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Developing a Long-Term Compensation Strategy for a Growing Medical Group


With a large number of employed physicians and advanced practice clinicians (APCs), Katz, Sapper & Miller’s medical group client serves one of the largest not-for-profit health systems in the Midwest. Its providers serve patients in multiple geographic markets and represent a wide range of specialties.

The Challenge

Because of the medical group’s rapid growth across its numerous markets and clinical specialties, its leadership needed to create and implement compensation plans that were uniform and predictable. They wanted to align their physician pay scale to remain market competitive while being sensitive to individual physician specialties, needs, and expectations across many different geographic markets. This would also require the development and implementation of a policy for regularly reviewing physician contracts, physician productivity, and financial compensation terms, which in some cases required outside fair market value (FMV) and commercial reasonableness opinions for certain contracts.

The Solution

KSM’s healthcare specialists collaborated with the medical group to develop a customized, multispecialty physician compensation model that outlined payment parameters for a large segment of its providers. The model recognized primary care and certain specialist physicians, and it further defined those physicians that were new, highly productive, or highly compensated. It contained a wide range of compensation terms, including base salary, productivity incentive, quality incentive, APC supervision, affiliate shift coverage, and comprehensive recruitment/retention incentives. The model also included specific compensation limiters related to effective compensation-per-wRVU rate and net professional collections.

To ensure the medical group’s physician contracts remained in line with shifting regulatory standards, the KSM team conducted FMV and commercial reasonableness assessments and provided formal opinions for physician services arrangements. These assessments were sent through the board’s compensation committee for approval.

The Result

By implementing the new multispecialty physician compensation model, the medical group instituted a framework that addressed disparate compensation in a competitive market in an equitable manner. It also greatly improved the medical group’s ability to confidently and expeditiously review alignment between individual physician productivity and earned compensation for compliance purposes.

Because of the initial relationship built with the medical group, KSM continues to consult on new projects that address the health system’s and medical group’s needs and support their growth, including the following:

  • Assessing approximately three to five of the medical group’s proposed physician contracts each month, including dozens of comprehensive medical, surgical, and primary care clinical subspecialties.
  • Consulting on market issues impacting physician compensation (e.g., model design, regulatory changes, noncompete language)
  • Compiling compensation and production reports for targeted practice physicians and APCs in support of the medical group’s practice acquisition due diligence process
  • Providing business valuation support on practice acquisition issues
  • Conducting ongoing assessments and valuation opinions of proposed model amendments and exceptions to the model (e.g., physician-specific, specialty-specific, market-specific)

Working closely with many of the health system’s and medical group’s leaders, KSM helps ensure their strategic, operational, and financial goals are fully realized in an ever-shifting, dynamic healthcare landscape.

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