Physician Compensation Update: It’s a Mixed Picture

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November 2011

Industry market forces, national policy developments, and the economy are all having an effect. 
By Bonnie Darves, a Seattle-based freelance health care writer 
In a year when bad news predominates on economic and societal fronts, there’s a spot of bright news for most physicians: Their incomes, with the exception of a few specialties, are either holding steady or seeing increases. Major national surveys that track how much physicians earn yielded what might be called a “cautiously optimistic” picture — increases of 2.6 to 5.7% overall for primary care physicians (PCPs), and between 2.5 and 9.5% for specialists.

The largest survey, produced by the Medical Group Management Association (MGMA) in Englewood, Colorado, reported median compensation of $202,392 for PCPs and $356,885 for specialists in its 2011 edition. In the winners category, dermatology, emergency medicine, neurology, orthopedic surgery, and pulmonary medicine all saw gains of between 4 and 6%. Others saw sharp drops, notably invasive cardiology at –3.8%, urology at –4.6% and ophthalmology at –2.2%.

These declines — while somewhat surprising in their severity — work in concert with the modest increases overall and illustrate what’s going on behind the scenes generally, according to William Jessee, MD, MGMA’s president and chief executive officer. “It’s consistent with what we’re seeing in the [physician] industry at large — few increases in compensation, with some specialties’ incomes staying even and some going down,” he says, despite patient or procedure volume hikes. He cites diagnostic radiologists’ compensation, which declined 1.5% even though work volumes increased nearly 10% over the last two years.

“Overall, I think it’s a reflection of the physician economy being as unsettled as the rest of the economy,” Dr. Jessee says. “But it’s also market factors. All payers, public and private, are ratcheting down payment for imaging and other specialty-driven ancillary services.”

On the plus side, Dr. Jessee points to the continued increases in primary care compensation in recent years as a sign that the historically wide gap between specialists’ and PCPs’ income will continue to narrow. The emergence of medical home models and the recognition nationally that PCPs have been underpaid “are both contributing to the shift,” he says.

The American Medical Group Association (AMGA) 2011 survey reported somewhat higher median incomes in primary care than MGMA: $208,658 for family medicine, $219,500 for internal medicine, and $213,379 for pediatrics. On the specialty front, the Virginia-based organization found a mixed picture. Although 69% of specialties non-primary care medical and surgical specialties saw compensation increase in 2010, the range was wide. Allergy, endocrinology, emergency medicine, and hospitalists all claimed increases above 6%, while the surgical specialties overall, gained only 0.44%. AMGA also found that many physician specialties, regardless of compensation, are working harder to maintain income levels. As measured by work relative value units (RVUs), allergy, dermatology, ophthalmology, and urgent care all increased RVUs by more than 7%.

Both cardiac and thoracic surgery, and urology saw actual declines of –0.10% and –0.05%, respectively, in AMGA’s survey. Anesthesiology, diagnostic radiology, interventional radiology, and pathology all experienced modest increases; and in certain high-demand, low-supply specialties mean-compensation increases were pronounced. In neurosurgery, for example, median incomes jumped to $625,300 in 2011, up from $592,811 last year.

Donald Fisher, PhD, AMGA’s president and CEO, says that the mostly minimal compensation gains and the actual declines are largely attributable to market factors that will likely continue their stagnating effect. “The modest increases seen this year reflect the negative impact of declining reimbursements, competition for specialists, [and] the cost of [purchasing] new technology,” he says, all of which have substantially impacted practice revenues.

In the bigger near-term picture, physician compensation may flatten, industry observers maintain, but the ever-rising demand for services should have an upside offsetting effect, at least for a while. That’s especially the case for physicians whose services encompass the burgeoning baby boomer contingent, Dr. Jessee noted.

Mark Smith, president of the large national recruiting firm Merritt Hawkins & Associates in Irving, Texas, thinks that the demand “bonus” will diminish as emerging delivery models and budget constraints conspire to produce a palpable downward effect. “The needle on physician compensation keeps moving up in most specialties because demand for physician services keeps increasing. However, that’s not a trend that can continue indefinitely,” Mr. Smith says. “In the future, there will be more clear-cut winners and losers.” Health reform provisions enhanced reimbursement for PCPs, who are seeing “steady, if not dramatic gains,” he says, in their starting salaries, for example. On the other hand, specialists — including cardiologists and radiologists — are feeling the effects of reimbursement cuts and are seeing a downward salary shift.

“We expect both trends to continue,” Mr. Smith says, and to continue factoring in to compensation in the years ahead. “Incentive plans that include bonuses for number of patients seen, amount of revenue generated, or RVUs are still the norm. Fewer than 7% of our clients are offering physicians incentives that are quality- or cost-based. So in the ‘real world,’ fee-for-service compensation metrics are still the standard. But in four or five years, that won’t be the case.”

Recruiting Incentives Illustrate Trends
Year-to-year salary shifts are a key indicator of where physician income is headed, but other factors behind the scenes also portend future changes. Recruiting incentives, such as promised annual bonuses, income guarantees, relocation expense coverage, and sign-on bonuses, fall in to that category.

The national recruiting firm Merritt Hawkins & Associates (MHA), in its 2011 review of those incentives in more than 2,000 searches, uncovered several trends, including:

  • Income guarantees are disappearing. Only 9% of MHA 2010–11 search assignments included income guarantees, down from 21% in 2006–07 and 41% in 2003–04.
  • Relocation allowance, still offered in 92% of MHA assignments, was merely $1,000 on the low end, compared to a $2,500 minimum in 2008–09.
  • In 76% of searches, signing bonuses ($23,790 on average) are still offered. But that’s down from 85% in 2008–09.
  • On the plus side, 96% of offers include continuing medical education (CME) benefits, with an average annual CME payment of $3,194.


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