As the industry shifts from volume based to value-based care, the importance of physician alignment with hospitals continues to increase in order to achieve the Triple Aim (reduce costs, improve patient satisfaction, and improve the health of populations). As a result, the industry is seeing a growth in utilizing the expertise of qualified physicians in various administrative, executive, and medical director roles. As different types of physician administrative arrangements constantly evolve to include quality components, understanding the proper way to set up these agreements is important. Challenges include: determining if fees are consistent with fair market value and commercially reasonable, understanding if the physicians are required to document time and services prior to receiving payment, and confirming there is no overlap of payments between the physician administrative compensation and other compensation arrangements, as well as many other issues.

VMG Health has insight into the latest trends and numerous medical director and physician executive compensation structures based on our extensive experience in valuing these arrangements. As a result, we can rapidly assist in confirming if an arrangement with a physician, or other entity, is consistent with fair market value.


Documentation illustrating the physician administrative compensation was set at fair market value represents best practice for compliance purposes. Based on regulatory guidance, compensation should be derived based on a sound methodology reflecting the terms of the arrangement and relevant value drivers. Five examples of value drivers that should be considered in deriving a proper payment for these services include: 1) the physician’s qualification and relevant administrative experience 2) the robustness of the physician’s curriculum vitae including the number of articles, presentation and publications, among others 3) the required specialty 4) the number of hours to be worked in the role and 5) clearly defined duties and responsibilities of the position. VMG has a keen understanding of these factors, and a myriad of other valuation drivers associated with physician administrative arrangements.