Competition for New Docs Pushing Pay Higher

July 20, 2016 - In some parts of the country, you have to get up early to recruit an orthopedic surgeon—at least 18 to 24 months early. Michael Patterson, CEO of Mississippi Valley Surgery Center in Davenport, Iowa, began recruiting the latest addition to his orthopedic practice while he was still in residency. The new recruit still had a full year to go on a surgical fellowship in total joints when the wooing began.

To get to him, "we called 10 docs and flew three of them in for face-to-face meetings," he said. Counting airfare, hotel expenses and recruiters' fees, the cost to lure one physician will range between $50,000 and $100,000.

With a median annual compensation of $555,000, orthopedic surgeons topped the highest-paid list this year among the 23 medical specialties in Modern Healthcare's 23rd annual Physician Compensation Survey. The survey reports pay rates from 11 participating recruiting firms and professional organizations.

But just because a physician is in a high-paying specialty doesn't mean they're getting big pay increases. Orthopedic surgeons, practicing in a field where margins may come under pressure from the CMS' move to bundled payments for knee and hip implants, saw only a 0.3% average pay increase over the previous year, according to the survey.

The biggest gainers were non-invasive cardiologists, up 14.9% from last year's survey; radiation oncologists, up 10.7%; and medical oncologists (including hematologists), up 9.5%.

And in a finding reflecting society's rising demand for family and primary care, specialists offering those kinds of services saw their pay packages swell well beyond inflation, too. Pediatricians ranked fourth in pay increases, at 8.9%; psychiatrists, fifth at 7.6%; family practitioners, sixth at 7.1%; OB-GYNs, seventh at 5.8%; and internists, eighth at 5.2%.

Most physicians managed to beat inflation—the Consumer Price Index for 2015 was 1.6%—so 18 of the 23 specialties in the survey received percentage pay increases greater the rise in consumer prices.

The few falling behind in addition to orthopedic surgeons included dermatologists, 0.6%; intensivists, -1.3%; and plastic surgeons, -1.4%.

The five lowest-paid medical specialties, from the bottom up, are pediatrics with a median compensation of $224,000; family practice, $229,000; internal medicine, $247,300; psychiatry, $250,000; and hospitalist, $260,000.

The compensation firms in this year's survey reported a wide range of salaries, suggesting the median may not reflect conditions in many parts of the country.

Patterson said he was not surprised that the median for an orthopedic surgeon topped half a million dollars, or that the pay spread was so wide, because in places such as Davenport, away from urban areas with their attractive social amenities, or regions with geographical attractions such as ski areas or coastlines, prices are far higher than the median.

"The going rate is to recruit a new orthopedic surgeon into a practice (here) is around $600,000 a year," Patterson said.

Radiologists have the widest range of all specialties in average compensation reported by survey respondents—between $267,000 and $513,000, a whopping pay differential of about $246,000. Plastic surgeons placed second, with a pay range of more than $224,000, followed by radiation oncologists, about $209,000.

Family practitioners had the narrowest average compensation range—$213,000 to $248,000, a $35,000 difference.

The good news for family physicians and other primary-care physicians at the bottom of the salary scale—pediatricians, internists and OB-GYNs—as well as psychiatrists, is that their stock has been rising in recent years, and so have their paychecks.

In response to a question: "What are the toughest specialties to recruit?" five of our participating head hunter firms and group practice organizations said internal medicine; four picked psychiatry; and three chose family medicine.

Dr. Mike Munger, a family practice physician and interim CEO of St. Luke's Medical Group, an 18-office, 105-physician group practice affiliated with the 10-hospital St. Luke's Health System in Overland, Kan., is in a race to keep up with burgeoning demand for primary care. "We have onboarded since the first of the year five or six family physicians, and we have another four or five slated to start between now and Nov. 1," Munger said. "We're having some retirements, plus we're looking to expand offices and increase our workforce."

The competition for those half-dozen family practitioners was fierce. "We've actually increased our starting offer by 20% to 25% over the past year," Munger said. Sweeteners include offers to pay for continuing medical education as well as picking up the tab for board exams, state licensing and professional organization memberships. "We (also) have some things on retirement, matching accounts."

So far, the group hasn't paid new recruits' student loans, an incentive cited by several recruitment firms as gaining use. "We're just now starting to get asked to do that, (and) that's something we're looking at going forward," he said.

Signing bonuses are another tool in recruiters' arsenal. "We've not done that, but we are starting to look at that as well," Munger said.

The recruitment upgrades also forced St. Luke's to take a second look at its pay packages for family physicians already on staff. It plans to roll out a revised compensation package in 2017 for existing physicians "to stay competitive," Munger said. "It's a reality that we're seeing more money in general and family medicine, which is refreshing."

Travis Singleton, senior vice president at recruiter Merritt Hawkins, has been in the business 17 years and the year-over-year pay increases in the firm's survey this year were the largest he's seen. "It's clearly showing a healthcare system at capacity," Singleton said. "We're now in year three of this sort of employment dominated model."

"In years past, if you were part of a small, independent group practice and that (increase) came out of the partners' paychecks, that was a different thing," he said. But with large health systems, "When they're making $2 million or $3 million on a physician, they're not going to quibble over $30,000 to $40,000 a physician."

The trend ups the ante for rural healthcare organizations, which have traditionally faced difficulty recruiting physicians. Salaries are already higher and "virtually everyone is offering a signing bonus, virtually everyone is giving loan forgiveness," Singleton said. "That was the only arrow in a quiver for some rural areas." But as those inducements become commonplace in metro areas, "it's getting difficult" for rural areas to compete, he said.

Having a solid foundation in primary care is vital to providers shifting to alternative payment systems, such as accountable care organizations, and that's been driving up pay for family practitioners, internists, pediatricians and gynecologists, according to survey respondents.

A concurrent movement to close the divide between behavioral and general health is also pushing up the pay for psychiatrists, they said.

Providers are also figuring out how to incentivize physicians for quality and other performance metrics besides volume. But these new pay measures are unevenly distributed.

"We're seeing groups, depending on the size, offering from 5% to 20% of compensation" based on quality and other non-volume measures, said Tom Flatt, director of communications and publications for the American Medical Group Association, whose members include some of the nation's largest medical groups.

"It really depends on how sophisticated they are on managing risk. Five percent of compensation is an average," he said. "You have to have a pretty sophisticated EHR system that can draw data and show outcomes. ... It's still pretty small, for most groups, they're still largely fee-for-service, but we're moving more toward that each year."

In contrast, the Medical Group Management Association, a trade group whose members run medical practices that are typically smaller than those in the AMGA, has been monitoring the advent of value-based physician compensation in its annual surveys for the past three years. The number of groups in its survey using value-based compensation is so small and the data has such variation, the association hasn't publicly reported on it yet.

Adoption among groups is nascent, but it will come, said Dave Gans, the MGMA's senior fellow for industry affairs. "Are we seeing an effect on salary yet? I don't think so. But we are seeing practices looking closer," he said.

While most organizations moving toward value-based compensation determine rewards using measures of quality, some are starting to consider other measures such as efficiency, financial performance and satisfaction scores gleaned not only from patients but from fellow providers, said Maria Hayduk, a senior manager with ECG Management Consultants in Nashville.

Indeed, the movement by hospitals to acquire physician practices may be pushing financial metrics—not quality—to the fore. "They're seeing more patients, and that helps them generate more revenue, and that leads to more compensation," Hayduk said.

By Joseph Conn
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