Physicians Speak Out: Why They Love or Hate Incentive Bonuses

Incentive bonuses have long been part and parcel of many physicians’ compensation packages. They allow doctors in some specialties to boost their compensation by tens of thousands of dollars.

Often tied to metrics that doctors must hit, incentive bonuses aren’t without controversy. Some physicians welcome them. Others feel burdened by them or think that metrics distract from best patient care.

A recent Medscape poll asked what you think about incentive bonuses and whether or not tying metrics to your salary is an outdated practice that interferes with the integrity of a physician’s job or contributes to excellence in patient care and increased productivity.

Here is what 406 physicians who answered the poll, which ran from August 17 to September 1, had to say about incentive bonuses:

More than half the physicians polled (58%) received an incentive bonus in 2021. Of those who received a bonus, 44% received up to $25,000. Almost 30% received $25,001-$50,000 in incentive bonus money. Only 14% received more than $100,000.

When we asked physicians which metrics they prefer their bonus to be based on, a large majority (64%) agreed quality of care was most relevant. Other metrics that respondents think appropriate included

  • Professionalism: 40%

  • Patient outcomes: 40%

  • Patient satisfaction: 34%

  • Patient volume: 26%

  • Market expansion: 7%

  • Other: 3%

The Problem with Bonuses

Once thought to improve quality and consistency of care, incentive bonuses may be falling out of favor. Developing, administrating, and tracking them may be cumbersome for the institutions that advocate for them. For instance, determining who gave quality care and how to measure that care can be difficult.

What’s more, some top healthcare employers, Mayo Clinic and Kaiser Permanente, have switched from the incentive bonus model to straight salaries. Data shows that the number of tests patients have and the number of treatments they try decreases when doctors receive straight salaries. 

In fact, 74% of the polled physicians think that bonuses can result in consequences like unnecessary tests and higher patient costs. Three fourths of respondents don’t think incentives improve patient care either.

Physicians have long thought incentive bonuses can also have unintended consequences. For example, tying a physician’s monetary reward to metrics such as patient outcomes, like adherence to treatment protocols, may mean that noncompliant patients can jeopardize your metrics and prevent physicians from bonusing.

A Merritt Hawkins’ 2019 Review of Physician and Advanced Practitioner Recruiting Incentives found that 56% of bonuses are based in whole or in part on metrics like a patient’s adherence.

Additionally, tying monetary rewards to patient volume encourages some physicians to overbook patients, work more and longer hours, and risk burnout to meet their bonus criteria.

When we asked how hard it was to meet metrics in the Medscape poll, 45% of respondents who receive incentive bonuses said it was somewhat or very difficult. Only 9% consider it very easy. And 71% of physicians say their bonus is at risk due to not meeting their metrics.

Not surprisingly, large pay-for-performance bonuses are only offered to certain specialists and physician specialties in high demand. An orthopedist, for example, can earn up to an average of $126,000 in incentive bonuses, while a pediatrician brings in an average of $28,000, according to the Medscape Physician Compensation Report 2022.

Yet Physicians Are Still Torn

Despite these negatives, physicians are split about whether bonuses are good for doctors. The poll shows 51% said no, and 49% said yes. Further, physicians were split 50-50 on whether the bonus makes physicians more productive. Interestingly though, 76% think the bonus compensation method should be phased out in favor of straight salaries.

But many physicians may welcome the “lump sum” nature of receiving large bonuses at certain times of the year to help pay off student loan debt or other expenses, or are just comfortable having a bonus.

Financially Speaking

If you have the choice, you may fare better by taking a higher salary and eliminating a bonus. Receiving your pay throughout the year may be preferable to receiving large lump sums only at certain times. Another thing to remember about your incentive bonus is that they are sometimes taxed more heavily based on “supplemental income.” The IRS considers bonuses supplemental to your income, so they may have a higher withholding rate, which can feel penalizing. You may have noticed the extra withholding in your last bonus check.

Jennifer Nelson, Feature Editor, Reports

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