Physician Employment and Compensation Outlook for ’07
Published: Oct 02, 2011
Career Resources articles posted on NEJM CareerCenter are produced by freelance health care writers as an advertising service of the publishing division of the Massachusetts Medical Society and should not be construed as coming from the New England Journal of Medicine, nor do they represent the views of the New England Journal of Medicine or the Massachusetts Medical Society.
The basic economic model of supply and demand is working very much in favor of physicians. Whether entering the job market directly from training or looking for favorable opportunities with years of practice experience, both PCPs and specialists will find increased compensation and employed-model positions available. Expect generous signing bonuses and compensation packages, especially for PCPs recruited to underserved areas. For those in practice, higher income is also a function of increased patient volume. With ever-increasing medical education debt loads, robust remuneration for physicians is welcomed unequivocally.
— John A. Fromson, MD
The job market — and income picture — for physicians is bright.
By Bonnie Darves, a Seattle-based freelance health care writer
Physicians heading into the job market for the first time or eyeing a career move in 2007 will find plentiful opportunities and attractive compensation packages regardless of their specialty or preferred setting. Demand for specialists and primary care physicians is high in many regions, especially in non-urban areas. That demand is translating into substantial signing bonuses, generous education loan repayment, and other competitive benefits — especially among large groups and health systems.
Also on the rise are compensation packages that feature creative mechanisms for rewarding physicians’ hard work. Those structures include multifaceted annual bonus programs and elaborate productivity-based incentives, both intended to ensure star performers are recognized. Fully 90 percent of the medical specialties saw their incomes rise in 2005 and 2006, several large-scale national surveys found. (See "Highlights from the Compensation Surveys" sidebar below)
Highlights from the Compensation Surveys
The AMGA and MGMA surveys, as well as smaller-scale surveys and research conducted annually by national physician recruiting firms, are hardly uniform in their findings. Yet the most recent ones — from 2005 and 2006 — illustrate notable trends in compensation and employment.
Following are highlights and key findings that may be of interest to young physicians heading into their first or a subsequent job search this year:
- In 89 percent of specialties, incomes increased in 2005, and the average overall increase was 6 percent. The biggest jumps occurred in dermatology, gastroenterology, and cardiac/thoracic surgery; all tallied gains between 10 to 12 percent. For the most part, however, those specialists also significantly increased their production. (AMGA)
- Signing bonuses, primarily one-time offerings, are on the rise in number and amount — with the most pronounced hikes in primary care. Five-figure bonuses exceeding $20,000 are not uncommon, Cejka Search reported. The Merritt Hawkins 2006 survey of physician incentives found that the average bonus increased to $20,000 in May 2005, up from $14,000 per year earlier.
- More than 23 percent of physicians worked for hospital settings in 2005, up from 19 percent in 2004. (Merritt Hawkins)
- Following a persisting trend, physician compensation levels remain highest in the Midwest and northern Midwestern states (Illinois, Indiana, Michigan, Minnesota, and the Dakotas, for example) and the Southern states, compared to the Northeast and Western regions. The most dramatic recent compensation increases occurred in the West, where incomes rose more than 8 percent in 2005. (AMGA)
- Internal medicine and family practice searches increased by 46 percent and 55 percent, respectively, from 2004 to 2005. (Merritt Hawkins)
A more in-depth look at the survey findings and trends affecting physician compensation can be obtained by contacting the organizations cited above or visiting their websites; details follow. (Note that a charge applies for the complete AMGA and MGMA surveys.)
American Medical Group Management Association, Alexandria, Va.: (703) 838-0033; www.amga.org
Cejka Search Inc., St. Louis, Mo.: (314) 726-1603 or (800) 678-7858; www.cejkasearch.com
Medical Group Management Association, Englewood, Co.: (303) 799-1111 or (877) 275-6462; www.mgma.com
Merritt, Hawkins & Associates, Irving, Tx.: (469) 524-1400 or (800) 876-0500; www.merritthawkins.com
The employment picture is bright across the board. Even primary care, in which flat incomes and reimbursement produced a challenging practice environment in the recent past, is experiencing gains. Incomes for family practice physicians, internists, and pediatricians increased in 2005 and 2006, and the Centers for Medicare and Medicaid Services recently modified the Resource Based Relative Value Scale to attach a higher relative value unit (a measure of the physician work component) to most office-consultation services. The latter will increase Medicare reimbursement to most primary care physicians, industry experts concur.
Primary Care Earnings Pull Out of Doldrums
“This year and last year, we are finally seeing some compensation increases in primary care — of about 5.8 percent — after several years of flat incomes. That’s a positive trend that some of us saw coming, because basically something had to give,” said Brad Vaudrey, MBA, CPA, director of Minneapolis-based RSM National Health Care Consulting, which compiles the American Medical Group Association’s annual compensation and financial survey. These increases, in concert with emerging innovations in employment and care delivery, make for a vibrant job market.
“We’re seeing supply and demand coming into play, and that is raising salaries and benefits for internists,” said William Golden, MD, chair of the Board of Regents for the American College of Physicians. “And the Medicare fee schedule increase will likely translate into other insurance products down the road.” Both developments — underpinned by efforts to develop patient-centered, technology-enhanced care models in which PCPs assume a lead role in coordinating medical services — augur exciting changes, added Dr. Golden, a professor of medicine at the University of Arkansas for Medical Sciences.
Changes and innovations also are afoot in PCP compensation and employment structures. One is the major movement among health care systems and large multispecialty groups toward employing rather than contracting PCPs, according to Brian McCartie, regional vice president for Cejka Search Inc., in St. Louis, Missouri. “We are seeing signing bonuses of $5,000 to $35,000 in primary care, as well as loan repayment. But the big change is that the demand for primary care has brought systems to re-engage in employing PCPs,” he said, or to bolster community practices’ financial viability.
For example, some large groups and hospital systems are using “incubator” or transitional-employment models. In those arrangements, physicians are employed for two years and then allowed to buy out the practice for a sum that reflects the value of fixed assets and accounts receivable. “It’s a bit different than a net-income guarantee,” Mr. McCartie said.
Employment Structures, Financial Supports Help Physicians Get Started
In other developments, multispecialty groups — in vogue again after a long trend toward clustering of same-specialty physicians — are actively recruiting PCPs and offering attractive financial support systems. Those systems include not only signing bonuses, but also sustainable “credits” structures that increase compensation and recognize the value PCPs bring to the group through services and care coordination.
“In multispecialty practices, primary care physicians are certainly being supported to a higher degree than they were — in hopes of increasing retention,” Mr. McCartie said.
That support, whether achieved through credits, incentives, or salary ranges, is especially evident among large employed-model practices. Kaiser Permanente, for example, raises all physicians’ salaries consistent with the large annual surveys’ findings but “evens out” the disparity between specialists’ and PCPs’ incomes. “Like many large, high-performing medical groups, we pay a bit more than average for primary care and a bit less than average for the specialties,” explained Robert Pearl, M.D., executive director and CEO of The Permanente Medical Group-Northern California (TPMG), which employs more than 6,000 physicians. “We don’t want compensation to be the big issue.” TPMG also offers a housing program in which physicians just starting their careers can obtain a 10-year, interest-free loan for a home down payment.
Other large employers continue to modify and experiment with compensation-package arrangements — especially in retirement benefits and CME allowances — to recruit both PCPs and physicians in certain high-demand/low-supply specialties.
Health Care System Changes Affect Incomes, Practice Models
As the health care-delivery landscape changes, so do physician-compensation systems and practice models. For example, as costs increase and concerns about cost-effective care intensify, annual bonuses are undergoing modification. Community practice bonuses have typically been based on collections. Yet increasingly, they are being based on RVUs, the recruiting firms report. Quality-based bonuses — particularly for improved management of chronic conditions — are also on the rise. At Kaiser’s TPMG, for example, physicians can earn up to 10 percent of their annual salary in an incentive payment that is based half on quality and half on service (measured by patient satisfaction).
A recent study by the Center for Studying Health System Change (HSC) in Washington, D.C., found that despite the movement toward quality-based incentives, productivity prevails in setting bonus or incentive compensation. In 2004–2005, approximately 20 percent of physicians reported that quality measures figured into their compensation, and roughly 24 percent cited patient satisfaction. Yet more than 70 percent cited productivity as the predominant financial incentive.
Practice positions are changing to reflect certain marketplace developments, especially in primary care. Mr. McCartie of Cejka Search noted that position descriptions show growing evidence of the practice structure changes to which Dr. Golden alluded. Many practices are recruiting internists to serve as internal medicine “specialists” who direct patients’ overall care and assume primary management of complex patients, while other non-physician providers manage lower-acuity patients.
Dr. Golden and others who commented on developments in primary care were careful to place the positives in the larger context of how health care is funded — and all noted that more change is needed to narrow the gap between PCPs’ and specialists’ incomes.
“Primary care doctors are seeing income increases, but some of that may be attributable to the movement toward employment situations and the decrease in PCPs becoming solo practitioners,” said David Gans, vice president of practice management resources for the Medical Group Management Association in Englewood, Colorado, which conducts the country’s largest annual physician compensation and productivity survey. “Overall, among all types of physicians, our survey found that the amount of compensation supports the production — but primary care still is experiencing a gap in that regard compared to the medical specialties.”
Trend Toward “Employed Model” Also Showing Up in the Specialties
In health care, as in history, cycles repeat — and perhaps nowhere is that more evident than in the physician employment area. After a decade of entrepreneurial activity in the physician-group sector, 2006 showed a discernible movement back toward the employment model. Apparently, young physicians are opting for salaried structures rather than embracing the notoriously challenging business of operating solo or small-group practice.
This trend is especially apparent in the specialist realm, according to Kurt Mosley, vice president of business development for the national recruiting firm Merritt, Hawkins & Associates of Irving, Texas. “Specialists are coming back to the hospital, in a lot of cases back to hospital-sponsored employment models,” Mr. Mosley said, opting for the relative security of a good paycheck without the headaches of running a practice.
Employment-model medical groups are also experiencing renewed interest among physicians just out of training, Dr. Pearl noted. Evidence of that trend is the fact that TPMG hired 700 physicians in 2006, and 90 percent of the applicants offered positions accepted them.
Hospitals and health systems are engaging in the employed model in growing numbers primarily to ease their own headaches, Mr. Mosley noted, chiefly, ensuring that specialists are available to take emergency department calls and to provide timely inpatient consults. Increasingly, employers are tailoring their searches to specify “site-based” specialists, such as hospitalists or “surgicalists” (hospital-based surgeons), he added.
Despite the market forces and conditions that can negatively affect physician employment and compensation and reimbursement levels, the 2007 job outlook is bright and jobs are plentiful. “It’s a very good time to be looking for a practice opportunity,” said Mr. Mosley.