Methods Of Compensating Primary Care Physicians

Successful compensation methods for physicians support the mission of the medical practice.

Medical groups choose their physician compensation methods by studying the demographics of the population served, and the location and fair market value of their practice. Compensation methods must support the aspirations of the practice, be it research, teaching or increasing their influence in the community by growing the number of patients served. The method of compensation chosen should be easily understood and administered, be adaptive and responsive to changing economic conditions, and encourage physicians to be effective medical practitioners.

Fixed Salary

Utilizing a fixed salary compensation method for physician reimbursement is the easiest system to administer and understand. With the fixed salary method, physicians know upfront what their total annual compensation package will be, and the medical group has the advantage of knowing the fixed cost of payroll for budgeting purposes. Factors used to determine a fixed salary include market comparisons, academic titles, position evaluation and pay grading. According to the American College of Obstetricians and Gynecologists, this method is the standard for academic settings, large corporate or physician-owned practices and health maintenance organizations.

Salary Plus Incentive

Adoption of a fixed base salary plus incentive compensation method gives physicians an impetus to increase their pay by meeting specific productivity goals, and management flexibility when setting base salaries. In this method, the majority of a physician’s compensation is garnered from a fixed base salary, and the remaining from their ability to reach goals set by management. The salary plus incentive method works well in small practices and any medical group trying to increase revenue.


Basing a physician’s salary solely on productivity is the most difficult method to administer. This method requires full agreement from all partners of the medical group, and utilizes a series of formulas to determine the amount of pay. This method encourages higher productivity and awards physicians who carry a large patient load or, who participate in a larger number of clinical procedures. The American College of Obstetricians and Gynecologists warns that if the productivity method is not administered carefully, it could compromise the quality of patient care by promoting a competitive environment among physicians instead of one of camaraderie.

Equal Share

The equal share compensation method provides each physician with an equal share of the practice’s income after overhead and expenses are paid. This compensation method encourages physicians to look at the group as one organization, and assumes that all physicians are equally skilled, productive and motivated to work in the best interest of the group. According to Physician’s News, single specialty practices utilize this compensation method on the belief that all of the services rendered by physicians are vital to the survival of the business, and deserve equal pay.