Creating a sustainable physician compensation plan. Serving both fee-for-service and capitated populations

A large, integrated health system in St. Louis acquired a primary care, health maintenance organization staff model group practice with 55 physicians. Health system leadership positioned the acquired physician group to diversify and expand its fee-for-service patient base to increase revenue and support the expansive fixed cost structure of the health centers. With interim managers, the leaders developed a new physician compensation plan that put a greater portion of the physicians' compensation at risk and provided incentives for enhanced productivity in both the capitated and fee-for-service lines of business. This article explores the key characteristics, benefits and potential areas for improvement associated with the new incentive compensation model and describes the centers' improved operating performance and gains in physician productivity.