The Dose

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

Physician pay: What goes up must come down

July 1, 2013
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I reported over the weekend that Indianapolis-area physicians will face a pay cut in the next few years—unless the hospitals that now employ most of them stun everyone by drastically improving their efficiency.

That’s bad news for doctors. But then again, MDs have enjoyed a pretty good ride in their pay the last five years.

According to the latest data from the Medical Group Management Association, compensation in the most common physician specialties has been growing faster than inflation for the past five years. In 10 of those 13 specialties, pay has outpaced inflation by 10 percent or more.

There are several reasons for this, but one key factor is that hospitals have been buying up physician practices—oftentimes to help the physicians stave off financial hits—but they have done so by paying handsomely in many cases.

Hospitals have been able to take on these costs because they could generate far more in downstream referrals of patients. They could also command extra reimbursement for lab, imaging and physical therapy services—due to a wrinkle in medical finance policies.

But now, hospitals are making cuts—and physician pay is one of the options on the table.

Below are a few examples, from MGMA’s 2013 Physician Compensation and Production Survey, which is based on surveys with 3,800 physician practices nationwide. It contrasts 2012 physician compensation with 2008 survey data, and adjusts the increase to take out the effect of inflation.

- Family doctors' median compensation was $207,117 last year, up 12.3 percent in constant dollars.

- Orthopedic surgeons’ median compensation was $563,074, up 15.2 percent in constant dollars.

- Dermatologists’ median compensation was $471,555, up 24.6 percent in constant dollars.

The specialties that saw compensation growth in single digits were invasive cardiology, obstetrics & gynecology, and urology.

But no physicians suffered the stagnant growth in pay that the overall economy has seen. Nationwide, wages grew 1.3 percent from 2008 to 2012 when adjusted for inflation, according to data from the U.S. Bureau of Labor Statistics.

The MGMA compensation levels are probably higher than in Indiana, where a low cost of living tends to keep pay lower. But the trend in pay increases is fairly consistent. According to U.S. Bureau of Labor Statistics data, average physician pay in Indiana was $209,236 last year—an increase of 12.4 percent since 2008.

Overall wages in Indiana, not adjusted for inflation, rose 6.8 percent to $40,320 last year from $37,770 in 2008.

All those numbers tell one consistent story: Physicians, having climbed a compensation ladder the past few years, are now about to land on a chute.
 

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