Physician Compensation in a Managed Care and Stark II World

Traditionally, many medical groups have compensated physicians based on “productivity.” Productivity meant the more that physicians billed and collected, the higher their compensation. This approach worked well enough as long as insurance companies and Medicare were paying on a feefor-service basis. In a capitated, managed care world, however, the same compensation formula could prove disastrous. Medical groups need to rethink physician compensation in light of the shift to capitated managed care, and the impact of the new “Stark II” law restricting physician self-referral for ancillary medical services.