Navigating Physician Compensation and Contracts

Starting your medical career is an exciting milestone, but it also comes with the challenge of navigating complex job offers. Understanding the details of physician compensation and contracts is crucial for making informed decisions that will shape your professional future.

The demand for physicians is growing. The Association of American Medical Colleges (AAMC) predicts a potential shortfall of up to 124,000 physicians by 2034. This high demand means more opportunities, but it also makes understanding the fine print of your employment agreement more important than ever.

To help you get started, we're sharing key insights from our eBook, Resident Rising: Your Launchpad to a Successful Medical Career.

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What to Look for in Your Physician Contract

Though a contract is an extremely important document, it can be easy to neglect reading a contract closely to understand its nuances and finer details.

A physician contract often reflects the “behaviors” the employer wishes to encourage, but candidates should also be sure that it reflects their interests and rights. Below are specific terms and concepts physician candidates should be familiar with when negotiating contracts.

9 Key Considerations for Any Contract

While salary and location are often top of mind, a thorough evaluation of a practice opportunity goes much deeper. When reviewing a potential offer, it’s important to ask strategic questions that reveal the long-term viability and fit of the role. Here are key factors to consider when examining a physician contract:

1. Work Status: Are you an employee of the group or hospital, an independent contractor, a shareholder, or a partner?
2. Productivity: In a typical production-based bonus, the formula will include a fee-for-services component (e.g., relative value units or net collections) plus value-based or quality-based components (e.g., patient satisfaction scores, meaningful use of electronic health records, and others).
3. Income Guarantees: Though rarely used today, an income guarantee ensures that the physician will earn a certain amount of income per month after practice expenses, but the guaranteed amount must be repaid either monetarily or in exchange for a time commitment in the community.
4. Educational Loan Forgiveness: The employer agrees to pay the physician’s educational debt on a prorated basis, generally over a two or three-year period.
5. Non-Compete: This agreement obliges a new physician to agree that he or she will not go to work for specific competitors for a given period of time (typically, two years).
6. Hours, Call, and Vacation: The contract should stipulate the number of hours you will be required to work each week, including the maximum number of hours that can be required and when you will be expected to arrive and leave. It should also stipulate what the call arrangement will be and the number of weeks of vacation. 
7. Partnership: Being promised partnership when you reach a “full practice” or when you have “met the expectations of the group” is too vague. The path should be clear—one year, two years, or three years.
8. Benefits: Physicians are more similar to other employees today in that they generally are offered benefits that will be spelled out in the contract. Health insurance, disability, and malpractice are all standard.
9. Termination: Generally, there are two types of termination provisions: “with cause” and “without cause.” Under the former, the employer must provide reasons for which it can terminate a physician. These reasons usually include loss of hospital or prescribing privileges or inappropriate conduct. A “without cause” provision allows the employer to terminate a physician for no stated reason.

However, notice must be given in writing in advance—usually between 30 to 180 days.

Trends in Physician Compensation

Physician recruiting takes place in the context of the nation’s vast, complex, and evolving healthcare system, on which Americans now spend more than $3 trillion a year—more than the entire economies of all but six countries. ACOs, hospitals, medical groups, and other organizations are currently striving to create physician payment models that reward doctors for providing value, which is measured by various metrics, including the following:

• Patient satisfaction scores
• Adherence to treatment/quality protocols
• Reduction of hospital readmissions/errors
• Group governance participation
• Post-reduction/containment
• Appropriate coding
• Appropriate use of electronic health records

The use of quality-based metrics to determine physician production bonuses has continued dropping, particularly outside of primary care. AMN Healthcare’s 2025 Survey of Physician and Advanced Practice Recruiting Incentives reported that 16% of contracts featured a production bonus that included one or more quality-based metrics, such as patient satisfaction scores, readmission rates or others, down from 26% last year and down from 31% the year before that.

The use of these metrics has remained commonplace and account for a larger percentage of non-specialist physician compensation. However, productivity is still measured by what are essentially fee-for-service metrics, including relative value units (RVUs), net collections, and number of patients seen.

Volume-Based Production Bonus Structures 

Amid the fall of value-based and quality-based incentives, volume-based incentives, specifically RVUs—continue to be the most frequently utilized metrics to determine the maximum income that physicians can potentially earn beyond their base salary. These bonuses are calculated using a variety of metrics, including:

• Relative Value Units (RVUs)
• Net Collections
• Gross Billings 
• Patient Encounters

All of these metrics are volume driven—the more work units (RVUs) physicians generate, the more net reimbursement they collect, the more gross billings they generate, or the more patients they see, the higher their bonus.

Today, RVUs are the primary way that employers measure physician volume based productivity, with 65% of physician employment contracts offering a salary and production bonus as tracked by the 2025 Review, up from 57% the previous year.

Based on our national experience working with hospitals, medical groups, and other organizations, we have developed 10 recommendations to consider when implementing RVU-based physician compensation and productivity formulas

1. Keep it simple.
2. Ensure that administrators and physicians have a clear understanding.
3. Stay informed of developments with the RBRVS method.
4. Don’t believe the myth.
5. Consider hospital and physician alignment.
6. Include quality incentives.
7. Be practical.
8. Consider implementing a tiered plan.
9. Be aware of political risk.
10. Remember that there is a shortage of physicians.

By understanding these trends, physicians can better evaluate job offers and negotiate contracts that align with their career goals and personal priorities.

Take the Next Step in Your Medical Career

Navigating your first physician contract is a significant step, and it requires careful consideration and a clear understanding of the terms. Don't hesitate to seek expert advice to ensure the opportunity aligns with your long-term aspirations.

With the right knowledge and resources, you can confidently begin the next chapter of your professional journey.

Download our free eBook, Resident Rising: Your Launchpad to a Successful Medical Career, for a comprehensive guide to physician contracts and compensation trends.

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