Compensation Plans for Advanced Practice Clinicians: Implementing a Healthcare Model for the 21st Century

Most experts agree that advanced practice clinicians — nurse practitioners, physician assistants and other clinical providers who have advanced training in their fields — will play key roles in delivering medical care in our evolving healthcare system.

The roles APCs will fill in 21st century healthcare organizations, and the professional relationships they will maintain with physicians, have significant implications for compensation and benefit structures. This article will examine how APCs are paid today, and how pay structures may be designed in the future.

How APCs are paid today
Most hospitals and clinics currently use a salary structure where APC salaries fall within a range based on tenure, experience and performance. Step increases are fairly common for new employees. Many organizations also pay shift differentials for evening, night and weekend shifts, and more organizations are starting to provide on-call pay to physician assistants for emergency room call coverage. Benefits for APCs are usually the same as those for all other employees.

Approximately half of the hospitals and clinics in the United States reimburse APCs for their tuition expenses, and pay the costs for maintaining certifications and licenses, including providing paid time off for this purpose. Some also pay for professional dues and subscriptions, as well as for attending conferences, including travel expenses.

Incentive plans for APCs are less common. A recent survey conducted by Integrated Healthcare Strategies found that only 28 percent of organizations currently have incentive plans in place for APCs.[1] Of those, individual performance plans are the most common (11percent), followed by gainsharing plans (10 percent) and group or team incentives (7 percent). Production incentives are much less common for APCs, even though they are the most common type of financial incentives for physicians.[2]

The survey also found that, overall, salary levels are fairly comparable for nurse practitioners and physician assistants (see the chart below for median salary and compensation data).

Advanced Practice Clinicians Base Salary and Total Cash Compensation, National Data - Median

Advanced Practice Clinician Base salary Total cash
Nurse practitioner 
$92,708 $97,552
Physician assistant $92,275 $98,594
Certified nurse midwife $96,418 
Additionally, base salaries and total cash compensation are fairly comparable regardless of the practice setting. However, pay can vary significantly for APCs practicing in specialties like emergency medicine, neonatology and surgical specialties. This may be attributable to factors such as the advanced training and skills required, high stress work environments, and supply and demand. For primary care specialties, APCs make roughly half as much as physicians, whereas APCs practicing in other medical and surgical specialties can make less than half as much as physician specialists — often much less than half (see the table below for more information).

Advanced Practice Clinicians Compared to Physicians Total Cash Compensation, National Data - Median

pecialty Nurse practitioner[1] Physician assistant[1] Certified nurse midwife[1] 
Family Practice $92,229 $94,577 
N/A $183,999
Internal Medicine 
N/A $197,080
$98,994 $98,100 
$96,138 $99,438  
$100,480 $282,645
Emergency Medicine   
$103,127 N/A  
General Surgery 
Orthopedic Surgery
Cardiovascular Surgery

Data sources:
1 Integrated Healthcare Strategies 2010 Advanced Practice Clinician Compensation Survey
2 Medical Group Management Association 2010 Survey  

Where will APCs fit in the 21st century healthcare model?

The Patient Protection and Affordable Care Act aims to expand access to healthcare to all Americans. The legislation authorizes accountable care organizations to advance the goals of "better care for individuals, better health for populations, and lower growth in expenditures" for the Medicare population. ACOs will receive bundled payments for episodes of care, rather than payments for each service performed. Even for those organizations not aspiring to ACO status, the migration to a value-based payment model is drawing near. For many hospitals and physicians this will require a different approach to treating patients, one that is focused on efficiency, evidence-based treatment protocols, and coordination of care.

Because APCs are paid less than physicians, it seems fairly clear that they can play a role in making clinical practices more productive, at least when productivity is measured by labor costs. If nurse practitioners working in a family practice can successfully treat 80 percent of the patients coming into the practice, referring the 20 percent that represent higher acuity cases to a physician, they will provide care at a lower cost even if they spend more time with each patient. This will also allow physicians to spend more time with patients, even while supervising the work of nurse practitioners. This suggests that a team approach in a primary care practice can deliver excellent medical care, and allow more time for interaction with patients, at a lower cost than a practice staffed solely by physicians. This is especially important in the ACO model, because ACOs must demonstrate patient-centeredness while achieving cost savings.

Similarly, APCs are already improving the productivity of many emergency departments. Physician assistants are uniquely qualified to quickly diagnose and treat medical situations that are not life-threatening, and to triage the true emergencies that require physician care. Physician assistants often develop great skill in routine procedures such as setting broken bones and closing wounds, providing excellent care at a lower cost than a physician can. Adding APCs to the staff of the emergency department may be a cost-effective way to deal with an influx of newly-insured patients seeking medical care.

In a value-based payment model, nurse practitioners may also be uniquely qualified to coordinate care and implement individualized care plans for high-risk patients. They will play key roles in reducing or preventing re-admissions, which will help meet cost-management targets. For example, preventing a costly re-admission for congestive heart failure by monitoring the patient’s health after discharge is likely to generate savings that far outweigh the salary cost of the nurse practitioner.

Today APCs practice in rural settings under the supervision of physicians that may be located in distant communities. In the 21st century healthcare model, they may staff satellite clinics in pharmacies, big box stores and other non-traditional settings, providing excellent care at a low cost under the supervision of a physician at the main clinic.  

In surgical practices, APCs will help surgical teams provide high quality care in a cost-effective way. Their ability to develop their skills in procedural areas will make them valued members of the surgical team. As hospitals search for savings in every aspect of care delivery, including surgery, the roles assigned to APCs can be expected to expand.

Implications for pay structures
Human resource departments often manage pay for nurse practitioners, physician assistants and other APCs under a single salary structure based on pay plans for nurses. They typically do not provide any variation in benefits, even for continuing medical education. This can be problematic for several reasons:

•    The resulting pay plans don’t reflect the way APCs practice in different settings.
•    The salary structures don't recognize the differences in labor markets for various specialties, nor do they reflect variable levels of productivity.
•    The benefit structures don't reflect differences in CME and licensure requirements.

Pay plans for APCs can sometimes conflict with those of the physicians who supervise them or work with them on teams. Pay plans, especially incentive plans, send messages about what an employer believes is most important. People in medical professions all want to provide excellent care, but when one member of a team is paid on a production formula, and another on patient satisfaction, disconnects can occur. When physicians are paid on a production formula, they may see APCs as competitors for volume. When physician pay plans do not adequately reward the time and effort required to supervise APCs, doctors may neglect their responsibility to oversee their work.

As APCs become more prevalent and take on larger roles in the delivery of medical care, this is an ideal time to consider what pay plans for APCs would look like if you could start with a clean sheet of paper. Consider the following three principles in developing APC pay plans for the 21st century:

1. Pay for APCs should vary by specialty, just as pay for physicians varies by specialty. It will undoubtedly remain appropriate to have a substantial differential between pay for physicians and APCs within a specialty to reflect differences in education, knowledge, skill sets, call coverage and levels of responsibility. When requirements for a higher level of education, a nuanced understanding of complex issues, or a greater degree of technical skill in a certain specialty justifies higher pay for physicians, those aspects should justify higher pay for APCs as well, in the interest of attracting the best and brightest individuals to those specialties that are the most demanding.  

2. Incentive plans should be designed to reward expected results. In some settings, production–based pay formulas for physicians may need to be mirrored in productivity bonuses for APCs. While physicians may be rewarded for quality in general, it may be appropriate to reward nurse practitioners for their role on the care management team, such as preventing readmissions. Physician pay plans should adequately reward the time required to supervise the work of APCs. Incentive plans for physicians and APCs should encourage teamwork and not create competition for patient volume.

3. Continuing medical education benefits should vary to reflect licensure requirements. Most employers accept a responsibility for helping physicians maintain their licenses to practice medicine, and they should do the same for APCs. CME benefits should include reimbursement for tuition costs and examination fees, and time off for exams. Because licensure requirements vary for nurse practitioners, physician assistants, and nurse midwives, and because they vary from state to state, CME programs for APCs need to be customized to reflect the requirements of each profession.

The roles for advanced practice clinicians are almost certainly going to expand as more Americans seek health care, as the general population ages, as value-based payment models become more widespread, and as physicians are increasingly drawn to specialties instead of primary care. Working alongside doctors in clinics, emergency departments, delivery rooms and surgical suites, APCs will see patients, provide routine care and patient education and follow up with patients to prevent complications and re-admissions.

Employers will need to change the way they pay APCs and the physicians they support to reflect how medicine will be practiced in the future. Well-designed pay structures can reinforce employer expectations and smooth the transition to a healthcare model for the 21st century.

Susan O’Hare is a senior vice president with the Executive Compensation and Governance practice at Integrated Healthcare Strategies. She brings over 20 years experience in the healthcare industry. Ms. O'Hare has an extensive background in pediatrics highlighted by over ten years as the CEO of a children's hospital and in physician practice management in a multi-specialty and academic sub-specialty environment. She maintains her clinical expertise as a certified pediatric nurse practitioner.

Aurora Young is a senior consultant with the Physician Services practice of Integrated Healthcare Strategies.

[1] Integrated Healthcare Strategies 2010 Advanced Practice Clinician Compensation Survey

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Physician Assistants, Advance Practice Nurses Increasingly Tend to Hospital Outpatient Visits
Survey: Physician Assistants Have Increased by 100% Over Last 10 Years

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