Compensation plans are more complex, but straight salary still has appeal

The rise of physician employment models, alongside a growing emphasis on physician productivity and quality, heavily influence today's physician compensation formulas, but the trends vary by physician specialty and career stage, Medscape reported.

For example, physicians in their first one to two years of practice, whether self- or hospital-employed, generally receive straight salary-based compensation. Although this model can limit a doctor's earning potential, it's still desirable for recent graduates looking for a steady income. At later career stages, some physicians, particularly in primary care, more willingly accept a lower, yet predictable salary in exchange for greater work-life balance, Tommy Bohannon, of physician recruiting firm Merritt Hawkins, told Medscape.

Nonetheless, hospitals and large group practices have little to lose by incorporating a bonus structure into their comp plans, the article noted, even if the newer physicians aren't expected to hit productivity targets. Physician productivity, often measured by relative value units increasingly comes into play in physician employment agreements for doctors with slightly more experience.

"You're not going to attract the most efficient physicians unless you're offering rewards for those behaviors," Bohannon noted, "and from a hospital employer's perspective, straight-salary physicians have a disincentive to work harder."

The system now compensates physicians partly based on other facets of performance, such as quality benchmarks and patient outcomes. With electronic health record systems becoming more sophisticated, practices have more data to discern whether physicians use resources appropriately and effectively (e.g. whether an increase in tests correlates with better management of disease).

But while organizations determine physician compensation based on a multitude of factors, they legally can't link any part of their pay formulas to volume or value of referrals for services not personally performed by the ordering physician.

The consequences of noncompliance are severe. For instance, a New York medical practice recently agreed to pay the federal government $1.3 million to settle allegations that the practice used a pay formula that took into account the volume or value of the doctors' referrals for nuclear scans and CT scans in violation of the Stark Law and False Claims Act, reported.

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