Collaboration among physicians, practice administrators, legal and financial experts is key to designing fair, transparent and compliant compensation structures.
According to a March 26, 2024, MGMA Stat poll, six in 10 (60%) medical group leaders say their physicians participate in developing the compensation methodology in the organization, while only 38% responded “no” and another 2% were unsure. The poll had 455 applicable responses.
These results show a slight decrease in physician participation in compensation methodology development compared to a June 2019 MGMA Stat poll which found more than two-thirds (67%) of groups had physicians involved.
It is important to align compensation plans with the practice’s strategic goals, such as quality metrics and quality improvement initiatives. By involving physicians in the process and tailoring compensation plans to suit individual preferences, practices leaders can:
- Foster trust and reduce potential conflicts or grievances related to compensation
- Promote transparency and fairness
- Possibly motivate physicians to achieve practice goals
- Increase engagement by giving them a “voice” in determining their rewards
- Increase physician satisfaction and retention
- Provide a sense of ownership and accountability for practice performance.
The medical group leaders responding “yes” to this latest poll noted several different ways their physicians play a role in developing compensation methodology:
- Being part of a formal physician compensation committee within the organization
- Ongoing physician surveys
- Leading discussion on developing bonus metrics
- Participation in annual strategic planning meetings.
Among respondents who answered “no,” a sizable group noted reliance on competitive benchmarking data and analysis over clinician input due to salaried compensation models for employed physicians. Some who answered “no” signaled that they seek input from all providers around compensation, but that final recommendations on the methodology and approvals are done by senior leadership and the board.
Key considerations
Developing compensation plans requires time, resources and expertise. Things to remember when partnering with physicians on their compensation plan:
- Conflicts of interest may arise if prioritizing personal financial gains over patients' best interests or the practice.
- Performance metrics or productivity measures can introduce complexity in compensation structures.
- Physicians may lack expertise in compensation planning which could result in compensation plans that are not the best fit for either party involved.
- Compensation plans must comply with applicable legal and regulatory requirements, including anti-kickback statutes, Stark Law, and fair market value standards.
MGMA tools: wRVU variance calculator
MGMA offers a wRVU Variance Calculator that allows practices to calculate the impact of wRVU based on CPT® code and volume for both individual and group providers for 2022, 2023 and 2024. Changes in wRVU reimbursement directly affect physician compensation, especially in practices where compensation is tied to productivity measures.
Reduced wRVU reimbursement can lower physician compensation or necessitate compensation adjustments to meet revenue targets. An increase in wRVU reimbursement may result in higher physician compensation or bonuses, necessitating proper budgeting.
Practices must closely monitor reimbursement trends and take proactive steps to mitigate the impact of wRVU reimbursement fluctuations on their performance and sustainability.
Conclusion
Regular reviews of physician compensation agreements are crucial to maintain fairness and market alignment. Changes in healthcare laws, regulations or compliance requirements may necessitate updates to compensation agreements. Fostering collaboration between physicians and administrators encourages developing compensation plans that effectively align incentives with practice objectives, boosting physician satisfaction and engagement.
Join MGMA Stat
Our ability at MGMA to provide great resources, education and advocacy depends on a strong feedback loop with healthcare leaders. To be part of this effort, sign up for MGMA Stat — by texting “STAT” to 33550 or visiting mgma.com/stat — and make your voice heard in our weekly polls. Polls will be sent to your phone via text message.
Additional resources:
- MGMA DataDive Provider Compensation
- Physician Employment Contract Toolkit
- Provider Compensation Data Report 2023
- Physician Compensation Benchmarks to Navigate the Transition from Volume to Value
- Establishing fair market value physician compensation in a changing industry
- Physician Self-Referral (Stark) Law
