Physician compensation in ambulatory and outpatient medical group practices is one of the most significant drivers of revenue and cost. There’s no one-size-fits all approach — compensation methodologies typically vary by the organization's size, ownership structure, and strategic objectives.
In recent years, organizations have adopted various models to align physician incentives with strategic goals, ensure regulatory compliance, and maintain financial sustainability. The intensity and nuance of this work often moves it beyond the scope of private practice owners and their dyad partners, necessitating dedicated physician compensation teams or committees with expertise in financial, cultural, and regulatory areas.
An April 15, 2025, MGMA Stat poll finds that 36% of medical group practices have a dedicated team or committee for physician compensation, while 61% do not and 3% were unsure. The poll had 435 applicable responses.
About half of practice leaders in organizations with a formal compensation committee or team reported meeting on a monthly or quarterly basis, while the remainder held meetings annually, biannually, or on an ad hoc/as needed basis. These committees and teams are typically led by the CEO, CFO, or a vice president of finance. In many cases, leadership responsibilities are shared between an administration leader and a physician leader/medical director.
In organizations without a formal physician compensation committee or team, compensation decisions were most commonly determined by:
- The chief executive officer or C-suite (with board guidance)
- Physician owners and/or partners
- The organization’s board of directors
- The lead administrator and/or a financial leader (e.g., chief financial officer or finance committee).
Private practices: Collaborative decision-making
In private practices, physician compensation is often determined through a collaborative approach between physician owners and administrative leaders. Physician partners typically help create compensation models that reflect individual productivity, practice revenues, and long-term sustainability, while administrators provide financial analyses to ensure competitiveness and compliance. The aim of this partnership is to balance equitable physician pay with a practice's financial health.
Mid-sized medical groups: Structured governance
Mid-sized medical groups often implement more structured governance frameworks to manage physician compensation. An executive team — which may include a chief executive officer (CEO), chief operating officer (COO), and chief financial officer (CFO) — collaborates with finance and human resources departments to design and oversee compensation strategies. This approach ensures that compensation models are informed by comprehensive market data, aligned with organizational performance metrics, and support recruitment and retention objectives.
System-owned outpatient clinics: Dedicated compensation committees
In hospital- and system-owned outpatient clinics, dedicated physician compensation committees are often established. These committees — comprising physician leaders, compensation specialists, and compliance officers — develop, evaluate, and update compensation models. They focus on aligning physician incentives with system-wide goals, such as quality improvement and patient satisfaction, while ensuring adherence to regulatory requirements.
Trends in physician compensation
Recent developments in physician compensation strategies reflect a shift toward more holistic and value-based approaches:
Broader engagement of providers in compensation design
A March 2024 MGMA poll found that six in 10 (60%) medical groups include physicians in developing their compensation methodology. Involving physicians in the design or redesign of compensation models supports a more decentralized decision-making process in which physician input can lead to more effective and accepted compensation structures.
Adoption of team-based models
While productivity-based incentives — tied to work RVUs, collections, or patient visit volume — dominate, there is growing interest in adopting team-based measures in some organizations. However, some groups with advanced practice providers (APPs), care coordinators, and other clinical staff may offer team-based incentives paid quarterly or annually based on shared quality outcomes, patient satisfaction, panel health metrics, and team performance.
Integration of AI
AI is playing an increasing role in physician compensation — not only automating tasks but driving decision-making around productivity pay and forecasting compensation trends.
For example:
- In productivity-based models, AI can automate work RVU (wRVU) attribution by processing clinical documentation and CPT® coding to ensure accurate attribution of wRVUs per encounter or procedure. AI is also being applied in value-based care settings to attribute care activities across teams, helping distribute shared savings more equitably in risk-bearing contracts.
- As compensation models become more blended — integrating productivity, quality, risk adjustment, and team-based components — AI can help forecast what future payouts look like under various scenarios. According to an April 2024 MGMA poll, half of medical groups now include quality performance metrics in their physician compensation plans.
- In larger systems or managed service organizations (MSOs), AI tools can analyze trends across specialties, markets, or time periods to identify patterns and anticipate retention risks and cost concerns before they become problems.
- Compensation consultants are also beginning to offer AI-enabled valuation tools and modeling services that simulate how different compensation plan designs will impact individual physicians or departments, supporting more data-informed and adaptable compensation models.
Do you have any best practices or success stories to share on this topic? Please let us know by emailing us at connection@mgma.com.
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