Physician Compensation Plan Design

Healthcare Value
with Clarity.

Establishing a thoughtful and purposeful physician and advanced practice provider (APP) compensation plan design is critical for the success of any organization from a private practice to a large fully integrated healthcare system. Compensation plan designs should integrate all provider services including clinical, academic, and/or administrative services. It is through the compensation design that the mission, values, and goals of the organization are reinforced and should consider the unique circumstances within the context of a for-profit or not-for-profit health system, academic medical centers, or other healthcare entities.  

The following are key aspects of compensation plan design:

Align business goals with physician incentives

Compensation plans should be structured to align physician incentives with the goals of the organization. The proposed Stark Law changes will open up potential value-based arrangements to pay physicians for increasing quality care.

Pay for Performance

Physicians should feel as if they are being compensated based on their performance. Whether that includes performance in the areas of quality care, production, research & graduate medical education, physicians will be more likely to embrace a plan design that rewards effort.

Establish Equity across physicians

Establishing a plan design that can be applied across the system will minimize any potential inequities. While plan design should be flexible enough to allow for variability in physician practice, there should be consistency across physicians within the same specialty.

Ensure financial viability for the physician practice and healthcare system overall

An organization needs to remain financially viable while compensating physicians at an amount that is fair and consistent with the guidelines outlined above. In today’s ever-changing healthcare system, it is imperative that each organization keep a watchful eye on their bottom line. With physician compensation often representing over 50% of the total costs of an organization, it is critical that a physician compensation plan design yields compensation levels commensurate with profitability.

Mitigate Compliance Risk

Physician compensation needs to be within FMV and commercially reasonable. This is a regulatory requirement that should always be central to any plan design to ensure compliance. Physician compensation plan design should be integrated within an FMV compensation compliance framework.

Experience-Based Designs

HMS has played a central role in physician compensation plan design for over 20 years. Whether providing transaction advisory services for an individual physician’s agreement or partnering with healthcare systems to help establish a compliance framework for physician compensation, HMS draws upon years of experience, industry credentials, and a service-centered philosophy to deliver a plan design the meets the needs of each client. Our compensation plan design team will work closely with your key compliance stakeholders, including, but not limited to, the compliance department, administration, and in-house counsel. HMS is well-versed in physician compensation valuation work and will draw upon that experience to ensure the plan is compliant with FMV.

Valuation and Consulting Services in the following areas:

Physician Compensation Plan Design

Physician FMV Compensation Compliance Framework

Physician FMV Compensation Review

Financial and Productivity Benchmarking Analysis

Value-based compensation implementation


For more information on these services, please contact one of our experts today:

Joe Aguilar

Partner—MBA, MPH, MSN, CVA

Natalie Bell

Partner—MBA, CVA

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