Compensation Models

Compensation models are typically well established for most medical groups, hospitals, and large managed care organizations. As a new physician, you can expect compensation to be determined by regional market factors and comparable to that of physicians with similar skills and experience.

Because of the trend toward physician employment and away from private practice ownership, compensation models that include incentives are becoming more common. In addition to the straight salary option, three other compensation models — salary plus incentives, income or collections guarantees, and triangle agreements — are commonly offered to family physicians.

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Straight Salary

A straight salary may be offered with hospital or group practice employment and includes expenses, overhead, and benefits.

Salary Plus Incentives

Incentives can range from a small percentage to most of your compensation. There are several types of incentives:

  • Number of patient encounters
  • Relative value units (RVUs): total or work
  • Gross billing: bonus based on annual or quarterly billings
  • Net collections: bonus may be a percentage of collections minus overhead or on a collections threshold formula
  • Quality: factors may include patient satisfaction, peer review, committee work, administrative work

Income or Collections Guarantees

In this model, a hospital or practice subsidizes a new physician’s income for a set period, typically the first one to three years, so the physician can build a patient base. If, after the specified time, the new physician has not built a sufficient patient base, the amount still owed is transferred to a promissory note that is forgiven over time. The physician must stay in the area until the loan is forgiven or repaid.

Triangle Agreements

In this model, a local hospital helps a practice to recruit and pay a new physician in exchange for the physician’s agreement to remain in the community for a specified period of time.

Before You Sign

Regardless of the type of compensation model you are offered, set realistic goals, prioritize your needs — clinical, professional, and personal — and enter the negotiation process with an open mind. Before signing any agreement, be sure to ask a senior physician, recruiter, or an attorney to examine the contract.