Data Insights

Who creates your physician compensation plan?


Provider Compensation

Kenneth T. Hertz FACMPE
The Medical Group Management Association’s most recent MGMA Stat poll asked healthcare leaders if their physicians participate in developing their compensation plans: 67% answered “yes,” while 33% answered “no.” Respondents were then asked to elaborate on their answer.

Respondents who answered “yes” indicated:
  • The compensation committee includes physicians.
  • Physicians have designed their own base salary and quarterly bonus compensation plan.
  • Lead physicians are involved in all aspects of the compensation plan developing at the system level.
  • Physicians pick the quality or performance measures based on their population.

Respondents who answered “no” elaborated:
  • Set by Office of Chief Medical Officer each year. Provider satisfaction is monitored, but actual development of compensation plan is centrally controlled.
  • We take their thoughts into consideration, but the owner has the final say.
  • Providers do have ability to negotiate rates within [a fair market value] scale; however, structure is defined by the organization.
  • Board of directors and CEO develop compensation plan.

This poll was conducted on June 11, 2019, with 1,232 applicable responses.

There are three rules of thumb regarding physician compensation plans:
  1. In the most successful plans, everyone is equally satisfied and dissatisfied.
  2. Revising a physician compensation plan can be a career-limiting step for an administrator.
  3. For a successful plan, engage your physicians early and often.
Simple, right? Well, not exactly.

Let’s look at a baker’s dozen of tips for engaging your physicians and developing a new physician compensation plan.
  1. Identify a need. “Our plan is not compatible with the changes in new payment models.” “We’re not being rewarded for variations in our productivity levels.” “We’re not being compensated for individual effectiveness in meeting quality metrics.” Are these the only issues that will drive a new compensation plan? No, yet they are representative of the types of issues catalyzing change in our practices. Essentially, they make the case for the need to change the plan, which should be communicated to all physicians.
  2. Create a task force to address the issue and outline its membership, key tasks, reporting requirements, deadlines and milestones.
  3. Engage physicians early in the process and keep them engaged throughout. There is often a benefit in engaging external consultative assistance to guide the process, though this is not mandatory.
  4. Ensure that there is appropriate staff support for the task force.
  5. Identify the current issues driving the change.
  6. Identify the deal breakers for a new plan.
  7. Establish guiding principles for the new plan, consistent with the group’s mission, vision and values. [Note: We haven’t even spoken about wRVUs or dollars yet. There is more to a compensation plan than numbers.]
  1. Create a realistic timeline for the process. Ensure there is time to communicate and provide feedback. Again, engage physicians early and often.
  2. Model the plan on guiding principles. Communicate and receive feedback.
  3. Once approved, develop a clear communication strategy, realistic timeline for implementation and clear feedback loop for evaluation and adjustments.
  4. Explain the why. Explain the process and the plan.
  5. Deploy the new plan.
  6. Communicate. Communicate. Communicate.
Engage your physicians in developing the group’s compensation methodology. Engage early and throughout. If you want the plan to be successful, you must include your physicians in the process. Not doing so will likely result in failure.

This is a difficult process. It doesn’t have to be as difficult as we make it.

For more information on how MGMA Consulting can assist you with these or other physician-hospital issues, please contact Kenneth Hertz at

Additional Resources
MGMA Stat is a national poll that addresses practice management issues, the impact of new legislation and related topics. Participation is open to all healthcare leaders. Results of other polls and information on how to participate in MGMA Stat are available at:

Learn more about MGMA Consulting
Learn more about MGMA Stat

About the Author

Kenneth T. Hertz
Kenneth T. Hertz FACMPE
Consultant MGMA Consulting

With nearly 40 years of management experience, Kenneth T. Hertz, FACMPE, has held numerous leadership positions in small and large healthcare organizations in primary care, multispecialty care and large integrated systems. His consulting work has encompassed a broad range of services, including operational improvement, practice analysis, strategic planning, organizational development and strategic marketing.