As a follow-up to our other podcast episodes and blogs, I am adding more detail on how to model compensation options for a practice.
Building a compensation model in an OBGYN practice can feel messy, especially when traditional approaches don’t reflect the real economics of OB care. A global delivery package, surgeries, procedures, and ultrasounds all generate significant revenue that never shows up in standard E/M visit data.
This guide breaks down a simple, sustainable model built specifically for OBGYN practices, with new example numbers and fictional roles to help you implement this without using any client data.
Why Visit-Based Compensation Fails in OBGYN
OBGYN revenue comes from multiple sources:
- Vaginal deliveries
- C-sections
- Surgeries (LAVH, laparoscopy, hysteroscopy, D&C)
- IUD placements and removals
- Ultrasounds
- Global OB care
- In-office procedures
For now (we know this is all changing in 2027) – A single OB visit posts $0 E/M, yet that same patient’s delivery could bring in $3,200 in global revenue.
This means:
- Visits ≠ Revenue
- RVUs ≠ Provider profitability
- Profit per encounter ≠ Compensation
Collections per provider is the only fair, accurate way to calculate compensation.
Step 1 — Calculate Total Annual Practice Economics
Let’s use fictional numbers for a mid-sized OBGYN group:
2024 Practice Financial Snapshot (Example)
- Total Collections: $3,200,000
- Cost of Goods Sold (COGS): $820,000
- Operating Overhead: $940,000
- Providers: 2 MDs, 2 CNMs, 1 WHNP
Step 2 — Calculate FTEs Using Clinic Days
If your practice is like others then you may not have anyone in the clinic 5 days a week. Often their week is full of call, deliveries, and surgery time.
Use this rule (or re-calucate for 5 days a week if that is your model):
4 clinic days per week = 1.0 FTE
Example FTE Breakdown:
- MD #1: 4 clinic days = 1.0 FTE
- MD #2: 3 clinic days = 0.75 FTE
- CNM #1: 2 clinic days = 0.50 FTE
- CNM #2: 3 clinic days = 0.75 FTE
- WHNP: 4 clinic days = 1.0 FTE
Total FTE = 4.0
Step 3 — Calculate Financials Per FTE
Using the practice example:
Revenue per FTE
$3,200,000 ÷ 4.0 = $800,000
COGS per FTE
$820,000 ÷ 4.0 = $205,000
Overhead per FTE
$940,000 ÷ 4.0 = $235,000
Profit per FTE (before provider comp)
$800,000 − ($205,000 + $235,000) = $360,000
This is the economic capacity each full-time provider contributes.
Step 4 — Set Base Salaries for 2025
Use prior-year financials + market ranges:
Recommended Ranges (Example)
- MD (OBGYN): $280,000–$340,000
- CNM: $110,000–$140,000
- WHNP: $115,000–$130,000
Your salary must fit under the $360,000 per FTE margin.
Example Salaries Selected:
- MDs: $300,000
- CNMs: $125,000
- WHNP: $120,000
Step 5 — Set Annual Thresholds
Threshold = Base Salary + Overhead Allocation
Use overhead per FTE ($235,000 in this example):
| Role | FTE | Base Salary | Overhead Alloc | Annual Threshold |
|---|---|---|---|---|
| MD #1 | 1.0 | 300,000 | 235,000 | 535,000 |
| MD #2 | 0.75 | 300,000 | 176,250 | 476,250 |
| CNM #1 | 0.5 | 125,000 | 117,500 | 242,500 |
| CNM #2 | 0.75 | 125,000 | 176,250 | 301,250 |
| WHNP | 1.0 | 120,000 | 235,000 | 355,000 |
Step 6 — Use Actual Quarterly Overhead to Calculate Bonuses
This is where most practices go wrong.
Bonuses should NOT be based on last year’s overhead.
Instead, use actual overhead for each quarter, which fluctuates based on:
- Staff wages
- Malpractice premiums
- Supplies/IUD/device purchases
- Billing costs
- EMR fees
- Contract labor
- Administrative support needs
Quarterly Bonus Example (Using Fictional Data)
Quarterly Numbers (Example):
- Actual overhead in Q1: $240,000
- Total FTE: 4.0
- Overhead per FTE_Q: $60,000
Step 1: Calculate Quarterly Thresholds
Quarterly threshold = salary/4 + (overhead per FTE_Q × provider FTE)
MD #1 (1.0 FTE)
- Salary/4 = 75,000
- Overhead = 60,000
- Quarterly Threshold = 135,000
CNM #1 (0.5 FTE)
- Salary/4 = 31,250
- Overhead = 30,000
- Quarterly Threshold = 61,250
WHNP (1.0 FTE)
- Salary/4 = 30,000
- Overhead = 60,000
- Quarterly Threshold = 90,000
Step 2: Apply Bonus Percentage
Example collections for Q1:
- MD #1: $210,000
- CNM #1: $80,000
- WHNP: $130,000
Bonus Percentages (Example):
- MDs: 35%
- CNMs: 22%
- WHNP: 18%
Bonus Calculations
MD #1
Excess = 210,000 − 135,000 = 75,000
Bonus = 75,000 × 0.35 = $26,250
CNM #1
Excess = 80,000 − 61,250 = 18,750
Bonus = 18,750 × 0.22 = $4,125
WHNP
Excess = 130,000 − 90,000 = 40,000
Bonus = 40,000 × 0.18 = $7,200
Step 7 — Add Year-End Profit Sharing (Optional)
For practices using a hybrid model:
- Set aside 10–15% of net profit
- Split 50% based on FTE
- Split 50% based on productivity (collections)
This creates strong team-based alignment and prevents a “what’s in it for me?” culture.
Final Thoughts: The Best OBGYN Compensation Models Are Simple + Data Driven
This is a confusing area for a lot of practices. You want to pay your team well and keep the practice strong financially, but it’s not always clear how to do that. Yes, you should know how many patients need to be seen each day or week for operational planning, but because OB care is paid through global bundled payments, visit volume alone simply can’t drive compensation decisions.
✘ Visits
✘ RVUs
✘ Profit per patient
✘ Call schedule
✘ Global OB visit counts
OBGYN is collections-driven, and your compensation model must reflect that.
The most accurate, fair, and sustainable method is:
**Base Salary
- Actual Overhead Allocation
- Collections-Based Bonus
- Optional Year-End Profit Pool**
This aligns:
- MDs
- CNMs
- WHNPs
- Office staff
- The financial health of the entire practice
And it removes the guesswork every quarter.
Frustrated that your billing team isn’t helping you solve operational issues or boost revenue? We’re different. As a physician, I understand the real operational and financial challenges practices face, and we partner with you to solve them.
Reach out at Info@natrevmd.com for more information or schedule a call at NatRevMD.com.
