How physicians get paid

Of all the challenges you’ll face navigating your job search, making sure that you’re paid what you’re worth—and in a manner that fits your style or goals—is critical.

Let’s take a closer look at how physicians get paid, and both the upsides and downsides for your career.

Salary: Part of a Mixed Bag

For most physicians, compensation is based on multiple methods, with salary plus productivity topping the list and bonuses a prevalent add-on.

Whether you’re looking at an employed position or even an independent practice partnership track, you’ll likely have a sure-fire stipend for at least one year and possibly more before moving to the standard compensation formula. Then, you’ll be expected to cover your base and contribute to overhead expenses.

“Nobody will give you a guaranteed salary forever,” says George M. Abraham, M.D., president of the American College of Physicians. “You’ll have some sort of base and then most of it is productivity. Otherwise, there is no incentive to work hard. If I’m guaranteed my salary, it doesn’t matter what I do.”

What does that mean for your career? Your initial salary may be lower than you might expect, but with the promise that as you prove your worth you’ll earn extra, either for productivity or some other metric. Anything you generate above and beyond will result in a bonus or some sort of profit-sharing split between you and your employer.

As to a salary grace period, there are upsides to having your employer carry the initial freight. “The positive is that you can focus not on productivity, but on value,” says Fred Horton, MHA, president of AMGA Consulting. You have a chance to align yourself with the incentives—whatever they might be—before they really affect your personal bottom line.

Into the weeds

Regardless of your earning expectations, you’ll want a clear idea how a salary will figure into your career strategy. If it’s guaranteed, for how long? If it’s straight salary and nothing else, what does that mean? Are there automatic increases in your future, or cost-of-living adjustments?

Likewise, if there’s a bonus attached, will those extra dollars be based on your work product, the group’s overall financial performance or quality measures? How might those bonuses escalate?

At Atlanta-based Piedmont Internal Medicine, for instance, physicians take a monthly salary draw based on their previous production history. With direct expenses and overhead eventually deducted from any calculations, the good news is that the practice’s operational expenses don’t really fluctuate as they might in a larger system. So, the more energized the 11 board-certified physicians are, the more revenues they can generate and keep, without worrying about unexpected overhead costs dinging the bottom line.

“They basically get a share of the remainder earnings,” says Kelly Ladd, FACMPE, COPM, Piedmont’s chief operating officer. “At the end of the day, their take-home pay is whatever is left after the bills and staff are paid.”

Productivity drives pay

Productivity will be key in some way, shape or form.

Granted, independent medical practices have historically compensated based on number of patients and fees for services billed. What likely won’t apply there—at least in terms of your compensation—is the RVU or relative value unit system.

But if you’re joining a larger, integrated or hospital-based employment model, your productivity likely will be measured—and reimbursed—via those work RVUs. By placing a numeric value on your effort and skills in performing specific services, they will be key in turning productivity into financial rewards.

“It used to be just how many patients can I see in a day, because that’s what I’m going to bill for…that’s what my collections are going to be tied to,” says Andrew Swanson, MPA, CMPE, vice president of industry insights for Medical Group Management Association. “This is just a different model. But they’re both relatively volume-driven.”

RVU plusses and minuses

So, what are the career positives and negatives with RVUs? For starters, there are variations on the theme, depending on your specialty and what you do. If you’re a surgeon or other proceduralist, for instance, you’re primed for a system built to incentivize and measure therapeutic and/or diagnostic tasks provided during face-to-face encounters. You get “X” for a catheterization or hernia repair, for instance, with the more you do, the more “Xs” you’re paid.

It’s more of a mixed bag, however, for those in primary care, psychiatry or other specialties that either aren’t so procedurally oriented or don’t even control their workflow.

For instance, as system chairman of pathology and laboratory medicine for New Orleans-based Ochsner Health System and Foundation, Gregory Sossaman, M.D., immediate past chairman of the American Society for Clinical Pathology Institute for Science, Technology and Public Policy, helps lead a large multispecialty employed medical group, one of the first such models in the South.

It has evolved from pure fee-for-service to a structure in which there’s some salary parity, but with opportunities for potential bonuses, based largely on overall group RVU targets and individual performance with some value-based activities in the mix.

The downside for Ochsner’s pathologists? They don’t have as much control over RVU production as other specialists who count on attracting new patients and delivering continual care.

If your pay eventually rests on productivity, you’ll want to know the specifics.

Attending to details

There is no one compensation formula that will work in all settings—or perhaps even for your entire career. That goes for the reimbursement structures you might be involved with, too. If you’re in primary care, for instance, a covered lives panel format might suit you well while RVU production makes sense if you’re a surgeon or other proceduralist.

But ultimately, any compensation plan, Horton says, “really needs to reflect the guiding principles and culture of the organization. You can go into a salary discussion and say, ‘I want to be paid this or that.’ But if it doesn’t align with the culture, it would be an absolute disaster.” More importantly, will your practice style and goals be in sync with your employer?

“To me, compensation is all about alignment,” Swanson says. “Yes, you absolutely want to be paid fairly. You want to get the upper end of whatever ‘fair’ is. So maximizing your earnings is essential. But being aligned with the group is key.”

In any case, if the offer is competitive, compensation shouldn’t be your first agenda item. It’s clearly important for now and your future, but so are those quality-of-life factors that round out the picture. What will make you and your family happy?

As Tammy D. Hager, MBA, CRPR, FABC, executive director of recruitment and privileging of Surgical Affiliates Management Group (SAMGI), notes: “You really want to think about where you are in your career and what’s really important to you.”

If you’re a surgeon interested in helping provide 24-hour quality care in a setting that gives you earning power and a work/life balance, you may be drawn to a hospitalist entity such as SAMGI. It employs some 350 general and other surgeons in 50 locations throughout seven states. Its primary focus? Staffing smaller community hospitals that often can’t attract surgeons along with some larger organizations that want the services.

As chief medical officer of the Indian Health Service’s Oklahoma City Area and a practicing OB/GYN, Greggory Woitte, M.D., also advises physicians to look at all facets of an offer, particularly in terms of their personal well-being. The emphasis among the IHS medical corps, for instance, is not just providing the highest, culturally appropriate care possible to American Indian and Alaskan Native communities, but also to retain staff.

“It’s important in the Indian Health Service that your well-being and personal life is valued,” Woitte says.

Along with a base salary, how physicians get paid comprises a list of benefits, including student loan repayment. As to bonuses, IHS takes what Woitte refers to as a “holistic approach to productivity.” That is, since its mission is to raise the physical, mental, social and spiritual well-being of American Indian and Alaska natives—and assure them access to care—the spotlight isn’t about productivity based on RVUs. Instead, the emphasis is on overall performance in determining if extra cash or time off is merited.

Final thoughts on how physicians get paid

Knowing what your salary might mean to your career, both now and in the future, is critical. Leaving no compensation stone unturned can mean the difference between just satisfying your soul—and satisfying your pocketbook as well.

A compensation primer

Check out the fundamentals below for a financially and otherwise satisfying career.

Structure set. If you’re in a very high-profile specialty or your services are extremely unique, you may be able to write your salary ticket. But compensation structures are generally set in stone, with oversight committees monitoring them.

Balance your negotiating approach. “I’ve watched physicians fight tooth and nail for every last penny,” Swanson says. “But it leaves a bad taste with a new employer because you’ve already become the stereotypical difficult physician.” A middle-of-the-road negotiating approach is likely a safer strategy for keeping you and your future employer in the game.

Use your attorney wisely. Instead of hiring an attorney to nitpick changes, Sossaman suggests that your time and money are better spent focusing on what’s there—not what you’d like to be there. “People spend a lot of effort having a lawyer take a look at something that there’s no way of changing,” he says. “Instead, you really want your attorney to help you understand what’s actually in the contract.”

Focus like a laser. Pay attention to what ultimately could derail your income. Are the on-call duties, for instance, going to be so stringent that they interfere with your own patient schedule? What about those leadership commitments or other periphery roles, particularly committee obligations? Be clear as to how they figure into your personal bottom line.

Pay attention to non-competes. Know what the organization has built into the document to protect its interests.

Pay heed to partnership particulars. If you’ve been promised a partnership track, understand when it might occur and what it will cost, not to mention what benefits might play into your purchase. It’s not unreasonable to question how your initial pay could figure into an ownership stake or to start talking early about such a transition.

How practice choice affects compensation

Your choice of practice settings can have an enormous impact on both the structure of your compensation package and the way you earn it.

Private practice. If you’re a team player, you might find a comfortable fit in a private independent practice. But your financial fate may be tied not just to your own performance, but everyone else’s, too. “Basically, everybody rises and falls together in that type of setting,” Horton says. “It’s one of the strengths, in my opinion, of private practice.”

Indeed, the sky could be the limit in terms of reimbursement and the ability to put more in your pocketbook. But as to the group, you need to know that your colleagues will be working toward the same positive bottom-line goals.

Another benefit? You’ll likely have more flexibility in how hard or how little you want to work, particularly if you become an owner.

“On any given day, I can decide if I want to block off a couple of hours on my schedule,” Abraham says. “I don’t need a manager to tell me whether I’m meeting my RVUs or seeing enough patients every month.”

Employed. If you want financial security with no management concerns or responsibilities, being an employee of a large group or integrated organization might fit you to a “T.” You can see patients and pursue your specialty, while leaving the administrative tasks and worries of running the place to others.

But be aware that your new bosses will float you only for so long by guaranteeing your monthly salary. If you don’t deliver as expected within the first quarter or year, they may show you the door. But if you’re a real performer with a knack for productivity, you don’t have to worry about your status.

Hopefully, you’re comfortable with the RVU system since, depending on your specialty, your productivity will likely be measured by it. Here’s the rub: It’s not always easy, say experts, to determine if the work RVUs associated with your patient care are either adequate or even accurate, especially in a larger organization.