Money talks can feel awkward, but avoiding them completely can derail your career satisfaction and financial well-being. For doctors, it’s important to understand physician compensation models, and the frameworks that determine your salary.
The structure of your pay isn’t just about the number on your paycheck. It influences everything from your daily schedule and patient load to your total hours. Some models reward high patient volume, while others prioritize quality of care or patient outcomes. The right model for one physician might be a recipe for burnout for another. By understanding the different physician salary structures, you can negotiate a compensation package that truly values your expertise.
The most common physician compensation models
When you’re choosing a job, you’re often choosing a payment system. Each model defines and rewards a physician’s work differently.
Physicians don’t always feel that their employer’s payment system adequately values their contributions. In a Sermo poll, while 56% of physicians felt their current compensation model was fair, 44% did not. All the more reason to familiarize yourself with physician compensation models, so you’re equipped to find a job with a payment system you find fair. These are the most prevalent models:
Straight salary (plus bonus)
Sermo polling shows that a straight salary model is the most common among members at 46% of the vote. It’s the most straightforward of all physician salary structures; you receive a fixed annual salary, often supplemented by a bonus. Bonuses may be tied to performance metrics, patient satisfaction scores or the overall financial success of the practice or hospital.
The primary advantage of this structure is predictability. A guaranteed income provides financial stability, which can be particularly appealing if you’re early in your career or don’t want to have your income fluctuate with patient volume. It allows you to focus on patient care without the pressure of productivity targets affecting your pay.
The main drawback is that it may not directly reward individual effort. A highly productive physician might earn the same as a less productive colleague, which can sometimes feel demotivating for high performers.
RVU (Revenue Value Units)
The RVU model was the second most common model among Sermo members, with 15% of votes. It’s a productivity-based system where your compensation is tied to the volume and complexity of services you provide. Each medical service is assigned a specific number of RVUs by the Centers for Medicare & Medicaid Services (CMS). Your total RVUs are then multiplied by a conversion factor (a dollar amount) to determine your payment.
This model is designed to reward productivity directly. “If I work more hours or see more patients or document better, then I make more money…” explains an emergency medicine physician on Sermo. “I have been paid solely per RVU for 3 years now and it is clearly the best model under which I have worked.”
When you align financial incentives with effort and output, it can drive some people to feel overworked. “I’ve seen too many great physicians burn out under RVU and volume-based models—it’s time we shift toward compensation structures that value quality, well-being, and true patient care,” argues a family medicine doctor on Sermo.
Production-based
In a pure production-based model, your income is directly tied to the revenue you generate. This is often calculated as a percentage of collections or net revenue. The more patients you see and the more services you provide, the more you earn.
This model offers unlimited earning potential and directly rewards hard work and efficiency. It’s common in specialties where services are procedure-heavy, like dermatology or surgery. However, like the RVU model, it can create a high-pressure environment focused on volume. An allergist on Sermo notes that for specialties like allergy where work involves long-term treatments, “a purely productivity-based model may not accurately reflect the true value of the work being done.” 11% of poll respondents on Sermo said they’re paid through this model.
Physician income guarantee
An income guarantee is a common strategy to recruit physicians to new or underserved areas, or to help them establish a private practice. Under this model, the hospital or healthcare system guarantees a certain level of income for a specific period (typically one to two years). If your practice revenue falls short of this guaranteed amount, the hospital covers the difference.
This model, which accounted for 9% of votes in the poll, provides a safety net, reducing the financial risk of starting a new practice. After the guarantee period ends, the physician typically transitions to a different model, such as a production-based arrangement.
Performance-based
Performance-based compensation (accounting for 7% of votes) links a portion of your income to specific quality metrics. These can include patient satisfaction scores, clinical outcomes, adherence to best practices and efficiency measures. The model is often integrated into other structures, e.g., a straight salary with a performance-based bonus.
The goal is to align financial incentives with high-quality, patient-centered care. When asked if performance-based models are motivating, a combined 76% of physicians on Sermo said “yes, definitely” or “yes, somewhat.”
Revenue less expenses
Also known as a cost-sharing model, this structure is common in group practices and accounts for 4% of votes. The practice’s total revenue is collected, all operating expenses (rent, staff salaries, supplies) are paid, and the remaining profit is distributed among the physicians.
This model promotes a sense of ownership and encourages physicians to be mindful of costs, as managing expenses directly impacts their take-home pay. The challenge lies in ensuring that expense allocation and profit distribution are handled fairly and transparently.
Equality shares
In this model, common in partnership tracks, profits are divided equally among all physician partners, regardless of individual productivity or seniority. It’s built on the principle of shared ownership and collective success.
This fosters a strong sense of teamwork and mutual support, as everyone benefits from the group’s overall performance. However, it can also create tension if some partners are perceived as not contributing their fair share, leading to a feeling that effort isn’t equally rewarded.
Factors affecting physicians’ compensation models
A combination of factors can shape your salary. In a poll, Sermo members said that practice setting (25%), specialty (23%) and geographic location had the biggest influence on their compensation, but other elements can also play a part.
Specialty and subspecialty differences
It’s no secret that some specialties pay more than others. Some of the highest-paying specialties include orthopedic surgery and neurosurgery, while family medicine and emergency medicine are some of the lowest-paying specialties, according to recent compensation reports. This is due to factors like the length and intensity of training, the complexity of procedures the specialists perform and the reimbursement rates for those services.
Geographic location and cost of living
Where you practice matters. Rural and underserved areas often offer higher salaries and signing bonuses to attract physicians, though the difference tends to be minimal. Salaries also vary globally. “I think there is a definite disproportion between money gained and responsibility in different countries,” observes a neurologist and Sermo member from Italy.
Practice setting
It matters whether you’re employed by a large hospital system or running your own private practice. Hospital-employed physicians often receive a stable salary and benefits package but may have less autonomy. Private practice offers greater control and higher earning potential, but also comes with the responsibilities of running a business. Some Sermo members find a happy medium, like an OBGYN who favors a direct pay/concierge model over a traditional insurance-based private practice: “I can’t imagine going back to anything else.”
Experience and seniority
As with any profession, experience pays. Physicians with more years in practice and a proven track record typically earn more than those just starting out. Senior partners in a group practice will often have a higher share of the profits than junior partners.
Reimbursement rates and payer mix
The source of payment for your services profoundly impacts revenue. The payer mix—the percentage of patients covered by Medicare, Medicaid, and private insurance—is critical. Private insurers generally reimburse at higher rates than government programs. A practice with a high percentage of privately insured patients will likely have higher revenue, influencing the compensation available for its physicians. In a Sermo poll, a resounding 75% of physicians agreed that healthcare reimbursement rates significantly influence their compensation model.
Additional revenue streams
Many physicians supplement their clinical income through other activities like side gigs. These can include taking paid medical surveys on Sermo, telemedicine consultations, medical-legal consulting, speaking engagements at conferences or taking on administrative leadership roles. These side hustles not only boost income but also offer opportunities for professional growth and variety.
Strategies to maximize physician compensation plans
Securing a fair compensation package is just the beginning. Proactive financial planning can help you make the most of your earnings and build long-term wealth.
Get a side hustle, like taking paid surveys on Sermo
One of the most accessible ways to supplement your income is by sharing your expert opinion. Communities like Sermo offer paid medical surveys, allowing you to earn honoraria for your insights on new treatments, medical devices and healthcare trends. It’s a flexible way to leverage your knowledge outside of clinical hours.
Ask for a raise
Don’t be afraid to negotiate. Whether you’re starting a new job or have been with an employer for years, it’s important to know your worth. Research salary benchmarks for your specialty and location. Come to the negotiation prepared with data on your productivity, patient satisfaction scores, and any additional value you bring to the practice.
Budgeting and expense management
A high income doesn’t automatically translate to wealth. Create a detailed budget and track your income and expenses to understand where your money is going. This will help you identify areas where you can cut back and free up more cash for savings and investments.
Investment strategies
Make your money work for you. Investing is essential for growing your wealth over the long term. This includes contributing to retirement accounts like a 401(k) or 403(b), especially if your employer offers a match. Consider working with a financial advisor to create a diversified investment portfolio tailored to your risk tolerance and financial goals.
Tax planning and optimization
Physicians are often in a high tax bracket, making tax planning crucial. Work with a tax professional to take advantage of all available deductions and credits. This could include deductions for business expenses, contributions to retirement accounts and other strategies to legally reduce your tax burden.
Financial security through insurance
Protect your greatest asset: your ability to earn an income. Disability insurance is non-negotiable for physicians. It provides income protection if you become too sick or injured to work. Additionally, ensure you have adequate life insurance to protect your family and malpractice insurance to protect your career.
Find your path forward
How you’re compensated can affect not just your income, but your professional satisfaction. Payment models aren’t all created equal. “The ideal model should balance fair compensation for medical efforts with the quality of service provided… the important thing is that the system recognizes the true value of medical work and promotes professional well-being,” states an infectious disease specialist on Sermo. The right fit for you depends on your specialty, your tolerance for risk and what motivates you.
The choice may become easier if you hear from physicians who’ve experienced different compensation structures. By joining a community like Sermo, you can connect with over a million physicians worldwide to glean real-world insights. When you understand your options and know your worth, you can build a fulfilling and financially rewarding career.
