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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  • the inevitable outcome
    Physician compensation has been a difficult one since the late 80's/early 90's when when Dr Zhou at Harvard proposed RBRVS that calculated rates on cognitive activity rather than on expensive procedure, boosting PCP pay out of a reduction in Specialty rates; Congress saw a lareg sum of money flowing by and absorbed the transfer back into the tax fund, and rates languished until the Med D backroom deal was cut to raise rates across the board for AMA support of that gigantic piece of legislation. ACA, indirectly will reverse some of that largess. Physicians are essentially twice removed government employees, since most of their income is based on Medicare rates, and the volume business they have been doing is, as you pointed out many times recently- about to be changed to a value business. Its a new game, and the shrinking pie is going to need to be cut differently. It will be an awakening. One that physicians, much less health systems are unprepared to make. There are going to be many care additional givers paid to bring patients into compliance with therapy, educate them, and significantly improve their ability to care for themselves (instead of unnecessary ER trips, and overusing their insurance cards)- physicians wont do that work, never have, never will- but someone will and they will need to be paid, probably out of money that technically physicians have always received but have never been able to deliver on. Grab a chair, get some popcorn, the show is about to begin.
  • Blamegame
    All the parties involved - hospitals, doctors,pharma, equipment and device makers, nurses and techs - need to be fairly compensated. But all need to be aware that even absent the ACA, health care non-profit and private is highly dependent on the public dole. And to say our "world-class" system is more desirable than, say a Japan, is laughable, when they deliver better outcomes, higher life expectancy, for $4000/capita less than the US. The free marketeers who extol the virtues of our currents system need to defend the practices of the past 20 years, when hospital systems have focused on expansion, buying up doctors' businesses, performing unnecessary (but lucrative) procedures etc., instead of focusing on improving outcomes and efficiency.
  • Why must it go down?
    You make it sound like it's a certainty that physician compensation will go down in the short-term, but don't cite a single source to back up your claim. The reality, backed up by the national trends you actually do cite, indicates that physicians are leveraging for more and more compensation with every contract negotiation. They are negotiating for call coverage stipends, medical administrative leadership stipends, higher clinical services rates, research and teaching stipends, outreach and telemedicine credits, mid-level provider supervision credits...So I wouldn't be so sure that the trend is going to reverse. Hospitals and health systems will find a pot of gold somewhere to fund what is clearly one of their most prized assets. You don't acquire a stable full of prize winning horses, then stop feeding them.
    • Evidence
      Comp Consultant, I appreciate your feedback. If you link to the article I mention in the first paragraph, I cite two CEOs of Indiana hospital systems, the CEO of independent physician practice, and others, who say doc pay is, most likely, headed down. Here is the link again: http://www.ibj.com/doctors-caught-in-cost-cutting-crossfire/PARAMS/article/42206.
    • WHAT'S UP DOC?
      I need eye drops cuz my eyes are soooo red from crying.
    • whats new
      read

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