5 ways to achieve an effective physician compensation model

It’s no simple task to earn a medical degree or be a doctor—especially during a pandemic that makes it difficult to practice medicine—so it’s not surprising that physician jobs continue to be among America's best-paid, according to U.S. News.

But it's one thing to acknowledge that these professionals are highly compensated, and another thing entirely to design a compensation model that treats employed physicians, and everybody else in your organization, fairly. How can you keep top talent while being responsive to local forces, all while keeping care as affordable as possible for patients?

Our research has identified five factors to keep in mind. And while these things are easier said than done, we hope you can harness some value from our findings.

1. Define your compensation philosophy—and then stick to it.

   Your compensation philosophy serves as a guide that stops conversations from turning into arguments. Not only should you communicate your philosophy transparently within your organization, but you also should reference it constantly as you develop and improve your compensation model.

2. Be careful that your financial incentives don't drive unintended consequences.

   For example, if you incentivize your team to hit a specific metric, you can inadvertently drive them to prioritize short-term objectives over long-term goals. Before rolling out a new compensation model with incentives, it's crucial to consider what unintended consequences could result from the new model.

3. Pay attention to the whole team, not just the individual.

   Any list of the best-paid jobs inevitably focuses on compensation at the individual level. But how does one person's pay affect the whole team contributing to their—and your organization's—success?

   A significant portion of provider compensation will remain based on their individual performance, but we believe that introducing a collective approach can benefit the overall organization. By assessing compensation at the unit level, you can see a boost in performance on major strategic initiatives such as access, service, quality, and cost.

   Just as importantly, collective compensation incentives foster a "we over me" culture in the workplace.

4. Give everyone a path to success.

   Incentives should, of course, be realistic and obtainable—but it's important to take the next step and actively help your providers achieve those targets. You might, for instance, help providers share their workloads appropriately so that one person's success doesn't result in another's failure.

5. Consider penalizing behavior that falls below your expectations.

6. Most compensation models rely heavily on "carrots," but we think that "sticks" can play a role too—especially if a physician's behavior falls below baseline expectations. For instance, should physicians really be incentivized for "good citizenship" behaviors such as completing their charts on time and attending meetings? Or should they instead be penalized for failing to exhibit these behaviors? There's no universally right answer, but penalties should at least be on your options list.

To learn more about designing a provider compensation model that works, read our more detailed research brief on the subject, or dive deeper with our report from the frontier of physician compensation. You can also check out our physician executive's guide to change leadership for tools to manage change across the physician enterprise.