a physician walking on towers of coins
a physician walking on towers of coins

Physician compensation models: Pros and cons

Read PracticeLink articles by Megan Trippi
Megan Trippi

Table of Contents

As you search and interview for jobs, you may have questions about your compensation and how you’ll be paid. There are different types of physician compensation models, and each one has its unique advantages and considerations.

What are physician compensation models?

Physician compensation models are the financial frameworks that determine how you are paid for your services. These methods have evolved over the years and continue to adapt to changing healthcare landscapes. Let’s explore some common compensation models and their advantages and disadvantages:

  1. Relative Value Units (RVUs)

RVU is the most common physician compensation model used today and is also known as straight productivity or volume-based care where you are paid based on the volume of services you provide. Each service, test or procedure is billed separately, and you receive payment for each one.


  • Incentivizes productivity

RVU encourages you to see more patients and perform more procedures, which can lead to increased revenue for your organization.

  • Transparency

The system is straightforward, making it easy for you to understand your compensation.

  • Flexibility

You have control over your income based on your workload.


  • Quality vs. Quantity

RVUs can incentivize overutilization of services, potentially compromising the quality of patient care.

  • Administrative burden

The billing and paperwork associated with RVUs can be time consuming and costly.

  • Limited focus on preventive care

This model may not prioritize preventive medicine since it is heavily procedure based.

  1. Straight salary (Base salary plus bonus)

Under the straight salary compensation model, you receive a fixed annual income regardless of the number of patients you see or services you provide. This model offers its own set of advantages and disadvantages:


  • Stability

You enjoy financial stability and predictable incomes, reducing the stress associated with

fluctuations in patient volume.

  • Focus on quality

You can prioritize patient care without concerns about revenue generation.

  • Team-based care

Encourages collaboration among medical professionals as compensation isn’t tied to individual services.


  • Limited financial incentives

Some physicians may lack motivation to increase their workload or take on additional responsibilities.

  • Recruitment and retention challenges

This may result in a salary being less competitive.

  • Potential for inefficiency

Incentives for cost-conscious care may be lacking in this model.

  1. Value-based compensation

Value-based compensation models are gaining prominence in the healthcare industry. Under this approach, you are rewarded for delivering high-quality care while controlling costs. Here are the pros and cons:


  • Improved patient outcomes

Value-based models prioritize patient health and outcomes, leading to better care quality.

  • Cost-effectiveness

Encourages you to consider cost-effective treatments and preventive measures.

  • Alignment with healthcare goals

Supports the shift towards value-based care and population health management.


  • Complex measurement

Determining value-based metrics and performance can be challenging.

  • Financial risk

You may be held accountable for factors beyond your control, such as patient compliance.

  • Transition hurdles

Shifting from traditional models to value-based compensation can be logistically and culturally challenging for healthcare organizations.

  1. Productivity-based compensation

Productivity-based compensation models reward you based on a combination of your clinical productivity, patient satisfaction and other performance metrics. Here are the pros and cons:


  • Alignment with organizational goals

Your compensation is tied to specific targets, encouraging you to contribute to the organization’s


  • Quality and efficiency

Promotes high-quality care and cost-effective practices to maximize earnings.

  • Flexibility

Allows for customization based on specialty and organizational goals.


  • Complexity

Determining a fair and transparent formula for compensation can be complex.

  • Potential for disagreement

Disputes may arise if the metrics are perceived as unfair or unrealistic.

  • Administrative burden

Requires robust tracking and reporting systems, which can require a lot of resources.


Choosing the Right Model

It’s important to know which model would be best for you as you interview and negotiate your contract. Some considerations may be:


Certain models may be better suited to specific medical specialties. For example, RVU may be more common in surgical fields, while value-based models are increasingly prevalent in primary care.

Income expectations

Consider your financial goals and how each model aligns with them. Some physicians prioritize stability, while others aim for high earning potential.

Work-life balance

Think about the work-life balance you desire. Some models may require more hours and administrative tasks than others.

Patient-centered care

Evaluate how each model affects your ability to provide patient-centered care. Ensure it aligns with your commitment to quality medicine.


If you’re part of a healthcare organization, discuss compensation models with your employer. Find out if there’s room for negotiation and customization.

Performance metrics

Understand the metrics used in productivity and value-based models. Ensure they are reasonable and attainable in your practice.


Each model has its unique advantages and considerations, and there’s no one-size-fits-all solution. Weigh the pros and cons carefully so you can ensure your compensation model supports both your financial goals and your dedication to delivering high-quality care.

Read PracticeLink articles by Megan Trippi

Megan Trippi

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