Physician contracts are changing

Shorter contracts, noncompete agreements and increased emphasis on value-based components are among the shifts occurring in physician contracts as hospitals and medical groups build recruitment pipelines and offer incentives to retain physicians. 

Changes in how physician contracts are layered echoes a trend that has been occurring in the labor market itself. Physicians are increasingly opting for employed opportunities and contracts within those models are changing accordingly. 

From 2019 to 2021, more than 108,700 physicians left private practice for employment opportunities, with 58,200 physicians joining hospitals. About three in four physicians are now employed by hospitals, health systems, private-equity-owned groups, payers or other corporate entities. 

The rising costs of private practice, increasing administrative burdens and reimbursement hurdles are also making solo practice a challenging model for many physicians today.

Fewer large medical groups are offering salaries with production bonuses, according to an AMN Healthcare report on physician and advanced practitioner recruiting incentives. The company's 2017 report found that 75 percent of contracts featured a salary with production bonus, while only 17 percent had a straight salary.

Some medical groups have stopped offering production bonuses.because they found that the straight salary model has less ambiguity and is less likely to cause friction with physicians, according to the report. 

AMN also found that a relatively high percentage of academic medical centers do not offer the salary with production bonus model, which may account for the decline in the use of this compensation structure in its report. 

Income guarantees, which are essentially loans that must be repaid generally (but can be forgiven over time) are used to establish physicians in solo or small independent practices. Income guarantees were once the standard contract model, but as the number of private practices has declined, so has the use of income guarantees, according to the report..

Health systems continue to rethink physician contracts as healthcare continues its shift away from fee for service, but challenges remain when it comes to compensation in these models. Systems at the forefront of this shift are developing ways to incentivize physicians in value-based care as the trend towards team-based compensation gains traction and fosters collaboration among providers.

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