For a final-year resident physician or physician fellow assessing practice opportunities, one of the most difficult tasks can be evaluating compensation packages. Not only are they often formulated using a slew of variables—many of which physicians transitioning to practice may be largely unfamiliar with—but determining how they compare with market standards is not always apparent.
A guide (login required) published by AMN Healthcare Physician Solutions, formerly known as Merritt Hawkins, explores how to determine whether a financial package benchmarks against the most recent and relevant physician compensation figures.
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.
More information is better
“Some years ago, in the era of traditional private practice, there was only limited data regarding physician compensation,” the guide notes. “Now that many physicians are employed, more data exist to benchmark physician compensation and help structure incentive packages.”
The guide recommends adopting the following strategies for evaluating a compensation package:
Check out publicly available benchmarking data.
“This will let you know, one, is the package competitive?” said Leah Grant, president of the AMN Healthcare Physician Solutions division.
The guide recommends referring to the annual reports published by the Medical Group Management Association, the American Medical Group Association and the Association of of American Medical Colleges, as well as recruiting firms, such as Sullivan Cotter and The Hay Group. In addition, AMN Healthcare recently published its 2024 Review of Physician and Advanced Practitioner Recruiting Incentives (registration required), which includes data collected on starting salaries and other incentives offered by the company’s clients.
Keep in mind, however, that some reports cite only base salaries, while others account for total compensation.
“You never want to negotiate yourself out of a role,” Grant said, noting that one subset of employers will offer a standard salary no matter how long you've been practicing, while a second will offer to pay you based on your experience. “So you want to ask: What is the opportunity for salary increase over the years? Is it looked at on an annual basis?”
Figure out who your patients will be, as well as the local payer mix, outmigration patterns and other data to confirm you will be able to maintain a busy practice and make your production bonuses.
“Nine times out of 10, the employer will have an example of what their local payer mix is,” Grant said. “That then can tell you a lot about what your potential is for relative value units,” or RVUs, which are the main measures used by the Centers for Medicare & Medicaid Services and private payers to determine physician payment.
“Whenever you're trying to assess a practice, you want to make sure you get an understanding of your base salary, your income potential and also the average provider payout,” she said. “Your income potential is naturally going to be the highest number, but that won’t always align with the average payout.”
Physician compensation is constantly changing, so determine how you will be evaluated: through value-based metrics, quality-based metrics or a combination of the two.
“Bonuses are calculated based a variety of metrics,” Grant said, noting that the top five are RVUs, net collections, gross billings, patient encounters and quality. “All of these with the exception of quality are volume driven. With RVUs, for example, the more patients a physician sees, the higher the physician’s bonus.”
In addition, it’s important to nail down what compensation besides salary is included in the package.
“When you talk with the employer about total income potential, be sure you get an understanding of whether it includes payments for such things as continuing medical education, a sign-on bonus, relocation assistance or an educational stipend,” she said.
Obtain all this information and request a copy of a sample contract or letter of agreement before you interview.
Leave further discussion of compensation out of the interview, however. That can be done once you receive an offer, the guide advises.
“When you have a copy of the contract or offer letter, you have an opportunity to work backwards to the exact compensation structure,” Grant said. “If, for example, there's wording that says you'll get a guaranteed salary for your first two years but year three onward is based on net collections, then you know to ask about the average salary for years three, four and five. Don’t take anything for granted.”
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.
