When two physicians in a hospital-owned rural health clinic approached contract renewal, they presented leadership with a unified request: identical compensation structures, identical productivity thresholds, and identical stipends for hospitalist coverage.
On the surface, the request seemed reasonable. Both physicians were experienced, respected members of the medical staff, and both played important roles in maintaining access to care in a rural community where physician recruitment is notoriously difficult.
However, a closer look at historical productivity data revealed a significant challenge. One physician consistently exceeded clinic productivity benchmarks, while the other maintained a significantly lower patient throughput.
Hospital leadership needed to answer a crucial question: How could they maintain fairness and transparency in physician compensation while still recognizing meaningful differences in productivity?
Background
The rural health clinic served as a key access point for primary care in the community. Two long-tenured physicians (Physician A and Physician B) were approaching contract renewal at the same time and chose to negotiate their agreements together. The physicians requested the same compensation structure, including:
- The same clinic base salary
- The same work relative value unit (wRVU) productivity threshold for incentive eligibility
- An identical stipend for hospitalist coverage at the hospital
While the physicians worked in the same clinic and shared some responsibilities, their clinical productivity differed considerably.
The Problem
Historical productivity data revealed a clear distinction between the two physicians.
Physician A, a family medicine physician, consistently demonstrated high clinic productivity. Year after year, Physician A exceeded productivity expectations, generating clinic wRVUs well above both rural and national benchmarks for family medicine physicians.
Physician B, an internal medicine physician practicing in the same rural health clinic, maintained a lower level of clinic productivity. While Physician B provided valuable services and continuity of care for patients in the community, their annual wRVU production was significantly lower and closer to baseline expectations. Despite these differences, both physicians advocated for identical compensation terms.
For hospital leadership, the request created several important challenges:
- Maintaining fairness and transparency between physicians practicing in the same clinic
- Aligning compensation with measurable productivity and market benchmarks
- Structuring incentives that appropriately reward clinic performance
- Retaining both physicians in a rural market where recruitment is often difficult
Leadership needed a compensation model that balanced these competing priorities while remaining defensible and sustainable.
The Approach
The hospital engaged Stroudwater to conduct a comprehensive compensation analysis that included reviewing historical productivity data, evaluating national and rural benchmarks for primary care physicians, and assessing the scope of the physicians’ responsibilities across outpatient and inpatient settings.
A key component of the compensation design was establishing a wRVU productivity threshold tied directly to clinic compensation.
Ultimately, the hospital implemented the same wRVU threshold for both physicians. The threshold was calculated based on the physicians’ clinic base salary and the MGMA National Family Medicine without OB median compensation/wRVU. It was designed to be attainable based on each physician’s historical clinic wRVU production.
Importantly, only clinic services were eligible for wRVU-based incentives. Hospitalist responsibilities were compensated separately through a fixed stipend and were not eligible to generate additional wRVU bonus payments, since wRVUs in shift-based roles are variable and not a true indicator of a provider’s productivity.
This structure created a clear separation between outpatient productivity incentives and inpatient coverage responsibilities.
The Solution
The final compensation model provided a consistent framework across both physicians while preserving alignment between compensation and productivity.
Key components of the model included:
- A standardized wRVU productivity threshold applied equally to both physicians
- Threshold calculations tied specifically to the clinic’s base salary
- Incentive eligibility based solely on clinic-generated wRVUs
- A separate, fixed stipend for hospitalist coverage with no associated wRVU bonus potential
Because the threshold was grounded in historical clinic productivity, it remained reasonable and attainable for both physicians while still recognizing differences in performance. Additionally, it allowed both physicians to achieve a wRVU productivity bonus if the threshold was exceeded, providing an opportunity to increase overall compensation.
Separating clinic productivity incentives from hospitalist compensation also simplified the model and ensured that incentives aligned with the work being performed.
Example Compensation Structure
| Component | Physician A | Physician B | Notes |
| Clinic Base Salary | $240,000 | $240,000 | Same base salary for clinic responsibilities |
| wRVU Productivity Threshold | 4,800 wRVUs | 4,800 wRVUs | Same threshold for both physicians |
| Compensation/wRVU | $50 per wRVU | $50 per wRVU | Applies only to clinic wRVUs above the threshold |
| Hospitalist Stipend | $40,000 | $40,000 | Fixed stipend for inpatient coverage |
Note: These numbers are for illustrative purposes only.
Example Productivity Outcomes (Based on Historical Patterns)
| Metric | Physician A | Physician B |
| Annual Clinic wRVUs | 6,000 | 4,900 |
| wRVUs above Threshold | 1,200 | 100 |
| wRVU Incentive Earned | $60,000 | $5,000 |
| Total Compensation | $340,000 | $285,000 |
Note: These numbers are for illustrative purposes only.
Impact
The approach that Stroudwater and RHC leadership developed enabled the hospital to implement a transparent, data-driven compensation model while retaining both physicians. The new structure maintained fairness within the clinic while ensuring that higher clinic productivity was appropriately recognized through incentive opportunities.
By clearly separating clinic productivity incentives from hospitalist stipends, the hospital also established clearer expectations for physicians balancing multiple roles.
Key Takeaways
- Equal compensation structures do not require equal productivity outcomes. Standardized frameworks can maintain fairness while allowing compensation to vary based on performance.
- Separating clinical roles improves compensation clarity. Distinguishing clinic productivity incentives from hospitalist stipends ensures incentives align with the work performed.
- Historical productivity data is essential. Using prior wRVU performance helps establish realistic and defensible productivity thresholds.
- Rural hospitals must balance retention with sustainability. Data-driven compensation design helps organizations retain physicians while maintaining alignment with market benchmarks and regulatory expectations.
- Conducting a Fair Market Value (FMV) analysis is critical. FMV opinions help ensure physician compensation is fair and equitable while also supporting compliance with regulatory requirements.
Learn more about Stroudwater’s approach to provider compensation planning.
