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Fair Market Compensation
Fair market compensation is a crucial concept in the healthcare industry, particularly for physicians. It refers to the amount of compensation that you should receive for your services, based on what is considered reasonable and customary within your specific market. This includes factors such as your specialty, experience level, geographic location, and other relevant considerations.
Fair market compensation is essential to ensure that you are being compensated fairly for your expertise and hard work. It also helps to maintain a competitive marketplace where you can provide high-quality care without being unfairly compensated or underpaid.
In this post, I will explore fair market compensation in more detail, and share with you the most cost-efficient way to do this.
How Much Am I Worth?
Determining fair market compensation for you can be a complex process that involves several factors and considerations. Here are some common methods used to assess fair market compensation for our tribe:
Compensation surveys: Medical professional organizations, healthcare industry associations, and consulting firms often conduct compensation surveys that collect data on physician salaries and benefits. These surveys provide benchmarking data based on factors such as specialty, experience, geographic location, and practice setting. You can compare your compensation to the survey data to gauge whether you are within a reasonable range. The MGMA and Sullivan-Cotter are two such groups that use survey data. Getting access to their numbers can be difficult and expensive.
Regional benchmarks: You may also consider regional benchmarks specific to their location. Salaries can vary significantly depending on factors such as local cost of living, supply and demand dynamics, and regional reimbursement rates. Consulting local medical societies, hospital associations, or professional networks such as physician recruiting sites like Jackson Physician Search that offer a salary calculator—these groups may provide insights into the typical compensation range in a specific area.
Third-party negotiation: In some cases, physicians may hire consultants or negotiate with third-party experts who specialize in physician compensation. These professionals have experience and expertise in evaluating fair market value for medical services and can provide guidance on negotiating a compensation package that aligns with industry standards. I highly recommend Contract Diagnostics for this.
Employer and practice considerations: You should also consider factors related to your specific employment situation or practice setting. This includes factors such as workload, call coverage, productivity expectations, practice overhead costs, and benefits packages. Assessing these factors alongside compensation can provide a more comprehensive understanding of fair market value, and Contract Diagnostics includes this in their very inexpensive Compensation Rx program for only $297.
Regulatory guidelines: In some cases, regulatory bodies or government agencies may establish guidelines or benchmarks for physician compensation. These guidelines can help provide a framework for determining fair market compensation in specific contexts, such as when physicians work in federally funded healthcare programs.
It’s important to note that fair market compensation can vary based on various factors, including specialty, experience, location, market demand, and other practice-specific considerations.
Employers usually have access to this data and use it to formulate what they consider fair compensation. This data is usually not viewable to you, and this creates information asymmetry.
Information Asymmetry
Information asymmetry is a term used to describe an imbalance in knowledge or information between two parties in a transaction. In the healthcare industry, this can be seen in the compensation of physicians. Often, physicians are not fully aware of how their compensation is determined, leading to feelings of confusion and frustration. On the other hand, healthcare organizations may have access to more information about market trends and financial data that they use to determine physician compensation packages. This can create a power dynamic where one party has an advantage over the other. The lack of transparency in this process can lead to disparities in pay and leave physicians feeling undervalued for their work. In the end, the best employment contracts with healthcare organizations and employers address this issue and provide transparent compensation data to ensure fair pay for physicians and promote a positive work environment.
Trust Them
In the end, many employers simply ask you to “trust them” that the compensation being offered is fair market compensation and will reassuringly say something like “We are monitored and regulated by the feds to make sure we stay compliant with this.”.
While this is legitimate and true, what it doesn’t fully unpack is that there is truly a RANGE for fair market compensation at your job. And what they are asking you to do is to trust them that they have placed you in an appropriate location within that range.
And if you are signing with a new employer, the contract is often laden with enough financial incentives (from signing bonuses to loan forgiveness) that it often clouds the question of where you are in that range. That is actually a negotiation strategy on their part. Enticing you with upfront money now causes you to forget the other stuff in the contract and allows them to pay you a little less annually.
Ceiling and Floor
Since fair market compensation is truly a pay range, your employer can come out ahead by leveraging their information asymmetry to arbitrage your compensation to the lower aspect of the range—closer to the floor.
But your goal should be to push them to pay you closer to the ceiling of that FMV pay range. That’s just smart business on your part.
Most of you will totally miss this, and that is because you don’t know your value and you are a bit business naive.
Know Your Value In The Marketplace
Whether you looking at your first contract, or you are getting ready to renew a 2 or 3-year contract, the fundamental question that each of us should ask ourselves is what is my current value in the system?
You can access this data through the previously mentioned methods.
But I highly recommend you save your time and energy and outsource this to experts who help physicians do this all over the country. Contract Diagnostics will provide you with a thorough and up-to-date Compensation RX for only $297, and you can sign up for that here.
I believe this minimally expensive analysis is something every doctor getting ready to sign any contract, should spend the money to do—so that you are empowered to not become a victim of information asymmetry.
Compensation Comparisons
With their analysis, your compensation data will be presented to you in the industry’s most up-to-date and comprehensive manner. Contract Diagnostics uses a personalized approach based on your specific situation and story.
Your contract will be compared to the best information available using real-time, proprietary data. Contract Diagnostics uses industry standards, such as MGMA, with no lag. Some published datasets can be a year old or more, but not theirs.
They will educate, listen, and implement. It is a one-time fee and they do not charge per email or hourly. They have a 30-minute built-in coaching feature and a money-back guarantee if you are not satisfied or happy with it.
Take a look at a sample report below, and I invite you to follow this link for your $297 Compensation Rx Report with Contract Diagnostics.
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