How Do Physicians Earn a Bonus?

As a physician, it is likely that your compensation package will include some sort of bonus structure to motivate you to be productive. Bonuses can represent as much as 25 percent of a physician’s compensation. This means a salary of $200,000 could put your annual bonus at $50,000. This should be an exciting incentive to physicians eager to earn extra to put towards loans or pad the retirement fund, but where exactly does this money come from? And is this bonus even achievable? 

Salary, Collections or Productivity 

Bonuses may be paid on top of a fixed salary, as a percentage of production or as a percentage of collections. A bonus or incentive combined with a fixed salary is the most typical and straightforward bonus structure. Even though it is very common, physicians should still inquire about how and when they can achieve these bonus incentives. This questioning should take place early in the contract negotiation process, and before you sign anything, you should discuss the terms of your contract with an experienced physician contract attorney. If you are paid based on productivity or other metrics, the formula for how bonuses are calculated becomes even more complex, so be sure to reach out for help in understanding the terms of your contract. 

Productivity Measures 

Healthcare is shifting compensation models to focus on measuring productivity, so it makes since that physician bonus structures would follow. One of the most popular productivity measures in use is the work Relative Value Unit, or RVU. RVUs are a method for calculating the volume of the work a physician produces while taking into consideration the intensity and skill required of them in their training.  In a 2016 review, Merritt Hawkins found that RVUs were featured in over 50 percent of recruiting assignments in which a production bonus was part of the incentive package.This metric allows for apples to apples comparisons by specialty and region and provides a benchmark for production. If you have this RVU incentive scheme and you are performing well above the average physician in your specialty, then your bonus should reflect your exceptional performance. Bonuses can also be based on collections or billings. The total amount of collections for a physician used to be the main metric upon which a bonus was based, but it is now seen as slightly unfair due to the fact that some of the organizations where physicians do not have strong claims-collection rates. Merritt Hawkins found that only 22% of current bonus schemes are based on collections, down three percentage points from just three years ago.

Non-productivity Measures

Non-productivity measures are an alternative to the traditional productivity metrics and give a more subjective view of whether physicians are practicing successfully or not. Non-productivity measures are typically things like patient satisfaction or successful treatment outcomes. In a recent study, Merritt Hawkins found that thirty-two percent of physician production bonuses featured a value/quality-based component, which was nearly a 10% increase from the previous year.

Note that these qualitative measures are not always entirely fair. For example, if your bonus is partially based on patient satisfaction and a member of your staff is unpleasant with the patient, then that patient’s negative experience may reflect upon your patient satisfaction score and ultimately the amount of your bonus.

Achieving Bonus Incentives

As mentioned previously, sometimes reaching the incentives set out by your organizations can be a trickier proposition than it may seem on the surface. Whether it is trying to meet unrealistic productivity expectations or the possibility of staff or other outside factors affecting your bonus, you might not have ever had a legitimate shot at attaining a bonus. According to Medscape’s Employed Doctors Report 2016, less than half of employed physicians are satisfied with their bonus structure. This is due largely in part to the fact that they feel their bonus arrangements are impossible to reach. One incentive scheme that can help remedy this problem is a tier and ladder system, where you can still obtain a percentage of your bonus for meeting a certain percentage in your productivity or non-productivity measures.

Keep in mind that many times when a bonus seems unattainable it is because an organization is inexperienced with implementing RVUs and non-productivity measures, as they are a relatively new concept. However, it is also possible that your employer might be purposely trying to ensure that you cannot reach an incentive so that they can save money. This is why it is so crucial to have a clear understanding of the bonus incentives in your contract and whether you can reasonably attain them. When you lay out the expectations early on and know what steps you need to take to earn your bonus, you are much more likely to be satisfied with your compensation model.