In theory, the idea of salaried compensation for employed physicians makes a lot of sense. For one thing, it’s blessedly simple, with the potential to remove the tensions that arise in shifting to value-based payment or implementing lower-cost (but lower-reimbursement) care models like telemedicine.
However, medical group leaders have long feared that productivity would tank if doctors were put on salary. (As a consulting colleague said recently, the switch to salary would cause a 20+ percent drop in productivity in the medical group, creating a challenge akin to keeping an airline profitable after removing a quarter of the seats on its planes). We’ve been expecting that more doctors might seek stable compensation models in the wake of the pandemic, and so weren’t entirely surprised when the question of moving to straight salary came up in three conversations over the past two weeks.
In all three cases, leaders are hoping to create more predictability, and to decrease the resources and effort needed to execute against a menu of complex plans. They believe that a move to salary is inevitable, and their questions have more to do with timing.
Gauging when to make the move should be determined not by external market shifts, but by internal cultural and operational readiness. Are the systems in place to enable doctors to work at a high level of efficiency? And do we have the group collaboration needed to maintain high performance without paying doctors as if they are salesmen on commission?
Another wrinkle has popped up for groups who might be ready now: the past year has upended the benchmarks that groups might otherwise use to inform decisions on where to set salaries. Nevertheless, over time we expect more groups to move in this direction, with the hope of getting off the “hamster wheel” of compensation committee meetings and ever more exotic permutations of bonus plans, in search of a more stable model.