No Such Thing as the Perfect Physician Cash Compensation Model

Successful physician cash compensation models must fit within a practice's culture, compensation philosophy and business strategy. As such, a cash compensation model that is successful at one organization may not work at another organization that has a much different compensation philosophy. Below are examples of three successful organizations that implemented effective, yet completely different, cash compensation model designs.

West Coast multi-specialty group practice
With more than 300 physicians and 40 specialties, this practice's cash model credits physicians with 52 percent of professional collections and charges back to the physicians controllable direct expenses such as transcription, support staff, supplies, etc. This model links practice financial performance to compensation. To ensure that cash compensation remains market competitive, the organization reviews each specialty annually relative to work relative value unit activity, and when appropriate, makes an adjustment to their professional collections. Besides the productivity component of the cash model, the physician can earn an additional 5 percent for quality incentives. Needless to say, it requires more effort and a well-developed infrastructure to manage this type of cash model.

Midwest primary care group practice
This practice features more than 150 primary care physicians, and is beginning to incorporate specialties. Its compensation model is a WRVU cash model that rewards physicians based on personally performed professional services multiplied by a market competitive payout rate. With this model, 90 percent of the payout rate is for productivity and the remaining 10 percent is carved out for a quality incentive program. The organization works closely with its biggest insurance carriers to develop quality incentive programs that are meaningful, but that will also maximize the incentive to the group. This type of cash model is much easier to administer because a WRVU is an objective metric to measure physician productivity.  

Southeast multi-specialty group practice
With more than 100 physicians with 20 specialties, this group's  compensation model is a WRVU cash model and a target payout at market median as reported by the Medical Group Management Association. There is also an opportunity to earn an additional $10,000 per 1.0 FTE that rewards physicians for quality incentive criteria and actual financial performance relative to budget. Once again, a WRVU cash model is easy to administer. The specialists' payout rate is set based on peer market data per MGMA.

The three cash models described above work for each of the successful organizations they are used at, but are different in their components and level of administration. Common trends that were found in each of the successful organizations include:

  • Strong medical director leadership
  • Top management support for the cash model
  • Five to 10 percent of the cash compensation is for quality incentive criteria

For more information on physician compensation strategies, contact Mr. Stutelberg at or at (612) 339-0919.

Related Articles on Physician Compensation:

Where are Physician Salaries Heading? 5 Current Trends
5 Key Trends for Physicians in 2012
Physician Pay Increases Expected to Regress in 2012

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