Compensating Physicians for APP Supervision

By Kumudini Sagi


New models of healthcare delivery brought by Affordable Care Act to improve the quality and value of healthcare services are reshaping the way healthcare is delivered in the United States. In the future, Advanced Practice Providers (APPs) will begin to fill most of the care delivery roles due to the increasing shortage of physicians. Hence, it is important to understand the regulatory requirements for services provided by APPs, as most states require some level of supervision of APPs by physicians. However, regardless of state laws, physician supervision should also depend on: APPs training, education, nature of practice, patient population, and supervisory style of physicians to meet the organization’s goals. 1  For developing an effective compensation structure for physicians for APP supervision, it is ideal if compensation is tied to effort, time, and quality a provider puts in for supervisory services. Additionally, it is important to maximize utilization of APPs services for boosting reimbursement of healthcare services and also for effective use of physician’s time for complex patient care.


Advanced Practice Providers (APPs) is a title used to describe advanced healthcare professionals, such as physician assistants, nurse practitioners, pharmacists, behavioral health specialists, health educators, and care coordinators who have completed their advanced education and training that qualifies them to manage medical care. They play a very important role in delivering healthcare services and their role in the healthcare system is expanding further due to issues such as physician shortage. A shortage of 65,000 physicians is projected for both primary care physicians and specialists by the year 2025.

As APPs are engaging patients to deliver quality healthcare, while reserving more complicated patient care for practicing physicians, it is important to develop an effective compensating model for physicians to accommodate the progressing relationship between APPs and supervising physicians.


Data from the last 15 years indicates that medical practices in the United States have been increasing the use of APPs. 2  Also, MGMA Data Dive 2013: Cost and Revenue model shows that many practices have seen an increase in the ratio of APPs per physician over the last five years. The main reason observed behind this phenomenon is that practices with APPs perform better financially and generate higher physician income. 1  The latest 2015 MGMA Cost Survey data confirms the trend by showing an increased utilization of APPs by 25% and decrease in the number of practicing physicians by 29% between the years 2012-2014 for healthcare organizations. A study conducted by Office of Inspector General (OIG) published that 40% of the Medicare billed physician services that exceeded twenty four hour workday were performed by non-physician providers.

There are two potential roles an APP can play in a healthcare organization – as an extender or provider 3  In the role of an extender, APPs work under a physician’s direct supervision and are not involved in independent patient services. Although the physician is responsible for the overall care of the patient, APPs are allowed to perform certain services independently within the scope of practitioner’s expertise. As a provider, APPs work autonomously and provide direct services to their patients through remote supervision of the physician for complex cases.

APPs are allowed to form independent group practices if their state laws permit and provide certain healthcare services in lieu of primary care physicians. The roles of APPs have been expanded and they can now supervise other non-physician providers in lieu of physician supervision. 4


State laws governing APPs scope of practice can vary significantly. Most state laws require some level of physician supervision over the services of APPs and there are currently two types of supervision and compensation structures widely practiced. The first type is that APPs work in a physician practice as an extender during regular practice hours. In this scenario, since the APPs are under the direct supervision of the physician, APP services can be billed at 100 percent of the physician rate to federal programs, such as Medicare and Medicaid, but the same rules don’t necessarily apply to insurance companies. 5  In the second scenario, APPs provide services as a provider to their patients without a physician available on site and the physician supports the APPs via telephone or on-call basis periodically. In this case, APPs can directly bill the services to the insurance companies, but might only receive 85 percent reimbursement of the physician rate.


There are many structures of paying physicians for APP supervision. The first method of payment is based on identifying the time and effort physicians put in direct supervision duties. Physician’s efforts are measured in the form of hourly rate, encounters, or some predetermined measures that compensate physicians for their services. 3  In the second model, physicians are compensated based on net profits of the APP, which is also referred to as the revenue less expense model. There is another method of compensation where physicians have a fixed annual payment per APP supervised in the range of $500-$2,000 per month. 6

The Physician Compensation, Benefits and Recruitment Incentives survey conducted by Association of Staff Physician Recruiters (ASPR) reveals that – 43 percent of physicians do not supervise APP’s, and those who do, nearly half are not compensated for their responsibilities. The survey further reveals that 58 percent of hospital employed and 69 percent of university employed physicians receive no compensation.

The Physician Compensation and Productivity Survey Report published by Sullivan, Cotter and Associates in 2015 reveals that the mean annual stipend for supervisory services is $9,274, which was slightly higher than 2014 ($8,930). Of the 139 organizations surveyed, 66% had some physician supervise APP’s and among them 65% received compensation for supervision. Among those who received compensation 74% got paid in the form of stipend, 21% received compensation based on incident to work RVU productivity and 16% received payment based on productivity credit. 7


As new relationships between supervising physicians and APP’s evolve, new compensation models and methodologies should be developed. Determining compensation structures for physician supervision can be a complex process and analysis of the compensating approach should be conducted specific to each organization to develop payment methods that conforms to fair market value for the supervisory services performed by the physicians.


There are some important topics that need to be examined by healthcare executives when developing a compensation structure for meeting organizational goals.

  • Is supervision necessary in the medical practice?
  • Is supervision already provided and to what extent?
  • How APPs are being utilized currently and what would be their future role?
  • How should supervision be measured? Should it be adjusted based on experience of APPs or time/effort a physician puts in?
  • Does supervision warrant additional compensation?

The key for success is to utilize services of APPs that have the potential to yield highest reimbursement without compensating patient care and utilizing a physician’s time for more complex services that is better handled by specialists. Effective utilization of APPs in a physician practice will not only improve reimbursement, but will increase patient satisfaction due to more time spent with APPs.


To create a profitable compensation model for providers in supervisory roles, an organization has to evaluate the scope of practice and utilization of APP’s for delivering healthcare services. A greater emphasis should be on providing team-based care that can be helpful in meeting the organization’s goals and maximizing patient satisfaction.


NPP utilization in the future of US healthcare. Published March 2014. Accessed June 15, 2016.
Physician Compensation, Benefits and Recruitment Incentives Report – Association of Staff Physician Recruiters. Published 2014. Accessed June 15, 2016.
Blumentritt R. Compensating Physicians for NPP Supervision. Published October 2, 2014. Accessed June 15, 2016.
Changes to the Hospital Outpatient Prospective Payment System and CY 2010 Payment Rates – Centers for Medicare & Medicaid Services. Published December 11, 2009. Accessed June 24, 2016.
Insurance Reimbursement for Nurse Practitioners-Medical Billing Software Education and Community. Published May 14, 2015. Accessed October 12, 2016.
APC’s Roles are Changing—Is Your Compensation Model Ready? – Integrated Healthcare Strategies . Published 2015. Accessed June 15, 2016.
& Dickenson, Inc A. Physician Compensation and Productivity Survey | Sullivan Cotter. Sullivan Cotter. Published 2015. Accessed June 24, 2016.