Reference no: EM133328425

Question: Traditionally a large group of orthopedists paid all the physicians that were part of the group a fixed annual salary that was based primarily on seniority and only loosely, if at all, some measure of productivity. Unfortunately, the group discovered they were losing money. after analyzing the data on expenditures and costs, the head of physician group discovered the doctors who brought in the most revenue also generated the most costs per patient and for many of them, per patient costs exceeded the per patient revenue, so they decided they needed to change the way physicians in the group were compensated. Under the new system doctors had a base rate of pay (S) and they received a bonus (B) given by the following equation B=R-OC-GC-S, where Revenue generated by the physican, OC=operating costs generated by the physicians, GC=physician's share of the general group costs. Future increase in base salary, S, will be based on past B. What affects, if any, might you expect this change in compensation scheme to have on overall productivity (measured as average per physician net revenue R-OC) and total wages paid to physicians? Discuss what might be the source of any change in productivity? What concerns might you have about this compensation scheme?