Abstract
Designing a physician incentive compensation plan that aligns the demands of managed care with the perceived fairness of income distribution is a key challenge for medical practices today. Rather than focus on traditional productivity measures, managed care requires physicians to demonstrate efficient practice of medicine. Physicians still need to be highly productive; however, they are now required to demonstrate efficiency related to clinical resource management, patient access and service, and evidence-based outcomes. Approaches to the development of physician incentive compensation plans and case examples are offered to assist practices that are transitioning physician compensation from volume-based to efficiency-based indicators.