Which compensation model is best for your urology practice?

March 1, 2012

Knowing current urologist salaries at a hospital or deciding how much to pay a new urologist joining a group practice can be difficult whether you're the applicant or the hiring physician. Several different compensation models exist, each with their own benefits and drawbacks.

Key Points

Today's compensation models are based on typical salaries per region or on physician surveys conducted by management organizations such as the American Medical Group Association. Basically, salary, a measurement of revenues generated, and incentives or bonuses are all considered in the computation of the final salary. Some of the major questions become: What incentives should we consider? How will we arrange and distribute bonuses? Are the criteria reasonable and/or attainable, and how do productivity and efficiency enter the picture?

One common compensation package is the salary model. Usually, salary-based (or "straight salary") compensation is simple to determine in large health maintenance organizations, academic settings, large corporations, and physician-owned practices. With consideration for the local market (location and organization) and position type, a set figure is offered as a salary. This salary may or may not incorporate figures based on the physician's merit or qualifications. Often, salaries will be based on the length of time a physician has been in practice, with consideration for any academic titles.

The salary-based plan offers a relatively worry-free and secure environment. Physicians will know their salary from the beginning of their employment. Theoretically, they will not feel the need to compete with their colleagues, focusing instead on effective patient care.

The key disadvantage of this package is that since physicians are secure and do not need to compete with one another, they might not be as productive as they otherwise might be. If there are no rewards beyond the set salary, doctors may come to feel that extra effort is not worth it. Minimal effort may become the norm.

Salary plus incentive. The straight salary model is modified by some organizations through the addition of a bonus or incentive. In fact, this is the most prevalent model in today's hospitals and practices. In this plan, salary accounts for a certain percentage of annual compensation (80%, for example), and bonus payments or other incentives make up the remaining portion (20%). There is an advantage to this system, which accounts for its popularity among many physicians and administrators.

This model remedies the problem of a system based simply on salary by rewarding extra effort. Income can be increased by excellent performance. Another incentive might be the opportunity for additional income earned through non-clinical activities such as research, teaching, or administrative duties.

The problems with this model? The guaranteed amount of salary may sometimes need to be reduced. There is a varying degree of risk, depending on the organization and its performance. If the practice as a whole suffers financially over the year, physician bonuses or incentives may not be available, even if the physician performed with excellence. In addition, bonuses or incentives are often based on quality indicators that are highly subjective-indicators such as patient satisfaction scores, utilization reviews, contributions toward practice administration, and more. Alternatively, bonuses may be based on insurance guidelines or other pay-for-performance statistics that may not allow leeway for special circumstances (an individual needing medications outside of guidelines, for example) or are based on the performance of the group as a whole.

'Equal shares.' A final salary-related model is known as "equal shares." In this model, practice or clinic expenses are paid, and all remaining revenues are split equally among the physicians. Administratively, this model is easy and discourages overutilization. But this model also suffers from the same disadvantages as a straight-salary program; it assumes all physicians are equal in skills, performance, and productivity.