Discussing trends in academic compensation has always felt a bit like discussing trends in plate tectonics: change has been slow and predictable because the business of academic medicine hasn’t changed much over the years.

Then came 2025.

With funding for the academic mission experiencing significant disruption over the past year, academic medical centers (AMCs) have been forced to adapt quickly, building modern compensation plans that better align with department economics.

Disrupting the Status Quo

Departments receive most of their funding from their clinical effort (either through direct professional reimbursement or through a funds flow arrangement with their clinical partner set at an established rate per WRVU). The remainder comes through support payments from their clinical partner (historically for clinical leadership roles and academic/mission support) or through externally funded research grants.

All healthcare is an exercise in cross-subsidization, and this is especially true in academic medicine. The real magic has always been balancing the amount of clinical revenue used to recognize clinical effort with the amount set aside to fund the other elements of the tripartite mission: teaching and research, through clinical buydowns for academic roles and start-up funding for young researchers.

The confluence of diminishing professional reimbursement rates, destabilized NIH funding, increased competition for high-producing clinicians, and health system scrutiny of investment in all nonclinical effort are driving meaningful changes to academic compensation plans. We’ve summarized the six most salient changes, while recognizing they are all highly interrelated and interdependent.

Focus on Production

This is an easy one to list first because it’s truly universal.

Gone are the days of simple faculty salary structures with modest raises for years of service and more meaningful raises for academic rank progression. Just about every faculty plan now has some incentive tied to production, and the portion tied to production is growing.

Notably, this is counter to the larger market, where we saw the percentage of total compensation at risk for production drop for the first time in 15 years, but it’s indicative of the increasing parity between academic and community compensation plans specific to clinical effort. In fact, many AMCs are no longer simply referencing AAMC data to establish compensation but are now looking at larger market benchmarks to ensure their faculty are paid comparably to their peers in the community for similar effort (even if the percentage of time dedicated to clinical effort remains lower within AMCs).

Scrutiny of All Nonclinical Deployment

The traditional CARTS deployment construct within AMCs is another source of scrutiny as department leaders look to reign in and add quality control to traditional protected academic time. This time isn’t going away, but as departments look to maximize the clinical effort among a diverse array of faculty, it is squarely in the crosshairs, as are all types of unfunded time. Even funded deployments, such as clinical leadership roles and grant-backed research, are being treated like cost centers to be managed because they rarely entirely pay for themselves and represent yet another area requiring cross-subsidization within departments.

As you’d expect, this is a major dissatisfier for traditional academic faculty. It must be carefully balanced and transparently explained so that trust in department and school leadership doesn’t erode as the tripartite mission becomes increasingly hard to balance.

Challenges for Generalists

Because of the cross-subsidization pressures described above and the natural fit among subspecialists within AMCs, it’s increasingly difficult to recruit and retain clinical generalists. Again, this is nothing new. But the spotlight on the issue has intensified, since generalists tend to represent the front door to the department and have the most influence on patient access, yet they are often more reliant on E&M codes and don’t generate high professional collections. Hence, generalists tend to lose money for the department but serve as critical referral sources for subspecialists. This is true among every health system, but within AMCs, generalists also tend to have fewer academic and research commitments and therefore the highest clinical deployment. This means that in most cases, they can easily find a job in the community that pays them more.

Greater Standardization

Compensation plans that truly recognize the full breadth of faculty effort while remaining aligned with funding sources can easily get so customized and complex that they become burdensome to administer. This urge to create bespoke plans for each faculty member must be counterbalanced by the need for standardization of compensation plans such that they can be administered in an accurate and timely manner, with a governance function that can adapt to reflect market trends while maintaining equity within the group. As AMCs scrutinize their funding sources and faculty deployment to achieve financial stability, they must become more efficient in managing faculty compensation to maintain market-competitive pay levels and structures for each track and deployment profile.

Rank Compression

This is yet another trend that is as true in community settings as it is in academia. We know the rising cohort of providers place heightened value on predictability in terms of both their compensation and their time commitment. We also know any recruit tends to index more on the guaranteed base salary than the projected total target compensation, which has prompted many medical groups to push more money into base salaries.

The same has been true within academic departments, resulting in compensation among entry-level faculty rising faster than compensation for more experienced faculty. While rank differentials will never go away, their magnitude has begun to decrease, as departments look to backfill rank and experience payments with objective measures of clinical effort and quality and academic production, which helps ensure greater equity.

Internal Funds Flow Impact

Finally, the evolving healthcare landscape has begun changing the traditional makers and takers among departments and divisions within internal school and department funds flows, with some departments that traditionally operated in the black suddenly contributing less or even requiring additional funding to maintain competitive clinical compensation or start-up packages for young researchers. This means the compensation problem becomes more of a funding problem, which places undue pressure on the dean’s office to slice up a diminishing pie among hungrier mouths.

Retention Is King

As with so many things, change in healthcare tends to happen gradually and then suddenly, and we are nearing a tipping point in academic medicine that requires a fundamental rethinking of how faculty effort is recognized. It may be painful to hear, but it’s more important than ever for departments to retain their highest clinical producers as compensation becomes increasingly transparent and the cross-subsidization of healthcare is tested by entities in every market targeting the cream and leaving AMCs and public safety net hospitals to handle the less lucrative care for patients.

Many AMCs have responded by adopting plan components that mirror traditional community plans, resulting in higher pay for clinical production, but that adds increasing pressure to find meaningful ways to recognize research and teaching excellence as the revenue that historically subsidized academic effort is redirected to clinical effort.

Reprinted with permission from the American Association of Provider Compensation Professionals.

---

---