By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    stress management for healthcare workers
    3 Tips For Healthcare Professionals: How To Stay Beautiful, Healthy, and Happy
    November 2, 2021
    importance of relaxing on the weekend for your health
    Importance of Relaxing During the Weekend for Optimal Health
    March 25, 2022
    LASIK Eye Surgery
    What Is LASIK Eye Surgery?
    May 16, 2022
    Latest News
    Beyond Nutrition: Everyday Foods That Support Whole-Body Health
    June 15, 2025
    The Wide-Ranging Benefits of Magnesium Supplements
    June 11, 2025
    The Best Home Remedies for Migraines
    June 5, 2025
    The Hidden Impact Of Stress On Your Body’s Alignment And Balance
    May 22, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    The PCMH and Home Care Data: An Interview with Melissa McCormack
    December 19, 2013
    IT Strategy for Health Plans: Interview with ikaSystems CEO Joe Marabito
    August 11, 2014
    A New Kind of Stress Test
    May 26, 2015
    Latest News
    Let Your Lawyer Handle the Work Before You Pay Medical Costs
    July 6, 2025
    Top HIPAA-Compliant Messaging Apps for Healthcare Teams
    June 25, 2025
    When Healthcare Ends, the Legal Process Begins: What Families Should Know About Probate and Medical Estates
    June 20, 2025
    Preventing Contamination In Healthcare Facilities Starts With Hygiene
    June 15, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: Physician Compensation 101: How Doctors Get Paid
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Business > Finance > Physician Compensation 101: How Doctors Get Paid
BusinessFinance

Physician Compensation 101: How Doctors Get Paid

Abby Norman
Abby Norman
Share
6 Min Read
Questions about physician compensation methods? Check out BHM Healthcare Solutions and call today 1-888-831-1171
SHARE
Questions about physician compensation methods? Check out BHM Healthcare Solutions and call today 1-888-831-1171 

Physician Compensation: Changes Are Coming 

The U.S. Healthcare System is moving toward unifying physician compensation methods, but we’re not there yet.

Contents
Physician Compensation: Changes Are Coming Physician Compensation: Changes Are Coming FEE-FOR-SERVICERELATIVE VALUE UNITS (RVUs)BUNDLED PAYMENTSPAY-FOR-PERFORMANCE (P4P)
Questions about physician compensation methods? Check out BHM Healthcare Solutions and call today 1-888-831-1171 

Physician Compensation: Changes Are Coming 

The U.S. Healthcare System is moving toward unifying physician compensation methods, but we’re not there yet. If you’ve ever tried to understand all the various methods by which doctors are paid in the U.S. and found yourself completely and utterly baffled, you’re not alone. Here’s a handy guide to help you understand the various methods by which physicians can be paid.

FEE-FOR-SERVICE

You’re probably most familiar with this model, which has long been the standard for physician compensation in the U.S. It’s the easiest to understand which might be why it’s persisted for so long even though it is arguably inefficient. In this model of payment, the amount of money a physician gets is based on how many services they provide- and the rate is negotiated between the physician and the insurer- no input from the patient whatsoever. This seems counterintuitive to most, since the true consumer of the service is the patient who receives treatment. But in this over simplified method, the insurance company instead treats the physician, ultimately, as the consumer. It is a standard business relationship; the insurer agrees to pay the physician based on how many services they provide. This might be based upon for example, how many prescriptions they write or how many services/treatments they order. The problem being, and where it becomes more complicated, is that these services might be more or less useless to the patient- but it matters not because the physician gets paid anyway. This model is under fire currently because it is seen as primarily wasteful and irresponsible. Moving away from fee-for-service payment models seems to be the natural evolution of a sick and suffering healthcare system, but just how long that evolution will take remains unknown.

RELATIVE VALUE UNITS (RVUs)

The basic idea behind an RVU is fee-for-service that takes into account how much time a physician had to spend with a patient, or on their case. It assumes that, the more time spent, the more difficult the case must have been, and the more difficult the case, the more money the physician should earn. This may be part of the reason why specialists tend to top the list when it comes to physician salaries, while general practitioners and family medicine doctors (who may see more run-of-the-mill cases) earn hundreds of thousands dollars less annually.

More Read

Is My Medicine on the Prescription Drug Formulary?
The Power of Conversations Between Physicians and Patients
Shift Bidding and Staffing the Unit
Mobile Devices, Patient Self-monitoring and Clinical Workflow
Why Foreign Companies Should Take Chinese Social Media Seriously

RVUs are, perhaps, a step up from fee-for-service because at least consideration is given to the amount of effort and time a doctor puts in to make a complicated diagnosis or treatment plan for a complex patient; and with our aging population, patients with complex comorbidities are slowly becoming the norm. The main issue with RVUs at this point in time is that the contracts that are negotiated by the physician and the payer are not standardized and it can be difficult for physicians to navigate them. 

BUNDLED PAYMENTS

Bundled payments, lumps together hospital costs with individual physician expenses for a single patient. While this option for payment is referred to as a “newer” model of payment, in fact, it’s been around for twenty plus years, it just hasn’t been widely utilized. The trouble with bundled payments is that, at times, it can work against providers by incentivizing them to withhold procedures. Each case must be looked at individually, but they generally can all fall under one of four categories:

1. Retrospective Acute Care – Hospital Stay Only

2. Retrospective Acute Care Hospital Stay plus Post-Acute Care

3. Retrospective Post-Acute Care Only

4. Acute Care Hospital Stay Only

Bundled payments, like RVUs, are a step toward value-based care, but they ultimately lack the specificity of true pay-for-performance models.

PAY-FOR-PERFORMANCE (P4P)

Sort of the antithesis of fee-for-service models, P4P models pay physicians based on how well they do their job, not simply whether or not they are doing it. While P4P models are appealing to a lot of organizations, they are usually executed poorly; ultimately, physicians may feel cheated. Ultimately, in a P4P based system of payment, physicians that routinely achieve positive outcomes (are deemed “high achievers”) will do very well. Conversely, those who generally function at a lower tier will avoid models where the amount of money they earn will be directly proportional to how hard they work. These “underachieving” physicians tend to seek out other payment systems where they are at least guaranteed some base payment. Some physicians argue that it’s impossible to be a high achieving physician in today’s day and age, because of the demands of technology, sicker and older patients, and the consequences of ongoing healthcare reform. Others like the idea, but again, just haven’t been exposed to P4P models that are effective.

Share This Article
Facebook Copy Link Print
Share
By Abby Norman
My name is Abby Norman and I am a healthcare blogger. With over 10 years of experience in the medical field, I have developed a passion for helping others understand the complexities of healthcare.

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

9 Lifestyle Tweaks That Can Add Years to Your Life
9 Healthcare Lifestyle Tweaks That can Add Years to Your Life
lifestyle
July 11, 2025
car accident lawsuit
Let Your Lawyer Handle the Work Before You Pay Medical Costs
Policy & Law
July 6, 2025
women dental care
What Is a Smile Makeover and How Much Does It Cost?
Dental health
June 30, 2025
HIPAA-Compliant Messaging Apps
Top HIPAA-Compliant Messaging Apps for Healthcare Teams
Global Healthcare Policy & Law Technology
June 25, 2025

You Might also Like

The Ultimate Guide for Finding and Editing Images for Your Medical Website

April 5, 2014
Siemens Varian partnership
BusinessNewsRadiologyTechnology

Siemens and Varian: Hooking Up to Mutual Advantage

June 13, 2013

Kaiser: Medicare Reform Ideas

February 1, 2013

Prescription Drugs in the United States [INFOGRAPHIC]

April 18, 2014
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?