Who Decides What Physicians Earn? Beyond RVUs and Productivity

Evidence based insights into physician compensation, RVUs, contracts, healthcare economics, and personal finances. For residents, fellows, and early-career attendings.

Life and Finances, in Medicine.

What Is This About?

So far, we have talked about the RUC. We have talked about CMS. We have talked about the Conversion Factor. We have talked about geography, specialty differences, and how RVUs are converted into dollars. But there is still another important question. How do hospitals, clinics, and medical groups decide how much to pay each physician? When an employer offers a contract to a pediatrician, an OB/GYN, an orthopedic surgeon, a cardiologist, or a family medicine physician, where does that number come from? Is it random? Is it based on what the previous physician was paid? Is it based on what the employer thinks they can afford? Sometimes those factors may play a role. But in most modern physician contracts, employers rely heavily on compensation benchmark data.

And one of the most influential sources of that data is the Medical Group Management Association, better known as MGMA.

Why Should Medical Professionals Care?

MGMA publishes annual survey data on physician production and compensation. This data includes information about how many RVUs physicians produce and how much they are paid, broken down by specialty, region, and other practice characteristics.

For example, MGMA data can show the median compensation for an OB/GYN in a particular region. It can also show the 25th percentile, the 50th percentile, the 75th percentile, and the 90th percentile for compensation and RVU production. That matters because physician compensation is often discussed in percentiles. The 50th percentile means the median. In simple terms, half of physicians in that category are above that number, and half are below it. The 75th and 95th percentile means that the physician is earning or producing more than approximately 75% or 90% of physicians in that same group.

This is important because employers use these numbers to determine what they consider Fair Market Value. This is a key concept in physician compensation. Fair Market Value refers to what would be considered a reasonable compensation amount for a physician, based on specialty, region, productivity, and market conditions. Hospitals and medical groups care about Fair Market Value because physician compensation must be justifiable, especially in settings where referrals, federal healthcare programs, and regulatory compliance are involved.

So, when an employer offers a physician a salary or a productivity-based contract, they often compare that offer to MGMA benchmarks. For example, they may say: For this specialty, in this region, the median compensation is a certain amount. The 75th percentile compensation is a higher amount. The median RVU production is this number. The 75th percentile RVU production is that number. Then, they build a compensation formula around those benchmarks. Many employers use the 50th percentile as a starting point. Others may use the 75th percentile, especially when they are trying to recruit physicians in competitive markets, difficult locations, or high-demand specialties. This is why two physicians in the same specialty may receive very different offers depending on the employer, the region, the demand for that specialty, and the benchmark percentile used in the contract. MGMA data can also influence productivity targets.

For example, an employer may offer a base salary and then require a physician to generate a certain number of work RVUs before receiving a productivity bonus. Where does that RVU target come from? Often, it comes from benchmark data. If the employer sets the target around the median RVU production for that specialty, the physician may have a more achievable path to a bonus. But if the target is set closer to the 75th percentile, the physician may need to work at a very high level of productivity before earning additional compensation.

This is why physicians should not look only at salary. A contract can offer a very attractive salary but include an RVU threshold that is difficult to reach. Another contract may offer a lower base salary but a more favorable productivity formula. Without understanding RVUs and MGMA benchmarks, it is very difficult to compare those offers correctly.

In summary, there are several major players influencing physician compensation. The RUC helps recommend the RVU value assigned to each encounter, procedure, or service. CMS publishes the Medicare Physician Fee Schedule and establishes the dollar value of each RVU through the Conversion Factor. The United States Congress has the authority to influence and adjust physician payment policy. And MGMA publishes compensation and productivity data by specialty and region, which employers use to help determine Fair Market Value and design physician contracts. Access to MGMA data is available through their website, usually for a fee.

For physicians, the important lesson is this: Your compensation is not created in a vacuum. It is shaped by national policy, federal payment rules, specialty-specific RVU values, geographic adjustments, market forces, and benchmark data. That is why understanding RVUs is not just useful for administrators. It is essential for physicians. Because once you understand how these benchmarks work, you can better evaluate your contract, understand your productivity target, and recognize whether your compensation formula is truly fair.

But even after all of this, there are still other factors that can affect how much you earn. Your years of experience. Your practice setting. Your payer mix. Your call schedule. Your surgical volume. Your negotiation skills. And the specific needs of your employer.

That is what we will discuss next.

The Bottom Line

MGMA benchmarks help employers decide what physician compensation and productivity should look like. Knowing how your pay and wRVU targets compare with those benchmarks can help you determine if a contract is truly competitive and fair.

Key Takeaways

✓ MGMA benchmarks help shape physician compensation. Employers use compensation and wRVU data by specialty, geography, and percentile when designing contracts.

✓ Salary alone does not tell you whether a contract is good. The wRVU threshold, conversion factor, and productivity formula can matter just as much as the guaranteed salary.

✓ Know where you fall compared with the benchmark. Understanding your compensation percentile and your productivity percentile gives you much more leverage when evaluating or negotiating a contract.

“Don’t just ask how much they will pay you. Ask what they expect you to produce to earn it.”

MD&D Quote of the Day

What’s Next?

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