Physician compensation is one of the most complex categories of contract management in healthcare. It isn’t complex because organizations make it that way. It’s complex because of what it has to reflect: the regulatory environment that governs every physician arrangement, the productivity models that vary by specialty, the quality metrics that shift with value-based care contracts and the competitive market for physician talent that makes getting compensation wrong an existential risk for recruitment and retention.
Managing that complexity well requires infrastructure that understands it. And that’s where a lot of organizations run into trouble.
When a generic ERP or non-healthcare CLM can’t support the variety of compensation models an organization has, the path of least resistance is to reduce the variety. Consolidate the models. Simplify the arrangements. Make the system the constraint that drives the strategy.
That decision has a price tag that rarely shows up in the technology evaluation.
Most contract management challenges are about process, routing, approvals, storage and visibility. Physician compensation has all of those challenges and a set of regulatory requirements that don’t exist anywhere else in the organization.
Every physician arrangement has to meet fair market value (FMV) standards. Not as a best practice, but as a legal requirement under the Stark Law and Anti-Kickback Statute. FMV documentation has to be current, defensible and traceable. If a physician arrangement is audited, the organization has to be able to show exactly what data supported the compensation decision, who reviewed it and when.
The Stark Law adds another layer. The relationship between a hospital or health system and a physician who can refer patients to that system is heavily regulated. The compensation paid for those services must be structured, documented and reported in a way that demonstrates compliance. Generic systems don’t organize data with that framework in mind.
And then there’s the compensation model variety problem. Physician compensation isn’t one thing. The 2025 MGMA Provider Compensation and Productivity Data Report found that pure salary and productivity-only models are increasingly giving way to arrangements that blend multiple components*:
A single health system may have dozens of active physician arrangements, each structured differently, each with its own FMV support, each governed by its own contract. Managing that in a system that wasn’t built for it isn’t just inefficient, it’s dangerous.
There’s a conversation happening at a lot of healthcare organizations right now. IT or finance leadership looks at the patchwork of physician compensation models across service lines and says: this is too complicated, let’s consolidate.
That instinct makes sense on the surface. Fewer models means simpler administration, easier reporting and less room for error. And when the organization is moving to a new ERP or enterprise system, consolidation feels like the natural companion decision.
The problem is that compensation model consolidation is rarely a strategic decision. It’s usually a workaround for a system that can’t handle complexity.
The organizations that manage compensation well aren’t the ones with the fewest models. They’re the ones with the right infrastructure to track, calculate and report across whatever models they have.
When consolidation is driven by technology limitations rather than strategy, something predictable happens: physicians notice.
Nearly half of physicians already report feeling underpaid.** More than two-thirds are looking for an employment change or considering early retirement.** In that environment, a change to compensation structure, even one framed as simplification, lands as a pay cut. Because often, it is.
A wRVU-based model converted to a salary model for administrative simplicity removes the physician’s ability to be rewarded for higher productivity. A quality incentive program eliminated because the system can’t track it means physicians who were performing against specific metrics stop getting credit for it. An administrative stipend that gets rolled into base salary loses its FMV defensibility as a separate arrangement.
The downstream effects compound quickly:
None of this happens because someone made a bad hiring decision or a poor strategic call. It happens because the technology couldn’t support the strategy that was already working.
The appeal of consolidating onto an ERP is understandable. These platforms are already in the organization. They handle HR data, payroll and financials. A single system sounds like efficiency.
But the gap between what physician compensation requires and what a generic system delivers is structural, not cosmetic.
Every physician arrangement requires fair market value support, evidence that the compensation being paid reflects what a commercial transaction would look like for that set of services.
Generic systems don’t have FMV fields. They don’t surface FMV data in reports. They don’t flag when FMV documentation is missing, outdated or inconsistent with the arrangement terms. Building that capability requires custom configuration that has to be maintained every time the system updates.
The data that flows through physician compensation—the relationship between physician and hospital, services rendered, compensation paid—has to be organized in a way that demonstrates compliance under the physician self-referral rules. A system that’s not designed around that requirement doesn’t structure data in a way that supports a Stark Law audit. Organizations discover this during an investigation, not before.
Work relative value unit calculations are healthcare specific.
The conversion factor, the specialty benchmarks, the productivity thresholds—none of this is native functionality in a generic ERP. Organizations either build custom modules, maintain parallel spreadsheets or accept reporting that can’t be fully trusted.
PwC has documented how health systems routinely end up managing physician pay across a patchwork of spreadsheets, ad-hoc databases and partially integrated platforms, with manual handoffs between recruiting, HR, payroll, finance and operations.*** The manual handoffs aren’t a sign that nobody has tried to fix it. They’re a sign that the available systems weren’t built to handle what physician compensation requires.
The organizations managing physician compensation most effectively aren’t the ones with the simplest model structures. They’re the ones with infrastructure that can support whatever models the clinical and strategic reality requires, without creating a compliance risk at every step.
That means a system where FMV documentation is a native concept, not a workaround. Where physician arrangements are tracked with the Stark Law compliance framework built in. Where wRVU-based productivity, quality incentives, call pay and administrative stipends can all be calculated, reported and audited from the same place.
When that infrastructure exists, the conversation about consolidation changes entirely. You’re no longer simplifying because you have to, you’re optimizing because you want to. And those are very different decisions with very different outcomes for physician relations, recruitment and the defensibility of your compensation program.
Consolidation is a workaround for a bad system. The right system makes consolidation unnecessary.
Before agreeing to compensation model consolidation, it’s worth asking a few honest questions about what’s driving the decision:
If any of those answers is unclear, the constraint isn’t the number of compensation models. It’s the infrastructure supporting them.
The right response isn’t to eliminate models that are working for your physicians. It’s to find infrastructure that can support them.
*2025 MGMA Provider Compensation and Productivity Data Report
**2025 Doximity Physician Compensation Report
***PwC Health Industries, Physician Enterprise Performance