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Physician Compensation Models Are Upside Down

Joe Cantlupe, for HealthLeaders Media, July 11, 2013

What about the much-ballyhooed moves toward quality, which is virtually demanded by the government, through incentives and disincentives, such as the form of 30-day readmission penalties? Marsh contends healthcare contracts for physicians are moving in that direction, but only slowly.

"We are seeing components of that," he adds. "Certainly hospitals are being incentivized to do that, when you look at hospital readmission rate data. It's a great thing. I can tell you, though, looking at a ton of hospital employment contracts, you will see value over volume making up to 5%, 10%, or 15% of somebody's income, and the rest is normally based on volume. I think the percentage of income may go up to 20%, but I always believe that physicians will be seeing more patients and doing more procedures to increase their income."

"There's only so much physicians can do to cut their overhead and so much hospitals can do, and run a quality organization. Physicians are getting squeezed from both directions," Marsh says.

The employment contracts leaning toward volume are repeatedly being written as physicians continue to be smitten with hospital employment. The Medicus Firm's latest survey on physician compensation shows that more than half—54%—of new physicians in training indicated a preference for hospital employment.

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