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Physician Compensation Planning for a Community Teaching Hospital


A suburban community teaching hospital


To create a more structured and relevant compensation model that would enhance the hospital’s efforts in recruiting and retaining faculty for the residency training program, as well as compensating physicians equitably for administrative, supervision and teaching (AS&T) services and providing a fair incentive plan for clinical service production. The model also needed to be standardized so it could be applied to all employed physicians in all clinical specialties.

The hospital employed 22 physician faculty who provided AS&T services to the internal medicine residency training program, and also maintained private practice clinical practices. The existing compensation model tied the physician’s AS&T effort to a set of arbitrarily determined base compensation and “cap” formulas with the remaining private practice compensation tied to a percentage of collections formula.


Veralon designed an equitable two-tiered compensation model addressing both the AS&T and clinical compensation components, using physician-specific AS&T effort levels developed by the hospital, along with physician teaching experience and published specialty-specific compensation benchmarks for academic faculty positions and private practices.


The model had protections for newer physicians as well as highly productive physicians. A unique feature of the model was its phased approach that guaranteed AS&T compensation for a two-year period for physicians experiencing an income shortfall due to model revisions, with the expectation that their clinical time and revenue would increase to offset the shortfall.

Veralon also developed compensation projections for each physician under the new model. These projections were used by hospital management as part of an education process for the employed physicians.

The final model, integrating the two components of AS&T and clinical production/collections, is being successfully implemented at the hospital.