In the world of healthcare, there are several physician compensation models (one of which is a productivity model) organizations utilize to pay doctors. These models vary based on the healthcare system, specialty and size of the practice. 

What is the most common physician compensation model?

The three most common models are salary-based compensation, production-based compensation and a hybrid model that combines the two.

  1. Salary-based compensation model: In this structure, physicians receive a fixed salary regardless of the number of patients they see or procedures they perform. It is common in academic medical centers, large hospitals and salaried physician groups. The main advantage of this model is the financial stability it can offer; however, the disadvantage is it may lack incentives for high performance.
  2. Production-based compensation model: Often referred to as the productivity model, this approach rewards physicians based on the volume of services they provide. Physicians are compensated for the number of patients they see, procedures they perform or the amount of revenue they generate. This model is particularly popular in private practices and group medical practices.
  3. Hybrid compensation model: Combining aspects of both salary and productivity-based compensation, this model allows physicians to receive a stable base salary along with performance incentives. It strikes a balance between financial security and the motivation to increase productivity, making it a common choice for larger health systems.

What Is the physician productivity model?

Growing in popularity is the physician productivity model, which is a compensation structure that ties a physician’s income to the services they provide. But what is the physician productivity model in healthcare and why is it so widely used? Essentially, this model rewards doctors for their output. The more patients they see or procedures they perform, the higher their earnings.

This type of compensation is measured using metrics such as Relative Value Units (RVUs). RVUs assign a standardized value to the services doctors provide, from patient consultations to complex surgeries. Each procedure or service is worth a certain number of RVUs, and physicians are compensated based on how many RVUs they accumulate over a specific period.

This model can be beneficial for physicians who are motivated by high performance and have the capacity to manage a larger patient load. It can also give an advantage to healthcare organizations by encouraging more efficient and productive work among their doctors. However, this model is not without its challenges. Physicians may experience burnout from consistently high workloads, and there is the potential quality of care could be compromised in favor of quantity.

What Is a productivity bonus for doctors?

Many organizations offer a base salary plus productivity model to their physicians which guarantees a set income while also providing the opportunity for additional earnings through productivity bonuses. This hybrid system gives physicians financial security while still rewarding them for exceeding productivity benchmarks.

A productivity bonus is typically based on how much revenue a physician generates beyond their base salary requirements. For example, if a physician’s base salary covers a certain amount of RVUs, they may earn a bonus for any RVUs they accumulate beyond that threshold. This bonus is a powerful incentive for physicians to increase their productivity, especially in high-demand specialties such as surgery or radiology.

In this model, doctors are encouraged to work efficiently while maintaining the flexibility to focus on patient care. The combination of a guaranteed base salary and the possibility of earning a productivity bonus can strike a healthy balance between stability and performance-based income.

How to calculate physician productivity

Physician productivity is often calculated using a value-based physician compensation model example to determine how well a doctor performs in relation to their compensation. While the basic productivity model focuses primarily on volume (i.e., the number of patients seen or procedures performed), value-based models take into consideration the quality of care provided.

A common way to calculate physician productivity is by using RVUs, but value-based models also factor in patient outcomes, satisfaction scores and other quality indicators. This is known as a “quality incentive” or “value-based care” component. In this scenario, a doctor who achieves high patient satisfaction ratings or provides better patient outcomes might receive a bonus, even if their raw productivity numbers are lower.

For example, a value-based model might assign higher RVU values to physicians who see more complex cases or who provide preventive care that reduces hospital readmissions. This approach aims to reward not just quantity but quality, aligning physician compensation with broader healthcare goals like improving patient outcomes and reducing costs.

The physician compensation landscape is diverse, and compensation models like the productivity-based approach play a crucial role in determining how doctors are paid. While the base salary plus productivity model offers stability along with performance incentives, newer models are beginning to emphasize the importance of value-based care as well. Ultimately, healthcare organizations need to choose the compensation structure that best aligns with their goals and the needs of their physicians.

For more information on physician compensation models and how physicians are paid, check out our resources on physician quality of life and contracts and compensation at Practicelink.com/resource-center to help you make the most informed decisions during your career journey.