LUTZ BUSINESS INSIGHTS
Trends in Physician Compensation
TARA WISDOM, LUTZ HEALTHCARE CONSULTING DIRECTOR
Physician compensation is changing as hospitals rapidly acquire physician practices and reimbursement levels decline. Hospitals are looking for new methods of compensation that tie their pay to productivity, on-call coverage, and quality measures. Below are trends affecting the physician compensation today.
RVU and Bonus Models Vs. Flat Salaries
Physicians are compensated based on a productivity formula in most situations, and typically the structure entails work RVUs. This means that most physicians now receive base compensation in addition to a bonus depending on their productivity. While work RVUs have become standard in physician employment compensation arrangements, the industry is also starting to see the rise of quality indicators tied to compensation.
These quality outcome bonuses tend to be aligned with hospital goals and third-party payors incentives. Depending on best practices in your clinics and hospitals, the outcomes tend to change from contract year to contract year. Whatever the source used for the quality measures, it is critically important that the measures are actually measurable and understood by both parties.
Historically, physicians were expected to provide on-call coverage as part of their employment or affiliation with the hospital. Today physicians across the country have begun demanding compensation for their time on-call, and the trend is spreading rapidly.
Increase in Physician Administrative Duties
As physician employment seeks to align providers more closely with hospital initiatives, physicians are increasingly expected to dedicate some time to administrative duties. The trend has only increased as the physician population ages and older physicians look to move away from clinical duties to physician executive or management positions. Hospitals and physicians need to be cautious that the entire physician compensation is fair market value for all their duties.
When hospitals acquire physician practices, they generally guarantee compensation for 2-3 years. This hesitance to guarantee compensation long-term is due to the uncertainty of reimbursement over the next several years. Fair market valuators are usually unable to predict more than 2-3 years into the future because changes to reimbursement are unpredictable.
ABOUT THE AUTHOR
TARA WISDOM + HEALTHCARE CONSULTING DIRECTOR
Tara Wisdom is a Healthcare Consulting Director at Lutz with over 18 years of experience. She assists clients with physician and hospital practice management, business plan development and new practice set-up to make sure healthcare practices are effectively managing operational costs and properly capturing revenue while staying compliant.
AREAS OF FOCUS
- Healthcare Consulting
- Physician Services
- Compensation Structures
- Data mining and Analysis
- Medicare and Insurance Reimbursement
- Merger/Reorganization Planning
- Internal Control and Systems Reviews
- Strategic Planning & Feasibility Studies
AFFILIATIONS AND CREDENTIALS
- Medical Group Management Association, Member
- Nebraska and Iowa Medical Group Management Associations, Member
- Metropolitan Omaha Medical Society, Strategic Partner
- BA in Accounting, University of Nebraska, Lincoln, NE
- Community Alliance, Executive Board Member
- Children’s Hospital, Friend’s Board
- Quality Living Inc, Ambassador
- Omaha Opera Guild, Cotillion Representative
- Nebraska Children’s Home, Gift Coordinator Volunteer
- Aldrich Elementary PTO, Executive Board Member
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