For physicians transitioning to practice, knowing whether a compensation package is up to market standards is one thing. Knowing whether it works for you and your career goals is another.
A guide (login required) published by AMN Healthcare Physician Solutions, formerly known as Merritt Hawkins, explores how to make sure a compensation structure is appropriate for the position, as well as for your mindset.
You can learn more with a separate AMA STEPS Forward® toolkit, “What to Look for in Your First or Next Practice: Evaluate the Practice Environment to Match Your Priorities.” It is enduring material and designated by the AMA for a maximum of 0.5 AMA PRA Category 1 Credit™.
The toolkit is part of the AMA Ed Hub™, an online learning platform that brings together high-quality CME, maintenance of certification, and educational content from trusted sources, all in one place—with activities relevant to you, automated credit tracking, and reporting for some states and specialty boards.
Learn more about AMA CME accreditation.
Compensation is conditional
“There are an increasing number of financial structures and contract types being offered to physician candidates today,” the guide says. “It is important to ensure that the structure being offered reflects your mindset and financial goals.”
The guide recommends evaluating a compensation structure using the following strategies:
If you are business-minded, you might consider an “income guarantee” to help build a start-up practice.
“Due to changing medical economics and other factors, there has been a large decline in the use of income guarantees, as physicians have gravitated to employed settings,” the guide notes. “However, such guarantees offer the benefit of practice autonomy and are still attractive to some doctors.”
But the key to making an income guarantee work is knowing what exactly it is, said Leah Grant, president of the AMN Healthcare Physician Solutions division.
“It is essentially a loan that must be repaid,” Grant said. “The agreement might say you’re guaranteed $200,000 per year, but you have to make sure you're generating at least $200,000 in revenue or the balance will be owed or taken out of your future return.”
You might also think about it as overhead, which should reinforce the need to ensure you will have adequate patient volume and billings to cover it.
“If you are considering an income guarantee, the number one thing you want to require is information that shows the historical data for the guarantee for either other providers or the income you can expect based on the patient population and what has been billed in prior years,” she said.
Most employers offer a package featuring a base salary and a production bonus. Look for a clearly defined bonus structure.
AMN Healthcare’s 2024 Review of Physician and Advanced Practitioner Recruiting Incentives (registration required) includes data collected on starting salaries and other incentives offered by the company’s clients. It found nearly two-thirds of job offers, 62%, featured a base salary and a production bonus.
Heaps of variables are used to determine production bonuses, including relative value units, net collections, net charges, patient encounters, timely records, patient satisfaction, patient panel size, qualitative metrics, profit share, on-call pay, departmental goals and administrative responsibilities.
“Transparency is essential—make sure you understand the terms of the financial structure and the metrics on which your productivity will be based,” the guide warns.
For example, Grant said, look at your patient panel: How sustainable is it?
“Many times when positions are advertised, employers will put out a big compensation number, especially for in-demand specialties,” she said. “I would always encourage you to confirm that you thoroughly understand how much of the total salary is guaranteed and how much falls into bonuses.”
If a private practice group offers equity ownership, it should have a defined process that is transparent and easy to understand.
“Today, some 90% of these opportunities are offering a 12–24 month partnership track,” the guide notes.
Equity ownership is a long-term goal, not something that's going pay off immediately.
“Think about it like the stock market—it’s a long-term strategy,” Grant said. “There's typically a buy-in of some sort, so you want to verify what that is and what the equity is that you’re buying into.”
Make sure some of the interview time is set aside for meeting your potential peers and partners in a social setting.
“While it is important to obtain all the facts you can about the practice and the community, remember that there is a personal and social dimension to examining a new practice opportunity,” the guide says.
If you're looking at partnership, make sure your would-be partners are people who you can see yourself working with in a long-term capacity.
“You're signing up not for just a one- or two-year contract, but a way longer-term game,” Grant said. “There's so much great conversation that can come out of a lunch or a dinner or even windshield time—driving from one clinic to another—when someone can say, ‘My daughter does gymnastics here,’ or, ‘We dock our boat over there.’ You can pick up on whether you fit into the the community.”
Much like diagnosing a patient, examining a practice opportunity relies on a careful, thorough process.
Think about the questions you’re already accustomed to asking, Grant said.
“For example, if a patient needs to be referred out to, say, an orthopedic surgeon, what's the referral system like? How do you work with specialists in the community?” she said. “You have to be able to genuinely envision yourself joining the practice. So think about the things that will help you say, ‘This is the right fit for me.’”
The AMA has assembled a variety of resources to help physicians flourish in the employment setting. They include the AMA Physicians’ Guide to Hospital Employment Contracts (PDF), free for AMA members, and the Annotated Model Physician-Group Practice Employment Agreement (PDF).
Learn more with the AMA about understanding physician employment contracts.
