Negotiate a Physician Salary With Eyes Wide Open

With more physicians going into employment in a large group or hospital arrangement, it is important they understand the pros and cons of various compensation methods they might be offered in an employment contract.

In some situations, the physician may receive a fixed salary, perhaps with the opportunity to earn bonuses. Often, physicians move from a fixed salary to a productivity compensation arrangement with the employer once they've had a chance to establish their practice. Physicians who work part time, want to avoid working call hours, or want to devote time to nonclinical work such as community outreach may prefer a fixed salary.

Productivity compensation is based on some measure of the physician's production in the practice:

  • Collections: The employed physician is paid a percentage of the collections for his or her services. This can be the exclusive basis for the physician's pay or a bonus to a base salary.  While a productive physician can benefit from this compensation method, it comes with some caveats, notes attorney Michael Kreager in TMA's new book, A Comprehensive Guide for Physician Employment. To some extent, the employed physician is at the mercy of the employer's payer mix as well as the effectiveness of the billing and collections staff.  The physician should seek an employment agreement that obligates the employer to assign patients to physician employees equitably, based on the payer mix and commercial payer rates.
  • Percentage of profit: The employed physician's pay equals the medical practice's collections for the employee's services less his or her allocated expenses. In this situation, the physician must make sure the employment contract spells out what income and expenses are included in this equation and how the allocation is figured. For example, the physician should make sure he or she will be credited for collections provided by midlevel professionals the physician supervises.
  • Work RVUs: Compensation is based on the amount of work the physician performs during a given period using work relative value units (wRVUs) as the measure. "Employers, especially hospitals and other institutional employers, are moving rapidly to wRVU compensation models," says Mr. Kreager. An advantage of this model is that the employee gets paid for his or her work regardless of how much or even if the employer collected for it.

Employers and physicians can turn to several sources to determine fair and competitive ranges for compensation and benefits for employed physicians, including free white papers and survey results from:

In addition, the Medical Group Managers Association publishes annual surveys for sale with information organized by subspecialty and region. The survey results are stratified into percentile results. "The employed physician will want to be diligent in ascertaining upon which percentile the employer is relying to base its compensation offer," Mr. Kreager writes.

A physician with more experience and a proven track record with consistent, high-quality outcomes will want to negotiate compensation based on a higher percentile, such as the 90th percentile. If the employer offers compensation at the 50th percentile, the physician aided by survey results will be able to press the employer for an increase due to the physician’s better qualifications, Mr. Kreager says.

You can order a copy of A Comprehensive Guide for Physician Employment from the TMA Education Center.

Published Nov. 15, 2012

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