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Physician Compensation

One of the questions medical practices face is how to compensate physicians. It is tough to determine all the assets a physician brings to a practice. Even using production alone as the basis for compensation fails to adequately address compensation per physician. The ability to understand and choose the best compensation package, with consideration for different types of associated expenses, is the difference between a thriving and failed practice.

Methods of compensation range from guaranteed salaries, sharing profits equally, stock options, base salaries plus incentives, production based salaries, combinations and special combinations.

Other ways to be compensated can come from administrative responsibilities, medical directorships, being on the board of directors, lecturing and publishing. Designing a compensation package based solely on production can leave individuals vulnerable since all are an extension of the practice and their governance and involvement in community affairs should be recognized.

It is difficult to account for all the benefits each physician provides a practice and to compensate appropriately. To make sure individuals are not taken advantage of areas of value should be recognized. A good solution is identifying individual interests and practice needs. Practices can then determine if individual interest have any value for organizational needs.

Some physicians may be part of the administration which can result in a loss of production due to administrative duties. To compensate physicians based on production alone would be unfair to less productive administrative physicians who help run the organization. In a scenario like this it would make more sense to establish a base salary coupled with production compensation.

With that said, there are always going to be exceptions administering compensation. For many years this wasn't an issue. Physicians. compensation was based almost exclusively on generated revenue. If Physician A generated 25% of the revenue then 25% went to Physician A. However, there was limited consideration for expenses. Physician A may have generated 25% of the revenue, but may have also accounted for 60% of the expenses to the practice.

Medical Practice Consultants prefers to use the Resource Based Relative Value Scale (RBRVS) for situations like this. The RBRVS analysis can effectively measure the amount of resources used and determine the frequency for which each physician performs a procedure. Thus making it easier to track expenses incurred during procedures and allocating costs appropriately.

The RBRVS is not the perfect solution to physician compensation, but establishes a basis for developing a package.

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