How Physicians Are Really Paid: Is There a Disconnect Between Value and Volume?

Even though this analysis first circulated a few years ago, the findings remain just as relevant today. RAND and Harvard researchers led by Rachel Reid, MD, MS, published in JAMA confirmed what many in the industry have sensed...despite value-based reimbursement from payers, physician compensation inside health systems remains overwhelmingly volume-driven. Only 9% of primary care and 5% of specialist compensation is tied to value metrics. 

Nonetheless, there is a critical nuance worth noting…. the payer-to-health system contract is often completely separate from how health systems and practices compensate their providers.

• RAND Article: "Despite Push to Reward Physicians for Quality and Value, Most Health Systems Base Pay on Volume"
• JAMA Publication: "Physician Compensation Arrangements and Financial Performance Incentives in US Health Systems"
• Thought provoking review of this by Eric Bricker, MD 

The Hidden Disconnect

Even when a payer rewards a system for lowering cost or improving quality, those funds may not flow directly to the individual physicians driving that change. Internal compensation formulas often remain built on:

• Work RVUs that reward throughput
• Fixed salaries for coverage stability
• Stipends or call pay for access obligations

This structural lag may explain why most “value-based” arrangements still behave like volume-based engines at the provider and health system level.

Inside the Compensation Cascade

Within a single system, physician pay can vary dramatically across departments and individuals. A cardiologist might be paid by RVUs, a hospitalist by shift, and an imaging physician by stipend… all under the same payer contract.

That complexity makes it difficult to align clinical behavior with system-level value targets.

Mapping the Models

In U.S. health systems, the flow of professional and technical revenue depends on whether care is delivered in an inpatient (bundled under DRG) or outpatient setting. Admitted encounters typically roll the technical component into the hospital DRG, while professional fees are billed separately by the physician group. For outpatient or ED discharges, both professional and technical components are billed independently, aligned to site-of-service fee schedules and governed by revenue cycle responsibilities, payer contracts, and local compliance rules.

As organizations move toward risk-bearing or shared savings models, several compliance and regulatory guardrails must remain top-of-mind.

• • Anti-Kickback Statute (AKS), Stark Law, and Fee-Splitting prohibitions continue to shape how compensation structures can be legally designed and distributed.
  • Risk adjustment activities require defensible documentation that reflects active monitoring, evaluation, and treatment planning for any new or reaffirmed diagnosis.
  • Corporate Practice of Medicine (CPOM), credentialing and scope of practice rules differ by state, defining what physicians, nurses, and other clinicians may perform and bill under supervision or delegation.
  • Data privacy and AI governance frameworks are also tightening, particularly where clinical decision support or analytics influence patient care or reimbursement.

These elements make compensation design as much a compliance exercise as an economic one. Even well-intentioned incentive models can create exposure if documentation, credentialing, or governance do not align with regulatory expectations.

Provider Compensation Models

Below is a concise high-level representative summary of 17 physician compensation and revenue integration models, spanning from traditional salary and RVU structures to emerging risk-sharing and joint venture models:

Each has distinct implications for how professional and technical revenue flow — and how value truly reaches the front line (or not).

The Foundational Framework Requisite: How Health Care Gets Paid

I often leverage Kevin Quinn's paper, “The 8 Basic Payment Methods in Health Care” to help educate on the building blocks of the current healthcare business models in use and although published in 2015, it remains relevant even a decade later.  Thus, before redesigning compensation, it helps to revisit the underlying payment building blocks that shape how money flows through the system. Quinn outlined eight basic payment methods and their derivatives, shown below:

Contemplating Payment Reforms and Implications for Physician Compensation
Many payment reforms including ACOs, bundled payments, patient centered medical homes, and shared savings extend these models by linking performance to population outcomes, yet physician compensation has largely lagged behind in adopting corresponding incentive frameworks. Also highlighted in Quinn’s work: 

Considerations in the Path Forward

Health systems that aspire to true value-based care must integrate compensation design into their broader contracting, governance, and performance frameworks. Until those incentives align, physicians will continue operating in two economies: one funded by value, another rewarded by volume.

The future of physician alignment will not be decided by payer contracts alone. It will depend deeper business innovation with regard to how health systems choose to translate value into compensation and how transparently they connect clinicians to the outcomes they create.