Getting paid for your expertise: How to price your services as a consultant or independent physician

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Many career opportunities for physicians fall outside traditional practice and employment. Many of these jobs—such as part-time work, independent contracting, and consulting—are often secondary income sources.

With unconventional jobs comes unconventional compensation.

Unlike full-time positions, most part-time jobs and side gigs don’t offer a set salary. As an independent contractor or consultant, you’re essentially running your own business, providing professional services to clients like health care organizations, pharma companies, investment firms, or health tech startups. You set your own fees based on the services offered, project scope, and other factors.

Compensation structures vary. You might earn an hourly rate, monthly stipend, or per-project fee. But determining the right charges isn’t always straightforward. Simply converting your employed physician pay into an hourly consulting fee isn’t the best approach. Consider tax implications, lack of benefits, and covering your own expenses.

Your expertise, which is built on years of training and specialized experience, has different value depending on the role. Patient care, clinical oversight, and nonclinical consulting all demand different levels of expertise.

Here are the main strategies that you can use to price your services as a physician consultant and how they can be applied to your personal situation and career goals – especially as it relates to side gig work.

Cost-plus pricing

Cost-plus pricing involves adding a specific markup to the cost of providing a service. Its major appeal is simplicity and straightforwardness. It ensures that all business expenses and operational costs that you incur by doing your work are covered by what you earn. This includes your time, overhead, supplies, and other costs of doing business.

For work that physicians tend to do as contractors, cost-plus pricing works well for tasks that are fairly standardized. By that, I mean where the deliverables don't vary significantly from client to client or assignment to assignment. It works well for chart reviews and conducting patients consults for telemedicine companies, for example. It's an efficient method to ensure you're compensated fairly for your effort.

This strategy is also fitting for services with well-defined expenses. It works best if you can accurately forecast your time and costs and apply a consistent profit margin.

The simplicity and transparency of cost-plus pricing sometimes makes it more readily accepted by organizations that hire physicians for part-time independent contracting work. This can minimize the need for extensive negotiation, and it can prevent feeling like you need to justify your rate to the hiring company.

This model is also particularly good for physicians who are just venturing into consulting work. It acts as a foundation to build upon while you focus on growing your client base and reputation.

There are a few drawbacks to cost-plus pricing, though. It doesn't always accurately capture the value of your expertise. This is especially true in highly specialized areas. Your knowledge as a physician should command a premium beyond the basic costs of service delivery.

Cost-plus pricing can lead to a disconnect with market rates. You run the risk of setting prices too low and leaving potential income on the table. Or, you could price your services too high and lose jobs to your competition.

Generally, cost-plus pricing is the least complicated method to ensure you are paid for your time, that your expenses are covered, and that your compensation is predictable.

Market-based pricing

Market-based pricing means that you set your fees based on the dynamics of the current market. This includes considering prices charged by competitors, the demand for the services you're providing, and the general willingness of the target market to pay for those services.

This strategy requires periodic market research to ensure your compensation remains competitive to that of your peers providing similar consulting services. You also need to be responsive to changes within the market, which could arise due to shifting demand, new regulations, or changing health care trends.

For physicians, market-based pricing is useful when there's a clear benchmark for the type of work you're doing. It is commonly applied to locum tenens work and telemedicine gigs. Unfortunately, this isn't the case for a lot of the other types of work that doctors do as side hustles. Physicians' rates for content creation, independent medical exams, or expert witness work, for instance, have huge variability.

As with cost-plus pricing, market-based pricing works well when you're just getting started in a new type of side gig. Aligning your fees with the market can help you to appeal to prospective clients and establish a client base.

One major drawback of pricing your services based on the market is the pressure to match or undercut competitors' prices. This can lead to reduced income for you, and it can also undermine the value of expertise in our profession.

Another disadvantage is the risk of commoditization, which essentially reduces your unique services to simple price points in the market. It can also be difficult to be reactive to market shifts, both because of the effort it takes and the potential confusion to clients.

Despite the downsides, incorporating market-based pricing helps a lot of physicians remain competitive when going after side gig opportunities.

Value-based pricing

With value-based pricing, compensation is set based on the perceived or estimated value of a service to the client, rather than the cost of providing it or market price norms. It's a shift in focus from the last two pricing strategies discussed.

Using value-based pricing helps you avoid the trap of trading time for money. As an independent physician, you offer immense value to a broad range of clients. Many physician side gigs require a high level of expertise. Pricing your work based on its value helps prevent you from unintentionally undervaluing yourself.

This strategy also helps the client to understand why your services are "worth" the price or fee structure that you are proposing. Clients sometimes balk at the high hourly rates proposed by consultants. ("All he's doing is reviewing charts!" or "We're just asking for a 1-hour phone call to discuss our product!") A value-based approach makes it easier to show clients what they are truly getting from you.

Along those lines, value-based pricing incentivizes you to align your services with your client's goals and objectives, leading to higher quality work and more innovation.

Value-based pricing suits highly specialized services, like strategic advice or expert medical opinions. It also works well for Medical Director roles mandated by state or federal rules, where responsibilities are mainly medical oversight. However, be aware of "fair market value" for such roles to avoid potential compliance issues, such as kickbacks or conflicts of interest.

To incorporate value-based pricing, understand the industry you’re consulting for, the company’s business model, and their market. This helps you grasp their needs, the problems you’re solving, and the economic impact of your services. Quantifying intangible benefits can be challenging, so expect some negotiation with your client.

Earn more by applying these pricing models to side gigs

Physicians undervalue themselves too often. This is especially true when it comes to the work we do outside of full-time clinical jobs. You deserve to be paid what your services are worth. This requires some planning, self-learning, and effort; however, your time spent on these will pay off!

Sylvie Stacy, MD, MPH is a preventive medicine specialist and author of 50 Unconventional Clinical Careers for Physicians and 50 Nonclinical Careers for Physicians.