Physician Compensation: How to Retain Talent Amid Budgetary Constraints

Physician compensation is a complex topic that must consider fair market value (to comply with regulatory standards for the Anti-Kickback Statute and Stark Law), budgetary and financial constraints, and the overall contentment of the physician receiving the compensation package. According to the 2024 Medscape Physician Compensation Report, physician compensation rose by 3%, on average, in 2023. This trails the 4% national average for nonunion employees. Additionally, roughly half of the physicians polled felt their compensation package matched expectations for their position. That means that up to 50% feel there is more to be desired when it comes to compensation.

With Medicare reimbursements down 2% and inflation still a major concern for most of the country, how can physician practices balance the need to stay within budget and still provide competitive compensation packages to retain talented physicians?

One way to incentivize staff, especially recent graduates, is to offer a student loan match program in your 401(k) plan. This match will follow all the same rules for your current 401(k) match with respect to the percentage match and vesting schedule; however, it treats student loan payments made by employees as if they were employee contributions to their 401(k) plan. This allows for an employer match, even if the employee didn’t actually contribute a single dollar to the plan. While this is a current cash outlay, due to the vesting rules in the plan, this method provides somewhat of an employee retention plan as the participant must vest or forfeit the matching contributions.

Another method to retain talented physicians is to offer programs that allow for more work-life balance. This may appeal more to your experienced providers who have grown their families and have more responsibilities at home. Whether it be caring for children or aging parents, the ability to have a flexible schedule can decrease stress and increase overall job satisfaction when a provider knows they can care for their families and their patients. Offering a plan to help physicians define their purpose, helping choose a schedule that offers the best time management to achieve that purpose, and maintaining a process for periodically reviewing and adjusting these plans as life changes are imperative. These policies can go a long way in building equity with your physician employees.

Culture is probably the most value-added aspect for retention, with the least cost. Build an inviting and thriving culture for your employees by:

In summary, many factors come into play when determining physician satisfaction and what ultimately leads to high retention. When compensation isn’t robust due to budgetary constraints and inflation is affecting how far those dollars go, practice leaders need to look at what their physicians truly place value on and then implement those ideas in order to build contentment and retention within their practice.

Author: Kristina Odermann, CPA, MST | [email protected]