Physician compensation continues to climb despite the forces of managed care and concerns about an oversupply of doctors.
A year ago, physicians were still reeling from an American Medical Association report that their average income fell in 1994 for the first time in 14 years. But that's been eclipsed by better news: The latest AMA figures show physician incomes took a solid 6.7% jump in 1995.
Other surveys bear out the upward trend. For example, national benefits consulting firm William M. Mercer reported a healthy increase in annual cash compensation for employed physicians averaging 7% in 1996, compared with a 4.4% increase in 1995.
MODERN HEALTHCARE's 1997 compensation report, the fourth annual, shows increases in total compensation for all 14 specialties tracked in the report. Last year, only nine of the 14 specialties enjoyed gains. The surveys cover physicians in all employment settings, including hospitals, group practices and managed-care plans.
The magazine calculated the average total compensation as reported by 10 of the 11 organizations that submitted survey data. One contributor, Weatherby Associates, was not included in the averages because it only tracks starting salaries.
The biggest increases were in oncology, up 23% to $202,577; neurology, up 16.9% to $170,582; and obstetrics/gynecology, up 14.5% to $230,150. The smallest increases were for psychiatry, up 4.1% to $140,197, and family practice, up 7.6% to $137,805.
Year-to-year comparisons reflect general trends but are not exact because different surveys are included each year.
One interesting point is what the salary figures don't show: A growing proportion of pay is based on incentives and bonuses.
As hospitals, medical groups and managed-care plans hire more physicians as employees, they are experimenting with ways to motivate them. The proportion of employed physicians grew to 39% in 1995 from 36% in 1994, according to the AMA, and by all accounts it continues to increase.
The average proportion of compensation from bonuses and incentives increased by nearly a third last year, to 18.6% of compensation from 14.6% the previous year, according to Oakland, N.J.-based Hospital & Healthcare Compensation Service.
According to William M. Mercer, New York, two-thirds of 124 healthcare organizations surveyed have incentive arrangements for some or all of their physician employees. In 72% of those organizations, incentive awards are determined at least partially by the physician's contributions to operating income or net revenues. Only about a third include patient satisfaction, and 24% include quality of service as bonus criteria.
According to HHCS, revenues are the most common measure of physician performance and productivity. Group performance, patient satisfaction, peer review and number of patients covered are among other factors affecting total compensation.
"It looks like everybody is moving toward some kind of variable pay component," says Paul R. Dorf, principal of HHCS and director of consulting. "The difficulty is, they don't know exactly how to do it."
Academic medicine continues to lag behind the rest of the healthcare industry in physician pay. For example, the trend of a few years ago of academic primary-care physicians' income growth outpacing that of their specialist colleagues' only recently emerged in academic medicine. In the past year academic primary-care physicians saw their pay hikes outpace specialists' by 2.2%, according to the Medical Group Management Association. Those primary-care doctors' pay rose 5.5% from 1995 to 1996, compared with a 3.3% increase for specialists, according to the MGMA. The survey showed family physicians were the big winners in academic primary care, with an 8.9% boost from 1995 to 1996.
This year's report shows a shakeout of sorts, with three previous contributors dropping out. Tampa, Fla.-based Physician Executive Management Center and Towers Perrin, a Parsippany, N.J.-based consulting firm, discontinued their surveys. Physician Services of America, a Louisville, Ky.-based physician search firm, closed its doors.
However, two new organizations submitted data. They are the Columbus, Ohio-based Center for Healthcare Industry Performance Studies and Norwalk, Conn.-based Weatherby Associates, a physician recruitment firm.
The report reflects average total compensation for physicians in 14 specialties, with an average of all the surveys for each specialty. Many of the organizations that submitted data also track median compensation figures, which were not included here.
Survey results vary dramatically in some cases because of differences in methodology. For example, Weatherby's numbers tend to be lower because its survey is based on starting salaries for physicians who have just completed residencies.
Surveys conducted by the MGMA and the American Group Practice Association generally reported higher compensation figures because independent group practices tend to pay more than other employers. The AMA includes self-employed physicians, which tend to earn more than employed doctors.
HHCS reported significantly higher compensation figures this year, due mainly to a change in reporting. This year its numbers show total cash compensation, including bonus pay, midlevel supervisory pay, administrative duty pay and incentive pay for managed care. Last year, the firm reported base salary only.
Mary Chris Jaklevic