In the 19th century, long before insurance companies and credit cards, doctors were typically paid directly per procedure by patients or their families, sometimes with emergency evening visits being more expensive and the cost for treating children often less. Payment back then wasn’t always in cash. Instead, compensation sometimes came “in kind” with produce, services or goods. 

Today, physician compensation comes in the form of physician compensation models: economics and business-based payment structures which can significantly impact physician work, satisfaction and the overall efficiency of healthcare delivery. Understanding these models as a full-time physician can already be a lot; for physicians working as locum tenens, or doing interim or temporary work, physician compensation models can vary dramatically with each assignment, so it’s important to understand all of them.

What is a physician compensation model in healthcare

A physician compensation model is a comprehensive framework that determines how healthcare providers are remunerated for their services. They range from salary-based payments to performance incentives. In healthcare, compensation models aim to ensure physicians are rewarded for their efforts, patients receive quality care and employers can stay afloat financially.

The four most common types of compensation models are:

  • Salary: A fixed annual amount paid regardless of the number of patients treated. 
  • Fee-for-service: Physicians are paid for each service they provide, incentivizing high patient volume.
  • Value-based: Compensation is tied to the quality of care provided, focusing on patient outcomes and satisfaction.
  • Hourly: Many locum tenens agencies pay physicians by the hour as employees of the agency, regardless of which hospital they’re assigned to.

Understanding these models is crucial for making informed decisions about healthcare practices and policies.

What is the most common physician compensation model

Among the various physician compensation models, the salary model is most common. This approach provides financial stability for physicians, allowing them to focus on patient care without the stress of fluctuating income based on patient volume.

Fee-for-service models are prevalent in certain specialties where high patient turnover is standard. Value-based models are growing in popularity because financial incentives sometimes align with patient health outcomes. Getting paid by the hour simplifies physician compensation for short-term employment, including additional administrative work not included in the physician’s contract.

Each model has its advantages and challenges, and the best choice often depends on the specific needs and goals of the healthcare facility and its providers.

What are the three components of physician compensation

Understanding what are the three components of physician compensation in healthcare can provide insights into how these models function. Typically, these components include:

  1. Base Salary: A guaranteed annual salary that provides financial security for physicians. Even if the base salary is calculated by the number of hours worked, providers still have a full understanding of how much they can expect with each paycheck.
  2. Incentives: Performance-based bonuses tied to metrics such as patient satisfaction, quality of care, or productivity.
  3. Benefits: Additional perks, including health insurance, retirement plans and continuing education allowances, which enhance overall compensation.

These components work together to create a comprehensive compensation package that not only attracts but also retains talented physicians.

How is physician compensation calculated

Calculating physician compensation 2024 involves a variety of factors, including the chosen compensation model, the physician’s specialty, geographic location and the healthcare organization’s financial structure. Typically, healthcare facilities assess:

  • Market rates: Analyzing compensation data within the region and specialty.
  • Performance metrics: Evaluating productivity and quality of care delivered.
  • Negotiation factors: Considering the physician’s experience, skills and demand in the area.
  • Supply and demand: The physician shortage has increased the need for a locum tenens workforce, while the attention to physician burnout has made getting paid for additional work standard.

By factoring in these elements, organizations can establish competitive compensation packages that align with their operational goals.

Understanding physician compensation models is vital for navigating the complexities of healthcare today. By exploring the different types of models and their components, healthcare providers can make informed decisions that benefit both their practices and patient care. 

For more insights into physician compensation, explore the resource center at PracticeLink.com. To discuss job opportunities with recruiters, including for locum tenens work, sign up for our Virtual Career Fairs.