Family Practitioner Pay Plans Vary Widely By Hospital Ownership and Payer Mix

Family Practitioner Pay Plans Vary Widely By Hospital Ownership and Payer Mix

Compensation systems for family practitioners (FPs) in medical groups run the full gamut from straight salary and equal shares to individual profitability and other production incentives.

Pay for FPs raises the “same issues” as that for internists, says Shari Harvey, director of clinics at Scaggs Community Health Center in Branson, Mo. Although internists’ pay levels tend to be somewhat higher than FPs’, their pay formulas are usually very similar, she notes. (For the profitability-based pay plan that Scaggs Community is planning to implement next year, see box p. 3).

Equal shares are very popular among FPs in small independent groups of three to six physicians, says Brent Feorene, a consultant with Medimetrix in Cleveland. “It keeps revenue questions out of the equation” of intra-group relations, says Feorene, “but you see less of that today.”

Between the “extremes” of equal shares and individual profitability systems, there are base salary plus incentive plans, Feorene notes. Many hospitals that paid FPs straight salaries several years ago have added production incentives based on revenues, RVUs or visits. Many have also added cost incentives, such as setting target budgets.

Payer mix also has a big impact on FP pay plans, Feorene says. If a group is heavily capitated, a physician may earn nothing more by working harder, and the group’s bottom line may even fall if costs rise from taking better care of patients. So, such groups may want to put size of panel and preventive care incentives in FP pay plans. Hybrid markets, in which capitation is neither very high nor very low, are the hardest kind of market for which to design physician pay systems. Such markets often need “good medicine factors” in pay plans, he says.

Each FP Has Multiple Incentives

At First Health Family Centers, a 30-physician (27 FPs), 17-clinic practice based in Pinehurst, N.C., physicians out of residency earn $120,000, and are raised to $125,000 once they’re board-certified.

This is in the lower range of MGMA pay for FPs, says executive director Geoffrey Norwood. However, physicians are eligible for a quarterly production bonus from the beginning. If they pull in more than 1.75 to two times their base pay in gross professional (non-ancillary) charges, they receive a bonus of 20% of the excess; the bonus is 25% if they have hospital patients. The precise ratios and dollar amounts are set by management.

First Health also pays a patient satisfaction/quality bonus of up to 6% of base pay. And, it pays $750 per month per midlevel provider supervised. Actual pay levels run from a low of $135,000-$140,000 to a high of $160,000-$175,000, Norwood says.

At Doctors Clinic in Vero Beach, Fla., which has four FPs out of 38 physicians in nearly all major specialties, physicians are paid 100% based on productivity measured by their net professional revenues or non-ancillary collections, says executive director Michael Kissner. All the physicians in each specialty have the same conversion factor from revenues to individual pay; the factors were basically set in 1994 following the enactment of the current Stark law (see article p. 1). Before Stark, conversion factors were applied to both the professional and ancillary production of each physician, Kissner explains. When Stark made that arrangement illegal, the factors were changed for professional revenues and the formula was completely restructured for ancillaries.

Although the conversion factors apply to net-revenues-to-compensation calculations, the group compares them with MGMA national medians for gross-charges-to-compensation for each specialty In the Physician Compensation and Production Survey: 1999 Report Based on 1998 Data, that figure for FPs is .451. The group then requires that the net revenue conversion factor be within .075 of the MGMA gross charges conversion factor. If so, the conversion factor is left alone. If not, it is lowered or raised to bring it in that .075 range.

Kissner says that, although the group’s pay system is extremely complex, most of the group’s physician members are quite satisfied with it.

Contact Feorene at or (800) 366-7740; Norwood at or (910) 255-3647; or Kissner at (561) 567-7111 or

Compensation and Production Indicators

For Family Practitioners

25th 75th 90th

Mean %ile Median %ile %ile


Overall 149 120 138 168 209

1-2 yrs in specialty 123 110 121 133 149

Single specialty 141 115 133 157 200

Multispecialty 151 121 139 169 210

No capitation 153 121 141 175 220

10% or less capitation 152 120 140 174 214

11%-50% capitation 145 116 133 162 206

51% or more capitation 152 129 147 165 204

Eastern 142 115 130 160 200

Midwest 145 120 135 161 205

Southern 170 130 155 200 250

Western 138 118 134 158 181

Gross Charges

Overall 348 256 320 399 506

1-2 yrs in specialty 306 206 262 340 473

Single specialty 375 287 339 447 541

Multispecialty 346 251 319 398 500

No capitation 382 281 352 436 583

10% or less capitation 334 257 320 399 478

11%-50% capitation 313 229 295 373 476

51% or more capitation 362 277 330 380 558

Compensation to Gross Charges Ratio

Overall .468 .382 .45 .53 .641

1-2 yrs in specialty .49 .387 .463 .566 .72

Single specialty .429 .332 .408 .507 .648

Mutlispecialty .471 .385 .451 .531 .64

No capitation .435 .344 .411 .506 .61

10% or less capitation .483 .404 .459 .533 .634

11%-50% capitation .488 .402 .463 .551 .669

51% or more capitation .46 .378 .45 .524 .65

Production Indicators, Per FTE Physician

Ambulatory encounters 4,337 2,935 3,914 5,017 7,502

Work RVUs 3,865 2,957 3,756 4,503 5,545

Compensation per RVU $39.86 $33.97 $37.41 $44.98 $53.68

Ambulatory encounters: * * 4,205 * *

hosp. owned

Ambulatory encounters: * * 4,672 * *

non-hosp, owned

RVUs: hosp. owned * * 3,673 * *

RVUs: non-hosp, owned * * 4,011 * *

* Not in published report.

SOURCE: MGMA, Physician Compensation and Production Survey: 7999

Report Based on ?998 Data. (888) 608-5601, ext. 895. All data are for

family practice without OB. Compensation and gross charges numbers are

in dollars rounded off to nearest thousand.

RELATED ARTICLE: Hospital Tests Profitability Pay Plan for Full Year

On May 1, Skaggs Community Health Center, a hospital in Branson, Mo., began financial modeling a new production-based pay system for the 24 physicians working in the 11 clinics it owns in rural areas around the country music and adventure park mecca. The hospital will run the model for a full year, and may make some changes based on its results, before replacing the current straight salary system on May 1, 2001, says Shari Harvey, group executive director.

Eight of the physicians are family practitioners. Salaries under the current system have been set informally based on local market levels and relationships between hospital managers and physicians.

The new plan pegs each physician’s pay largely to his or her approximate contribution to the hospital’s profitability (Steps 1-5). There are also four incentives: for productivity, patient satisfaction, cost control and coding accuracy (Steps 6-12).

Step 1: Add up each physician’s gross professional charges including ancillaries and charges for midlevel providers supervised by the physician.

Step 2: Multiply that by 75% to reflect the estimated average of 25% contractual discounts. Harvey notes that, given payer discounts and collection obstacles, pulling in revenues of 75% of gross charges is practically impossible.

Step 3: Add up all direct and indirect costs created by each physician except his or her pay draw. Costs incurred directly for a physician include malpractice insurance, transcriptions and rental of office space allocated to each physician. Indirect costs include a clinic’s nurses and ancillary expenses and the clinic’s share of central office costs. These are charged equally to the physicians in each clinic.

Step 4: Subtract Step 3 from Step 2.

Step 5: Multiply the Step 4 profit measure by 90% to get a truer picture of the physician’s profit contribution to the hospital. Pay that amount whether any of the incentives below are earned. This profitability measure will be the lion’s share of pay.

Step 6: Take 75% of each physician’s gross professional charges, less ancillaries, to get the overall pool available for incentives.

Step 7: Multiply that pool by 15% to get the maximum incentive pay. Thus, a physician can earn up to 10.5% (70% times 15%) of gross charges.

Step 8: Award 50% of the maximum incentive for meeting a threshold production goal. The goal is negotiated annually between hospital management, including Harvey, and each physician. The goal is prorated and awarded quarterly; failure to meet it one quarter does not reduce the chances of meeting it the next quarter. Like the other three incentives, it is “pass-fail.” A physician either meets the goal for the quarter and gets the whole incentive, or doesn’t meet it and gets nothing.

Step 9: Award 20% of the maximum incentive for a 75% patient satisfaction score. The scoring system will be set by the hospital’s marketing department.

Step 10: Award 20% of the maximum incentive for holding total costs (as measured in Step 3) down to no more than 5% above the median for the physician’s specialty in Midwestern rural practices, as reported in MGMA’s Cost Survey. Harvey may have to do certain extrapolations of MGMA data to get a fully comparable figure.

Step 11: Award 10% of the maximum incentive for achieving 85% coding and documentation accuracy. This helps the hospital’s compliance and collections efforts.

Step 12: Add profitability pay (Step 5) and incentives earned (Steps 8-11) to get total pay.

Contact Harvey at (417) 335-7551 or

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