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Compensation Analysis of Performance Pay for MGOA Physicians

In order to fulfill the requirements of the final exam, students will need the Harvard Business School case study, Performance Pay for MGOA Physicians (A).  The case costs approximately $4.25 and can be found at:   https://hbsp.harvard.edu/import/532199

The case study examines the transition of an orthopedic surgical group at a premier teaching and research hospital from a system in which the surgeons are compensated with flat salaries to a system where they are compensated based on profitability. 

Students will critique the MGOA’s Proposed New Plan as proposed by Dr. Herndon that includes the components of base salary, development fund tax, bonus, and adjustment of base salary.  

Dr. Herndon stated:

“Our physicians need to be motivated to be clinically productive (as opposed to being productive in research and teaching). If salaried with no control over their expenses or income, productivity will decline and make them feel helpless in their environment. If empowered with a mechanism to control their expenses and enhance their income, they will respond with increased productivity. “

However, the proposal is facing some opposition among the physicians, with some expressing:

“Why punish the doctors who are doing more than their share to cover those who aren’t bringing in enough? It’s unfair.” 


“What if I have a great year and I bring in substantial profits, but the department doesn’t do well—then I may not get a bonus at all?” 


“An academic faculty practice should provide an environment that supports its faculty in pursuing interests in research and teaching”. 


In no more than ten (10) pages, critique Dr. Herndon’s proposal.  Students who support the proposal must substantiate their support, while those who disagree with the proposal must provide a viable alternative. The primary issues involve the concepts of incentive pay and pay-for-performance, however, students should feel free to discuss other areas of compensation if relevant to their analysis.


Within the paper, students must demonstrate knowledge of the relevant labor market for orthopedic surgeons, as well as current salary requirements and structures.


The analysis should include the following topics with the respect to the MGOA plan and any recommended alternative:

1. Physician activities or behaviors that are rewarded;

2. The strengths and challenges of the plan;

3. Potential modifications that could address issues or concerns associated with the plan; and,

4. The intended or unintended consequences that could occur.

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