages of each system.

Types of Packages: Salary Based

Usually the hallmark of large HMO’s, academic settings, large corporations, and physician-owned practices, salary-based compensation is simple. Considering the local market (location and organization) and position type, a set figure is offered as a salary. The salary may or may not incorporate figures based on the physician’s merit or qualifications. Often salaries will be based on physicians’ length of time in the field and any academic titles.

This plan offers a relatively worry-free and secure environment. Physicians will know their salary from the beginning of their employment. Theoretically, they will not feel the need to compete with their colleagues, focusing instead on effective patient care. But this can lead to the major disadvantage of this compensation model. Since physicians are secure and do not need to compete with one another, this arrangement can discourage extra effort or productivity. If there are no rewards beyond the set salary, or flexibility for extra compensation, doctors may come to feel extra effort is not worth it. Minimal effort may become the norm.

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