Physician Compensation

Compensation for Primary Care Physicians at Mayo Clinic Health System

July 5, 2017 11:56 am

Mayo Clinic Health System’s new physician compensation model focuses on quality and Mayo Clinic’s mission.

Physician compensation is evolving, with primary care compensation at the forefront of change. The Affordable Care Act and an industry migrating toward value-based payment have accelerated a need for new models of compensation, especially in primary care.

In 2013, Mayo Clinic Health System (MCHS) undertook an initiative to overhaul its physician compensation model to meet the needs of the changing healthcare environment and its more than 1,000 physicians in its 7 acute hospitals, 11 critical access hospitals, and 72 clinics across Minnesota, Iowa, and Wisconsin. Traditionally, primary care physicians were paid primary via relative value units (RVUs), with 95 percent of the salary proportionate to the prior year’s production and the other 5 percent determined by quality, safety, and patient experience outcomes. Over a period of two years, MCHS developed and piloted a new model that determines compensation based on salary plus performance measures. Desired clinical outcomes and associated physician behaviors were identified and assigned point values, allowing physicians to earn additional income on a graduated scale.

The Need for Change

When the healthcare system began its shift toward value, it became increasingly apparent that the use of RVUs as the sole compensation benchmark was unsustainable. The physician compensation model needed to adjust to include forms of work that did not contribute to the RVU—some performed in daily practice, some requiring a new focus on population health, and others supporting broader organizational goals.  

Primary care physician compensation was a natural starting point at MCHS because these physicians perform a large proportion of the work activities mentioned above. A new model of medical practice, the Mayo Model of Community Care (MMoCC), was developed with the intent of making population-based health care a reality. MMoCC formally recognized the need for team-based care and established the physicians’ role on the team. The model included elements designed to improve access, disease prevention, chronic disease management, team-based care, and palliative care, as well as to manage high-risk patients. The physician compensation plan then was designed to incentivize and align behaviors critical to the MMoCC’s success.

New Compensation Model, Different Challenges

In 2013, a subcommittee was formed and charged with the task of creating a compensation plan that would support the needs of the MMoCC. The fundamental value of Mayo Clinic is that the needs of the patient come first. The MMoCC compensation committee thus established strategic principles to support that mission.

Transforming the physician compensation model at MCHS meant a cultural shift as well. The expectations of the new MMoCC and the compensation metrics involved had to be sufficiently detailed to ensure physicians—who were used to the RVU model—would clearly understand how they would be compensated. Further, MCHS had to define success and identify appropriate metrics for success while addressing concerns about managing the redefined practice expectations and demands.

Metric Development

Initial discussions were designed to define the core work and basic expectations of employment, including attendance at department and clinic meetings, collegial interactions with staff, timely completion of charts, and clinic timeliness. Meeting these basic expectations of employment was defined as a management issue, not a compensation concern.

Other decisions included placing all physicians with a substantive administrative component on a straight salary, with exceptions being considered on an individual basis. New physicians received a guaranteed salary for a limited time when the program commenced. MCHS indexed its scale to nationally normative scales to account for market changes.

MCHS also developed a scorecard to be provided to physicians on a monthly basis. Points were awarded for each metric tracked, and compensation was established on a graduated scale determined by the number of points awarded for the categories described below:

  • Patient experience (based on the specialty-specific percentiles within a national patient experience database) 
  • Safety (determined by the physician compensation committee and updated yearly, as indicated)
  • Nurse practitioner and physician assistant collaboration, defined as being the designated physician who is responsible for mentoring and education as needed
  • RVUs
  • Department grouped (not individual) quality scores, with specific measures determined annually by the physician compensation committee and adjusted as needed
  • Adjusted panel size, using an internal method to accurately determine this number
  • Appointment as department chair
  • Years of service

MCHS prepared sample scorecards for individual physicians based on at least six months of real-time data. (A sample scorecard is shown in the exhibit below. Occasional outliers were expected. Paid administration time less than 0.2 FTE was not included in these salary determinations.

Sample Physician Scorecard Points Earned by Measure


Four departments comprising 31 physicians were chosen as the first to implement the model because of their similar practice activities (primarily outpatient-only practices) and geographic closeness to the center of MCHS’s coverage area. The four groups, all in Wisconsin, included an internal medicine group and a family practice group in Eau Claire and family practice groups in Mondovi and Chippewa Falls. Physicians in the pilot project had their salaries guaranteed for the year before implementation. During this time, daily schedules were changed to accommodate the new model of care. The physicians’ daily activities in the new model also were tested and updated.

Physician leaders of the compensation subcommittee met with each physician in the pilot project before rolling out the model beginning Jan. 1, 2015. The compensation model collected data through the entire calendar year, with new annual salaries beginning May 1, 2016. Six months of real-time data were collected for each physician’s practice, and the impact of the new method was discussed with physicians individually and in person. These conversations were the most important, albeit time consuming, piece of the entire project. As the prior culture of RVU-based compensation was well entrenched, a great deal of time and trust was needed in this step.


MCHS measured three outcomes of this pilot project:

  • Physician satisfaction
  • Financial impact
  • MMoCC outcomes

Physician satisfaction. The 31 physicians in the pilot project were surveyed in February 2015 and again in May 2016 about their perceptions of the new compensation model. Notably, there was an increase in positive response to the survey statements regarding the MMoCC between the surveys. Physicians reported feeling more appropriately compensated for non-visit care, and overall, they believed the new model promoted teamwork and ability to improve a patient’s quality of care. The exhibit below provides physician response to five key survey questions. 

Physician Satisfaction Survey Responses to six Statements in reference to the Mayo Model of Community Care

Financial impact. Total financial impact of the pilot project group was a 2.2 percent increase in global physician compensation; this amount was within the range of annual market adjustments in physician compensation. The physician salary range narrowed, with few outliers.

Although MCHS included an RVU measurement in its new model, leaders anticipated that a direct comparison would be difficult because the care delivery model had changed. Indeed, RVU production decreased overall by 4.9 percent under the new model, with contributing factors including the following:

  • Increased appointment times (but fewer appointments overall)
  • Outsourcing of acute visits to online or express care
  • Shift of an internal medicine group from a full-scope practice (with outpatient clinics, hospital rounding, and call) to an outpatient-only practice

MCHS saw a 1 percent decrease in RVU production per FTE provider in family medicine and a 12.4 percent decrease per provider FTE in the internal medicine pilot group. Although the implementation team was expecting a decrease and was pleased that it was relatively small, MCHS continues to investigate the reasons for the decrease.

MMoCC outcomes. The new compensation model aimed to align compensation with the MMoCC’s goals of decreasing cost, improving quality, and improving patient satisfaction. After implementation of the MMoCC, utilization measures showed improvement, with decreased emergency department (ED) visits and readmission rates, as shown in the exhibit below. Many quality measures also showed improvement without additional resources. MCHS was unable to measure the impact on patient satisfaction because of vendor changes implemented during the pilot program.

Resource Utilization Before and After Implementation of the Coordinated Care Model

Challenges and Considerations

Throughout the pilot year, MCHS proactively addressed several unanticipated challenges. For instance, midway through the initial year, MCHS determined that the panel size data were not as reliable as previously believed. Each physician was credited with points, and that criterion was disregarded for the year.

Meanwhile, the need for a shift in culture to the new compensation model has posed an ongoing challenge, which MCHS continues to address. An example of this is a shift in how MCHS defines and measures work. Previously, the organization had let RVUs stand as a measure of work and did not delve deeper if they were acceptable. Now, the organization realizes the importance of understanding, measuring, and communicating a new definition of work to the providers. This new system is continually being monitored for incremental improvement.

Setting physician baseline work expectations is a critical concern. MCHS was somewhat unaccustomed to actively managing physician work efforts, however, because many of the new metrics had not been considered separately in the RVU model.

As previously stated, MCHS regards the private discussions with each physician in the new model as critical to the program’s success. Many fears were allayed, and buy-in occurred through these meetings. The six-month real-time scorecard also is regarded as having been necessary to show how the plan would affect physicians individually. Although the work surrounding the discussions and scorecards constituted the most time-consuming part of the implementation process, it also was deemed to be the most beneficial.

Next Steps

As implementation of the new compensation model expands to other areas of the health system, MCHS plans to adjust the point system to account for other factors—including, for example, the various forms of “call” (e.g., locations with a hospitalist available around the clock versus only from 8 a.m. to 5 p.m.), primary coverage of the ED, obstetric coverage, and resident teaching duties—with the total number of points and targets reallocated to account for the new methods and categories. Physicians also provided feedback that the RVU thresholds were too high and that the definition of panel size needed further refinement.

The compensation for work performed in addition to the baseline schedule and expectation also remains to be addressed. Some physicians are taking on extra shifts in the ED or urgent care clinic or as a hospitalist. Some are assigned these activities in lieu of their regular duties, whereas others are not.

Expectations for the base salary also need fuller description. Defining the minimum physician expectation is critical because it improves management ability. Because physician duties differ by work site, there is an ongoing need to understand and define these differences and to refine expectations.

Finally, to disseminate this compensation model across other regions in MCHS, the health system must reproduce goals and key concepts learned from the pilot, through the following steps:

  • Meeting with physicians individually 
  • Acquiring an understanding of the physicians’ work at each site 
  • Defining measures of productivity that promote MMoCC and population health management
  • Providing market-based pay for market-based work
  • Promoting department teamwork while maintaining some individual differentiation
  • Providing stable and competitive compensation to enhance recruitment and retention
  • Assigning easy-to-understand metrics with realistic goals
  • Keeping the model adaptable as a framework for expansion

MCHS set out to build a compensation model that aligns not only with the strategic goals of the health system but also with its method of population-based care. Results to date show that the new compensation system has supported the care model well. Although the patient experience outcomes are not yet available, physician satisfaction is high, quality is improving, and the financial analysis is encouraging.

Jill Lenhart, MD, is vice chief medical officer, MCHS Northwest Wisconsin region, Chippewa Falls, Wis.

Richard J. Horecki, MD, is vice chief medical officer and chairman of compensation, MCHS Northwest Wisconsin region, Eau Claire, Wis.

Gerald K. Kowal, DO, is vice chief medical officer, MCHS Southwest Minnesota region, Mankato, Minn.

Henry J. Simpson, MD, is vice chief medical officer, MCHS Northwest Wisconsin region, Menomonie, Wis.

Mark E. Deyo-Svendsen, MD, is vice chair of practice, department of family medicine, Mayo Clinic—Midwest, Menomonie, Wis.

Andrew E. Floren, MD, MPH, is physician advisor, outpatient CDI, MCHS Northwest Wisconsin, and chair, department of occupational medicine, MCHS Northwest Wisconsin, Eau Claire, Wis.

Jeanenne M. Lubinsky, MBA, is director of physician compensation, MCHS, Eau Claire, Wis.


a. Wofford, D., and Libby, D., “How to Avoid ‘Death by Benchmarking,’”hfm, August 2015.

b. Chamblee, J., “Building the Right Physician Compensation Model,” hfm, July 2014.

c. Gans D.N., “Provider Compensation: Getting Your Money’s Worth,” MGMA Connex, April 15, 2015.


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