Regional Health System Develops Integrated Physician Compensation Plans

"The process Guidehouse uses has provided a compensation plan that exhibits who we are today: one integrated, high-performing medical group for all System physicians."


In the wake of healthcare reform, changing reimbursement models, and the increased focus on clinical integration, hospitals and health systems across the country are being forced to modify physician employee compensation plans. Given the continued pressure to transition from fee-for-service to value-based payment, new agreements must include flexible provisions that adapt to market changes by reducing reliance on volume while aligning incentives to quality, service, and efficiency.

Recognizing the need to optimize performance and prepare for new payment and delivery models, a large regional healthcare system (“System”) combined three physician practice networks into one new organizational structure (“System Medical Group” or “SMG”). With the unification of its legacy networks, SMG had more than 100 variations of its employed physician compensation plans that were not only fragmented, but included inconsistent incentives and performance requirements for its providers. In many ways, the “deals” from historic growth of the respective networks included a wide-range of variations of compensation arrangements.


SMG selected Guidehouse to design one or more unified compensation plan(s) for its employed physicians and mid-level providers that would be fiscally responsible, clinically accountable, and economically sustainable.

Guidehouse’s team of professionals utilized a highly interactive strategic planning process to align the providers’ performances with the organization’s goals and clinical objectives. Realizing the importance of engaging the physician community in the governance and decision-making process, Guidehouse solicited input through confidential surveys and interviews with providers and appointed a core steering committee and work groups for detailed communication exchange.


Using a new four-component, base salary-plus-performance incentives methodology, a new compensation plan was developed that included:

  • Establishment of unified SMG compensation plan principles, to promote internal equity, external competitiveness, and alignment with the organization's guiding beliefs
  • Inclusion of multiple minimum work standards (MWS) to earn base salary and qualify for value-based performance incentives
  • Use of payer-neutral (wRVU and/or shift rates, etc.) metrics for production incentives
  • Inclusion of non-production incentives tied to achievement of other quality, service, efficiency, and/or development targets
  • Inclusion of components to promote co-management services and achievement of new care team behaviors

In preparation for the future, we are changing how doctors are paid. The process Guidehouse uses is solid and has provided a compensation plan that exhibits who we are today: one integrated, high-performing medical group for all System physicians.

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