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Increasing Income When Your Guaranteed Salary Expires (Part 1)


There are several things you can do to make sure you're on track to earn just as much (or more) than your guaranteed salary provided. Graduating to production-based pay doesn't have to be a rocky transition… you just have to be prepared for it.

Pay Day

In an ideal world, physicians could spend as much time with their patients as they needed to. But in the real world — which is one that many patients are blissfully unaware of — physicians have to meet productivity goals.

More often than not, a physician’s productivity informs his or her compensation (this is called production-based pay).

However, for new physicians (and seasoned physicians who are new to a practice), many employers start with what’s called a guaranteed salary. This compensation structure guarantees a stable salary for one to three years, allowing physicians to build their practices before graduating to 100% production-based pay.

Obviously, this model has advantages. It allows physicians to settle into their practices and build their patient bases at a comfortable rate.

But that’s not all — once physicians graduate to 100% production, they often have the opportunity to bring in 10-40% more income than their guaranteed salary provided.

However, this takes discipline and time management skills, not to mention a good patient base to work with. Unfortunately, many physicians aren’t prepared to graduate to 100% production, and find themselves earning less once their guaranteed salary expires.

When this happens, physicians are faced with all sorts of emotions and questions, such as:

• “How is it possible for me to keep up with such a high patient load?”

• “I’m worried I won’t be able to see enough patients to make the money I need.”

• “If I work enough to earn as much as I did on salary, I’ll be completely exhausted and I won’t have a life!”

• “I’ve gotten so used to my lifestyle with a guaranteed salary. Now I don’t know how to make the adjustments necessary to live on a production-based pay schedule.”

These concerns are just the tip of the iceberg. As you can see, it’s easy for a downward spiral of negative thinking to occur.

What happens in many cases is that physicians start looking for opportunities with new organizations. Because they feel undervalued, underpaid, and overworked, they decide to practice elsewhere, where “the grass is greener.”

Often times, they’re looking to replace their guaranteed salary. This leads to a churn-and-burn cycle of “practice hopping”: physicians practice for two years at an organization and then leave.

But after two or three practices in four to six years, such a physician becomes much less marketable, and employers are cautious to hire. What’s to keep that physician from leaving their practice in two years?

As you can imagine, this phenomenon isn’t just hard on employers — it’s hard on physicians, too. Not only do physicians struggle with trying to maintain a steady income, but their families struggle with constant relocation and change. It’s tough to pick up and move from place to place, school to school and community to community.

Isn’t There a Better Solution to Maintaining (or Increasing) Physician Compensation?

For physicians who have a philosophy of spending more time with fewer patients, 100% production-based pay can seem less than ideal. It’s very hard to find an employer who can afford (or would be willing to) pay an evergreen guaranteed salary.

However, there are several things you can do to make sure you’re on track to earn just as much (or more) than your guaranteed salary provided. Graduating to production-based pay doesn’t have to be a rocky transition… you just have to be prepared for it.

Stay tuned for Thursday’s post (Part 2), where I’ll offer suggestions for a smooth transition into production-based pay, as well as insights from MDs on building a practice and earning the income you deserve.

What are your thoughts on graduating from a guaranteed salary to production-based pay?

About the Author

Todd Skertich is the founder of Adventures in Medicine (AIM), an innovative media company whose online platform is dedicated to delivering the highest quality career and life planning content and resources for residents and physicians.

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