Survey: Rural physician compensation remains out of step with productivity

A new report is offering a closer look at how rural hospitals are approaching compensation in 2025, highlighting where pay practices continue to fall out of step with workload, benchmarks and federal expectations for physicians and advanced practice providers (APPs).

The national survey from Stroudwater Associates, developed with the National Rural Health Association (NRHA) and the National Organization of State Offices of Rural Health (NOSORH), shows that incentive‑free contracts, outdated fee schedules and unclear work expectations remain widespread across rural health systems — even as margins tighten and staffing challenges persist.

“In its third year, the report reveals that provider compensation in rural hospitals remains misaligned with best practices — creating both financial and compliance risks,” said Jeff Sommer, M.P.P., managing director at Stroudwater Associates. “As rural hospitals prepare for looming Medicare and Medicaid cuts, aligning compensation strategies with sustainable benchmarks has never been more critical.”

The 2025 State of Rural Provider Compensation Report draws on responses from 197 rural organizations across 41 states, offering one of the most detailed looks this year at how rural hospitals structure compensation amid workforce shortages, fluctuating patient volumes and rising cost pressures.

Straight salaries still dominate

Nearly half of responding hospitals continue to pay physicians and APPs a straight salary with no incentive component.

About 43.7% of organizations reported using salary‑only models, down from 54.7% the year before but still the prevailing approach. Independent hospitals were slightly more likely than health systems to offer quality‑based incentives, yet only 22.8% of independent hospitals reported doing so.

Stroudwater analysts note that relying solely on flat salaries increases the gap between what hospitals need — improved access, productivity and quality — and what they reward.

“Straight salary is not aligned with best practices. Rural health care organizations are under pressure, and hospitals need providers to do more than just show up,” said Carol Alexander, MBA, senior advisor and board member at Stroudwater Associates.

Primary care pay is tightening

The report shows compensation ranges narrowing for rural primary care physicians, driven largely by increases at the lower end of the scale. Family medicine physicians without obstetrics (OB) reported average total compensation of under $343,000, with pay stretching from $240,287 to $465,000 across surveyed hospitals. Median compensation for family physicians with OB increased to $343,229, up from $322,341.

Differences were more pronounced in organizations without Rural Health Clinics (RHCs), where family physicians with OB earned a median of roughly $380,000, compared with $264,000 for those without OB responsibilities.

Alexander said the findings reflect the realities of rural family medicine, where physicians often manage broader scopes of practice and heavier clinical loads.

“It’s encouraging to see that compensation is becoming more closely tied to the services providers are delivering,” she said.

APP pay shows wide variation

APP compensation saw significant variation in 2025. Most nurse practitioners (NPs) working in family medicine earned under $135,000, but pay for NPs with OB responsibilities spanned a wide range.

At the 10th percentile, NPs with OB saw a 20% decline, while those at the 90th percentile saw a 59% increase, highlighting how rural hospitals adjust compensation to market competition and differing clinical needs.

Physician assistants (PAs) continued to out‑earn NPs across comparable roles, and pay differences were particularly stark in RHCs, where NPs with OB reported salaries ranging from $80,000 to $309,000.

Anesthesia pay continues to climb

Persistent shortages in anesthesia professionals — both anesthesiologists and certified registered nurse anesthetists (CRNAs) — remained one of the most pressing workforce challenges in rural care. Median compensation for anesthesiologists increased 14%, while CRNAs saw an 11% increase. Compensation packages for CRNAs in rural markets can exceed $300,000, often buoyed by sign‑on bonuses, loan repayment programs and higher hourly rates.

“These incentives are necessary to attract and retain talent,” said Shad Ritchie, M.H.A., FACMPE, CRHCP, senior consultant at Stroudwater Associates. “However, all organizations, including rural areas, need to ensure that the compensation for these individuals is within [fair market value] for compliance purposes.”

Reliance on outdated fee schedules

The report identified substantial confusion around which CMS physician fee schedules rural hospitals use to calculate work relative value units (wRVUs) and determine compensation.

None of the surveyed hospitals reported using the current‑year CMS physician fee schedule, and more than half said they did not know which year’s schedule they relied on. The largest share — 63.6% — were still using the 2023 schedule.

Ritchie warned that outdated or inconsistent fee schedules complicate fair market value assessments and distort productivity metrics.

“A lot of organizations are avoiding the difficult decision of updating their physician fee schedules or determining if they should use wRVUs at all,” he said. “Without calculating wRVUs, you lose an objective measure of the services being provided.”

Patient‑facing expectations remain unclear

Despite ongoing concerns about access to care in rural communities, many hospitals still lack clear expectations for patient‑facing hours.

According to the report, 42.4% of organizations had no patient‑facing requirement, while 38% set expectations below industry norms. Only 18 hospitals aligned with the widely accepted 36‑hour patient‑facing standard for a full‑time physician.

“Most respondents require at least 30 hours of patient‑facing time,” Ritchie said. “However, nearly half of those surveyed do not have a set requirement, which is extremely concerning, given that many organizations surveyed relied on pure base salary, and providers should be incentivized to see more patients due to serious patient access concerns amongst rural hospitals.”

Federal scrutiny of FMV continues to grow

Stroudwater also highlighted heightened federal attention to fair market value (FMV) compliance, including among smaller rural facilities. The firm recommends reevaluating FMV at key intervals: with every new employment agreement, every two years for existing arrangements and any time compensation exceeds the 70th percentile or diverges from productivity by more than 10%.

“Many organizations present a survey when asked about their FMV data and believe that if they do not go above the max salary on the survey, they are complying. That couldn’t be further from the truth,” Ritchie explained, adding that “organizations need to evaluate the market level for the services provided [to stay compliant].”

Looking ahead

More than 238 rural hospitals have closed or stopped offering inpatient services since 2005, a trend that continues to reshape care delivery in rural America.

Against that backdrop, Stroudwater outlines several recommendations for 2026: clearer and more transparent compensation structures, updated wRVU and fee schedule methodologies, well‑defined patient‑facing expectations, FMV‑aligned frameworks and incentive models that incorporate both productivity and quality.

“There simply isn’t enough money in the system to sustain rising compensation costs without a clear understanding of provider productivity, patient volumes and patient access needs,” Alexander said. “Without greater transparency and alignment, the financial outcomes are not sustainable.”

The next Rural Provider Compensation Survey is scheduled to open in January.