Physician pay and private equity: 5 notes on compensation arrangements 

Private equity remains a strong force in physician practice deals, according to VMG Health's 2023 "Physician Alignment: Tips & Trends" report

Here are five key notes on how that is affecting physician compensation models:

1. The influx of private equity will "inevitably disrupt" community-based care and ambulatory migration, according to the report, which makes it even more difficult for PE companies to align incentives with compensation models. 

2. Physician pay models for private equity "must be compliant with regulatory provisions and must maintain alignment with underlying attributes of the practice's revenue and expense structure."

3. The most common transaction involves the creation of what the report calls "synthetic EBITDA" through an income reduction. This model makes synthetic EBITDA into a "margin that is subject to valuation and helps generate cash to the physician owners" as well as create rollover equity for the private equity platform.  

4. Compensation models will vary by specialty and may include a Stark law-compliant expense model derived from earnings before physician compensation. 

5. Other models may include a version based on the "percentage of professional net revenue or personally performed productivity."

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