Three Physician Compensation Arrangement Trends to Expect in 2024

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In this episode, host Jen Johnson and Compensation Arrangements Managing Director Ben Ulrich explore three significant trends in physician compensation arrangements they expect to see in 2024.

Some of the trends and topics they cover include:

  • The shift towards single-specialty-focused compensation models
  • The integration of value-based care components into compensation plans
  • The increasing need for coverage arrangements in hospital-based specialties

These insights are explored further in VMG Health's 2023 Physician Alignment: Tips & Trends report. This report covers everything from strategy to compliance in the physician space and can be downloaded through the link below.

This episode is packed with practical advice for healthcare professionals and organizations looking to stay ahead of the curve in physician compensation strategies.

Tune in and subscribe to the Healthcare Download with VMG Health to stay informed about the latest trends and updates on the business side of healthcare. You can also visit for more resources and stay connected with VMG Health's newsletter. Thanks for listening!

Want to learn more about this topic?

Access VMG Health's 2023 PATT Report here: VMG Health's 2023 Physician Alignment: Tips & Trends Reports


Intro 0:06 Welcome to the Healthcare Download with VMG Health. We are the leaders in strategy and transaction advisory dedicated to finding solutions for the healthcare industry. In each episode, we will leverage our expertise to provide trends and timely updates about what is happening on the business side of healthcare so you can move your strategy forward.

Jen Johnson 0:32 In this episode, “Three Physician Compensation Arrangement Trends You Can Expect in 2024,” I will be speaking with Ben Ulrich, who is both my friend and colleague. Ben and I are both managing directors in VMG Health’s Compensation Arrangements division, and we have been working together for over 10 years. Hello, Ben, how are you?

Ben Ulrich 0:50 Hi, Jen. I’m good. I’m good. I’m super excited. This is such a successful awesome podcast, I don’t know why you invited me. But I do have to correct you, It’s actually been 15 years of working together.

Jen Johnson 1:04 Okay, I misjudged that one by a lot. Well, it’s been awesome. So, it’s been quite the journey. So, moving on to the journey, what is it you do here? So, give everyone a little snapshot of the types of clients you work with, how you help them, types of valuations. Just a little overview.

Ben Ulrich 1:25 Yeah, no, I mean I have a super diverse client base. I mean, I work with the largest for-profit and not-for-profit health systems in the country, all the way down to super small physician groups, and really everywhere in between. We work in all different types of verticals. You know, lab, imaging, oncology’s big. Most of my clients actually leverage our FMV Tools process, which was what we developed about 10 years ago to provide a more cost effective and expedient valuation solution for very specific types of provider comp arrangements. So, that’s been super successful. The typical projects we’re doing, it’s all manner of provider contract valuation. So, everywhere from employment to PSAs, call coverage, administrative functions. We do a lot of bundled payment reviews where we’re allocating payments within a bundle. Telemedicine has been huge, so really a huge gambit, everything, the provider contract valuation space is super wide. So it’s a big, big umbrella.

Jen Johnson 2:44 Yep, you’ve hit it all, 15 years of it, right? And little on the FMV Tools front, you know, that’s been growing, evolving for many, many years, and we do have 2024 is going to be pretty cool. We’re doing some giant things with that, I don’t think we want, we’ll keep it a secret.

Ben Ulrich 3:01 Big things to come.

Jen Johnson 3:02 Big things to come. Alright, that’ll be for the next podcast with us. Okay, so great to have you. And I always think it’s kind of cool that, you know, having done this together and watched the evolution of this space, it’s neat to see what pops up each year and what’s hot and what’s no longer relevant. So, for this one, I thought we could just highlight three physician arrangement trends that I think we’re gonna keep seeing in 2024. So, that’s where I want to focus because there’s a lot we could cover. But first, all of this insight that we’re tackling today really came from VMG Health’s 2023 Physician Alignment: Tips & Trends report. So, we put that out every two years. It’s a huge report, it covers all sorts of things from strategy to compliance. So we’re just focusing on one little piece for it, but I know that your group Ben, a lot of the folks that work with you put a lot into this report. So, you want to just kind of mention a few of the topics they covered and what readers will be able to expect?

Ben Ulrich 3:54 Yeah for sure, I mean, the PATT is such a huge lift every two years, but it’s such a valuable research vehicle for us internally and then also the industry. I mean, we’re diving into a lot of different topics in physician alignment, big thanks to my group. I’ve got a big group of folks and I think most all of them contributed, which I’m so thankful for. But yeah, this year we have a huge section on the current state of telehealth in America from a legislative and reimbursement standpoint, telemedicine has been just an incredibly active space really for the last 10 or 15 years, but really so since COVID, the last three or four years, it’s just exploded. So, that’s a great section. Tangentially, you know, semi-related, we have a big section on some of the troubling trends we’ve seen with the increase in physician burnout, along with some of the strategies that health systems have used to mitigate burnout with telemedicine being, you know, one of the big ones. And lastly, a very comprehensive section on the latest developments and trends in the regulatory environment with really nice summaries on what areas are being scrutinized more frequently and what some of the more hot-button compliance issues that the government is really honing in on.

Jen Johnson 5:25 Yep, yep. You guys did a huge lift on this for us and really appreciate it. We’ve also had a lot of folks reach out saying how much they appreciate the report and how good it is and they use it for this and their board meetings. So thank you all, thank you to your team. And really the last thing on the PATT report is we also have a giant section on PE and how they participate in the physician space, as well as an excellent coding section that is really, really great for practices on optimizing reimbursement and areas of risk. So there’s the PATT report. So, what we did is you and I worked together to pull three trends that we thought from a comp model we’re going to start seeing even more at the end of the year and into 2024. So, these are: One, the move towards single-specialty focused compensation models, two, more value-based care components included in comp plans, and then three, we’re definitely seeing an increase in the need for coverage arrangements. So, that’s what we’re going to hit, you and I. I want to start with the single-specialty trend. So, I know we’ve seen for many years how hospitals have focused on elevating their specialty service lines. So, I’m talking orthopedics, cardiology, they’re doing things such becoming a center of excellence. So, there’s been a single-specialty focus at the hospital level. And it seems like that trend is trickling down and really starting to impact how leaders are developing physician comp models. So, I was wondering, Ben, what requests are you seeing from your clients to make you think this is going to continue?

Ben Ulrich 6:53 Yeah, it’s been a very noticeable shift. I mean, I think 10-15 years ago, the multi-specialty group model was definitely the en-vogue approach. And it has a lot of big strengths and benefits that are associated with it, you know, and when I say multi-specialty group model, the approach that the health systems would take would be to wrap all of their medical and surgical specialties under one corporate umbrella with the big benefits being streamlined operations, and you’re presenting to your community a very comprehensive care mindset like you’ve got all the solutions that community might need. And there’s a lot of financial efficiencies too, that go along with it. If you’re all one big medical group, it’s sharing of admin costs and overhead. And it’s still really common, for sure. But we definitely have seen a marked shift here as of late, with health system clients pursuing that more single-specialty focus. And I think the big benefit that we see, or I guess maybe the big mindset or strategy that we see these health systems employing is really trying to differentiate their service lines and raise a flag to the community that they are the experts, right? They have the experts in cardiovascular care or experts in neurosciences, like you said, pursuing centers of excellence. It’s a big branding push to the marketplace that this is where the experts are that you need, right? And it’s been incredibly successful for those that have pursued it. You know, I think from our standpoint when we’re talking about compensation models, there’s also a variety of nuances associated with different specialties that you can’t fully capture in a multi-specialty philosophy or approach, right? I think the most common specialties that we’re seeing this around, definitely cardiovascular, orthopedics. neurosciences, oncology is really big. And the requests from clients have been, “Hey VMG Health, can you help us set up something specific related to our group and how they practice and how unique they practice that appropriately captures the value that they bring?” I mean, it might not be the exact same as what we do with the specialists next door, it might not be what we do with the primary care group, but it is something that makes sense for them and I think that gets a lot more buy-in from the physician side being really heard, right? Like feeling like that health system is being a partner with them, really understanding their business, right? So, the ones we’ve seen have been quite successful. And again, yeah, a lot of the requests are around specific service line comp model development. And I know you’ve seen a lot of that with your work.

Jen Johnson 10:06 I have. So it’s, you know, employment model, it’s hospital-level bundled payments. So, we’re talking single-specialty focus where we’ve seen it way back. I mean, it started in 2008 and it continues to grow every year is in co-management. So, co-management is when you engage a group that’s specialized in, let’s say orthopedics, and they help manage your service line to get better quality outcomes. So again, that would be a comp model thing tied to single-specialty. So, huge trend, I think it’ll continue. I think you said it right. Branding is what’s happening out there. So, that is good stuff. With all that coming into play in the comp models, are you seeing any sort of, you know, slowdown on the work RVU productivity type model?

Ben Ulrich 10:48 I mean, I think personally perform productivity and comp per work RVU is definitely still the underbelly of most every comp model that we’re seeing. Yes, in these, you know, in these more nuanced models, we’ve seen a mindset that potentially work RVUs aren’t appropriately capturing the true value of what a particular highly specialized group might be doing, right? We’ve seen a lot of team care models lately, right, where you’ve got multiple physicians in the room providing care to a single patient. Work RVUs may or may not, you know, really be super reflective of the true value that that model, that approach is bringing, right? So, we’ve certainly seen in those types of circumstances, a drifting from just pure, what we would have seen in 2012, just straight dollar-per-work RVU-type approach. That said, comp per work RVU is definitely still the predominant foundation.

Jen Johnson 11:55 It’s going to take a while as that fades, but we’re seeing a ton of just specialized comp models. And as part of those, a lot of times you’re seeing quality outcomes or shared savings, or some sort of value-based care component to those. So, switching gears to value-based care, and the growth of value-based care within compensation models, what are you guys seeing? What type of components in these comp models and which ones do you think are going to continue to grow into 2024?

Ben Ulrich 12:21 Yeah, no, I mean, it’s incredibly common today for most every comp model to have some level of a value-based component, right? It definitely depends on the type of arrangement that we’re looking at whether it’s employment or PSAs. But in terms of compensation components, I mean, I think most typically, we see these are going to be set at risk dollars, generally tied to very specific outcomes or processes. But the overarching goal is measured improvement, right? The health system is looking to get an outcome out of this, right, they want to move the needle. So, I mean, it definitely depends on the type of arrangement and the type of specialty, I mean, for surgeons, it tends to be more tied to benchmarked outcomes and efficiencies, right? For primary care, it’s going to be more panel management, and opening up access to care, right, which is a little counterintuitive, or counterbalanced against that traditional fee-for-service mindset which is really interesting. But yes, I mean I think the slow trickle, in my experience over the last 15 years, I mean, value-based care has always been on the forefront, right? It’s always been this gradual shift from volume to value. And every year, it’s just more and more and more, it hasn’t been the humongous explosion, you know, that everyone expected, but it’s also not stopped, it’s not reverted.

Jen Johnson 14:01 Nope, it’s happening. It’s growing. And you know, back on the original theme, it is specialty-specific, you know? When we do quality valuations, we’re like, “Okay, are these metrics relevant for this specialty?” So, same sort of theme going on. Now, when you do a valuation, when you get an agreement, and there’s all sorts of components to it, including a value-based care component, you know, how do you tackle these in an FMV opinion? Because I know it can be a little bit more challenging than just looking at survey data.

Ben Ulrich 14:27 Yeah, no, it definitely can be tricky. I mean, I think broadly speaking, if we’re talking about the most direct, maybe the shortest and the sweetest approach, if we can at all validate that the total cash compensation is within range, and by total cash compensation, I mean anything that might be guaranteed in that comp model, and then assuming the physicians earned or were paid this bonus, you know, what would that max payout be? If we could validate that max end under a traditional approach, obviously that’s completely supportable and checks the compliance box. Yes, looking for that FMV cushion, when possible advising withholds and models because I think that’s just, it’s much cleaner. That said, it’s not going to fit every circumstance, right? And so when we’re actually having to value a quality Incentive, it really depends on what those metrics are. Are they outcomes driven or are they more process driven? Are they stretch goals? Are those goals going to be set at rates consistent with national top decile performance on that metric? Is it like a benchmarkable metric is really key? Are there any sort of third-party dollars tied to that outcome itself? Like, is a commercial payer going to reimburse that health system an extra 10% because the physician hit that mark, those are all critical factors.

Jen Johnson 15:58 Easier to support if you got money coming in. Good deal. Yeah. And I know, we’ve done a lot of valuations on my team with value-based care. And one thing we would always do is look at governmental programs like, “Okay, well, Medicare does this. So, they do that, we could do this.” So, worst case we’re in the court of law arguing our fair market value opinion, if we can say, “Hey, this looks just like the MIPS program.” Then we’re like, “Okay, that’s a good way to go, or this is how BlueCross BlueShield does it.” So, it’s definitely not as straightforward as other valuations, but you know, I think there’s always a way to tackle it, as long as you’ve got market data, and you understand how governmental programs work. So, I think we’ve been doing it the right way. So, on just concluding the whole, okay, we’ve got this value-based care component in here on this, you know, comp model, specialty-specific all sorts of things going on. Is there anything that you think listeners should watch out for when you get one of these big models that have a lot going on, that we really haven’t covered yet?

Ben Ulrich 16:58 Yeah, I mean, I think the topic of stacking is really important, especially when you’re looking at multiple compensation components within an arrangement. You know, stacking is a huge thing. It’s not just relative to quality incentives. But whenever you’re looking at multiple comp components, making sure that that baseline resource that you’re using to justify a specific compensation piece, like let’s say a base salary, or a compensation rate per work RVU, making sure you understand what that truly reflects, right? Like our traditional market surveys are reporting total cash compensation, that’s everything under the sun. So, if you’re going to be stacking on additional dollars, on top of an employment arrangement for, you know, a quality upside, I think it would be prudent to appropriately look at those market surveys and make a consideration for the fact that there is likely, especially increasingly so year after year, an impact in those survey rates of quality dollars.

Jen Johnson 18:08 It’s already in there, and it’s growing. We look at it every year, and watch it grow, and think about that at the end of the day, right? Well, that is a lot of stuff. But I think that’s a good, kind of ties up the whole comp models and all the things that are in them and what we’re expecting in 2024. There’s a different trend that I want to hit, this is the third trend that we’ll see in 2024 continue, which is the growth in coverage arrangements. So, I mean, this is all over the place, everyone’s talking about it. It’s a big financial impact. So, Ben, can you just give listeners an overview of why you think we’re seeing this surge in the need for coverage arrangements that wasn’t there prior? And if it will stay, what specialties are being impacted? Just to give everyone a little overview of what’s going on out there?

Ben Ulrich 18:53 Yeah, no, I mean, this has been such a hot area for us in terms of valuation requests. And when you say coverage arrangements, I mean, this is typically in the context of hospital-based coverage and hospital-based specialties, right? So, hospitalists, intensivists, critical care, anesthesia is really huge. The main reasons why we’re seeing this surge in valuation requests. I think it’s two main reasons. One, these groups are under more financial pressure from a reimbursement standpoint than ever before. CMS has had multiple years of conversion factor declines. There’s another one projected for 2024. Specific to anesthesia with the No Surprises Act, I mean, these groups whereas in the past, they have been able to subsist on commercial and governmental reimbursement, are now looking to their hospital and surgery center partners to support them, right?

Jen Johnson 19:56 Yeah, and they maybe never had that before, they just billed and collected and they were fine.

Ben Ulrich 20:01 Especially with anesthesia. So, that’s been huge. And I think too, just on the expense side of it, provider costs are continuing to surge. I mean, I think there’s specific provider types, we’ve seen a lot of focus on APPs, and the lack of supply and the difficulty to attract and source APPs into specific markets that’s driving up their cost. Same on anesthesia, CRNAs are incredibly hard to find. And in some markets, we’re seeing comp rates for CRNAs that aren’t even within ranges of observable pay from five years ago. It’s been huge, and so if you’ve got a group that’s been operating for years, and years and years that suddenly has surging expenses and tightening reimbursement, you have to turn to your hospital and ASC partner to find that support, right?

Jen Johnson 21:02 Yeah. So, you know, that’s a good segue because a lot of folks have not had to do this. And I mean, I don’t want you to walk through the valuation process, you know, because it’s not really that interesting. I mean, it is, but, you know, in general, I’m someone that’s like, “Oh, my gosh, these people are asking for money. I’ve never had to pay my anesthesia group.” Can you give listeners just a couple of tips? Like what do they need to do? What type of documents do they need to get? What’s the high-level approach to valuing a coverage arrangement? How should they prepare?

Ben Ulrich 21:30 Yeah, no, I mean, I think especially we’re seeing this a lot with surgery center management companies, because I think for them, historically, they’ve not had to provide much financial support to independent groups, especially with anesthesia. So, I mean, what we typically say, I mean, obviously, documenting fair market value is paramount, you really have to understand the facts and circumstances behind that coverage. So, the big diligence items for us, are understanding any sort of revenue estimate that this group might be presenting to you, right? Are they presenting to you a proforma of what they expect to collect and digging at what the underlying facts are behind that estimate? Or are they presenting to you a historical snapshot? You know, really understanding what that revenue assumption is, is really important, and doing the extra digging to say, “Are they collecting what they should?” We’ve seen a lot of these instances where, you know, the group aligns with these hospitals or surgery centers for the first time and feels like maybe I don’t need to try as hard at tracking down my bills. The risk shifts. So, making sure that underlying revenue estimate, you know, is reasonable relative to the volume, relative to the case volume, right? And likewise, on the staff inside, you know, making sure that the provider comp projection makes sense. And when I say make sense, I mean, if there’s a preset coverage hours expectation, right? If the hospital is requiring you to cover a certain set of hours or use a certain rotation, are the underlying provider cost estimates. does that make sense relative to that coverage hours expectation?

Jen Johnson 23:26 Like required FTEs? Do they make sense?

Ben Ulrich 23:29 Exactly. And likewise too, is the volume a factor, is the group having to cover you know, what we would call a potentially “above market level of patients or cases” or generating the above market level of work RVU productivity, all of that could drive where in the scale that provider comp range should fall. But also to the earlier point, there are certain specialties where it’s truly the market demand for those providers that’s driving the rate. So, doing the diligence ongoing market rates within specific areas for APPs, for CRNAs, I think it’s a really prudent process.

Jen Johnson 24:08 Yep. Yeah. So, I mean, it is pretty basic. It’s revenue and expense, right? How many humans and what’s the market rate and make sure the revenue is right. Okay, well, that’s good, because I know a lot of people have just never had to deal with that. So, super helpful. So, Ben, that was great. I hope it helped listeners.

Ben Ulrich 24:30 No, it was fun at least. I enjoyed it.

Jen Johnson 24:31 Did you? Okay, good, because that’s really it. We wrapped it up. But I do want to remind everyone before I kind of hit our last three points, that we’ve got teams dedicated to not only all this FMV stuff, but compensation design, physician alignment strategies, so we’re here to help. And just for the little recap of this episode. First is we’ve got a single-specialty focus, which we think is going to continue in the compensation models as part of hospital strategy. Second, value-based care continues to grow and impact compensation models for both employed and independent contractor arrangements. And third, the need for coverage agreements will likely continue both in the hospital and the ASC setting. So, Ben, always a pleasure. I appreciate your excellent insight and I want to make sure listeners know they can reach out to you anytime with questions.

Ben Ulrich 25:20 Of course. Yeah, anytime, anytime. And thanks, Jen. This was so fun.

Jen Johnson 25:23 Yeah, of course! Everybody, take care.

Outro 25:31 Thank you for listening to the Healthcare Download with VMG Health. Make sure you subscribe to the show wherever you listen to podcasts to receive new episodes when they release the first Wednesday of each month. You can also go to or visit the episode notes to follow VMG Health’s monthly newsletter and to learn more about this conversation.

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