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Physician compensation can be a complicated subject, mainly because there’s no one right way to offer a compensation package. There are numerous compensation models available, so new Medical Practice owners may feel overwhelmed with structuring their offers to physicians. Some people live with the philosophy, "If you have seen one physician compensation model, you have seen one physician compensation model." Others say, "We have three models: The one we used last year; the one we are using this year; and the one we will use next year." Compensation models include everything from pay and incentives, to benefits and non-financial rewards. There are four main models you can use to structure your compensation packages. Just remember, the most important thing in designing your compensation packages is to find or design one that fits your business philosophy and your business model.

Why You Need a Compensation Model

At the end of the day, everyone wants to feel like they are being compensated fairly in exchange for what they do. Understanding different compensation models gives you the opportunity to ensure that happens, affording you the best chance to compete for the best physicians. Talking about money is one of the worst fears you will probably face as a clinic owner. Dealing with doctors who feel they are being treated unfairly for some reason is one of the biggest problems you could face. Once a doctor feels he or she is being treated unfairly, the problem tends to fester and grow like a big abscess. So, the sooner you address compensation standards, the better. My personal philosophy is to take money off the table. This simply means you should pay well enough that money is not the reason a doctor will decide to take another job or to leave your practice. Once money is off the table, the other more important things, like fitting into your company’s culture, become much easier to talk about. To avoid problems later, doctors should know and understand exactly how their compensation works before being hired. They should also understand that in exchange for great pay and a great place to work, they are required to be clinically on top of their game. Equally as important, all doctors must buy into your Medical Practice’s culture and your philosophy of treating patients.

Things to Include in Your Model

There are five things you should make sure your compensation model includes.

1. Equality Your compensation model should be fair economically, but not necessarily equally. The difference here is subtle but huge. Your model must have a way to compensate for things you feel are important. These things may include productivity or good behavior.

 2. Understandable Your compensation model should be easy to understand. In other words, a physician should not have to do calculus to be able to know how they are paid. Confusing pay schedules lead to unhappy doctors.

 3. Consistency Your compensation model should be consistent with your philosophy. This means doctors should be rewarded and penalized for doing or not doing the things your business philosophy highlights as important.

 4. Easy to manage Your compensation model should be easy to manage. The easier it is for you to manage, the less likely you will be to make a mistake. Doctors do not like it when there are mistakes on their paychecks.

5. Physician Extenders Your compensation model should take into consideration the use of physician extenders. Be careful to put your plan together in such a way that doctors are not penalized for supervising physician extenders.

Types of Compensation Models

There are numerous ways you can set-up your compensation models, but they all fall into one of these four categories.

1. Straight Pay The most common, easiest to manage, compensation model is Straight Pay for Time. This may come in the form of hourly or salary. The form of pay is very simple. Physicians can easily determine how much they will make monthly. Additionally, slower doctors, or doctors who work on a slow day or shift, are not penalized. Unfortunately, this form of pay does not fairly compensate the “go-getter” on your team. This means the doctors on your team who bring in the most revenue actually get penalized by this model because they are compensated the same as those who see less patients. This model can cause doctors to become less productive. Additionally, this model tends to breed a feeling of contempt for patients. It creates the, “I get paid the same if I see one patient an hour or five patients per hour” mentality.

 2. Equal Sharing Pool The Equal Sharing Pool model is also easy to manage. Physicians split the pot of whatever is brought in by the clinic. Assuming everyone is pulling their weight, this model helps breed team spirit. However, like Straight Pay, the Equal Sharing Model penalizes doctors seeing more patients or bringing in more revenue to the group. It also breeds a sense of entitlement to money that perhaps should not to be shared equally.

3. Productivity Model Another common compensation model is Productivity. In this model, a physician’s pay is based on things like percent of gross charges, percent to gross collections, or even a percent of net collections based on performance. This model rewards doctors bringing in the most revenue and is fairly easy to manage. Additionally, this model tends to bring the best care for patients. The biggest disadvantage to this model is it can create an unhealthy spirit of competition, where doctors may “chart pick” for higher paying patients. Additionally, it may penalize doctors who work unattractive hours because volumes may be slower during those hours.

4. Mixed Model The Mixed Model allows you to combine pieces of all three models. However, it is the most difficult model to set-up and the hardest model to maintain. Nonetheless, it is often seen as the fairest because it allows your group to include the rewards they are most passionate about. Additionally, it may allow for both a base pay and percentage pay, giving physicians both security and opportunity to earn more. The hardest part about implementing the Mixed Model is getting a consensus on the most important things to include. Additionally, managing the mixed-model can be painstaking because of all the criteria it has to include.

5. The Extras After you have picked your compensation model, don’t forget to add extra things. The intangibles for keeping good doctors are just as important as pay. After pay, doctors look for the integrity of the leader in charge of them. Physicians want to know when you say something, you back it up. In addition, physicians want to work in a culture that is fun, a culture that inspires good doctor work, and a culture that encourages all team members to look forward to going to work. Let's face it, at the end of the day, we all want to be paid fairly for what we do. But there are other things just as, if not more so, important.

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