Healthcare Compensation Plans: Current Challenges and Novel Approaches

The US healthcare sector differs from others, particularly with regard to how its workforce is compensated. In healthcare's third-party payer system, the consumer (i.e., the patient) typically is not the one paying for the service. Moreover, the payment for a given service is negotiated by the provider and the third-party payer before the patient ever seeks care-and the payment for the same service may differ among payers and patients. To further complicate matters, myriad overlapping federal, state, and local statutes and regulations govern how providers interact with patients and each other. The challenges with compensating physicians have been amplified by the healthcare workforce shortage that was looming even before the onset of the COVID-19 pandemic. In light of these various forces in the healthcare industry, this article reviews the current ways healthcare providers are compensated and the challenges with those compensation plans. Potential approaches to remedy those challenges are described, both broadly and with specific real-world examples related to primary care and surgical specialties. Lessons learned from these approaches include ways that healthcare organizations may measure the success of a compensation plan.