The usual rules of supply and demand that move markets are certainly at work in the business of healthcare. With specialties such as cardiology among the biggest drivers of the industry's dollars, doctors practicing in those fields also are commanding the biggest raises and the fattest pay packages.
According to participants in Modern Healthcare's 11th annual Physician Compensation Survey, specialists continued to reap the biggest income rewards last year, while primary-care physicians earned lower-than-average pay increases.
This year's survey compiles results from 13 companies that track physician salaries (See Data trackers for more information). Some firms poll different respondent pools from year to year, which accounts for the erratic percentage changes last year for some physician titles.
According to the Medical Group Management Association, one of the survey respondents, specialties outside of primary care, saw an 8% rise in median compensation last year among a short list of 23 benchmark specialties charted by the organization. Primary-care physicians, meanwhile, reported their salaries rose just 2.4%, compared with a 5% median increase in 2003 for all physician titles, to $217,684. The accompanying survey charts reflect average total cash-compensation figures.
"Most specialties exhibited some, but not significant, increases in compensation," says Dan Stech, director of survey operations at the MGMA, with jobs in ophthalmology, cardiology, radiology and urology lead- ing the specialty pack with the highest pay- percentage increases.
Compensation up, charges down
Cardiologists recorded a 13.6% jump in median total cash compensation last year, according to the MGMA's survey, while logging a 4.1% drop in the amount they charge for those services. The discrepancy is important, Stech says, because it suggests cardiologists could be generating income from work outside their clinical duties, such as "certain ancillary (procedures) in imaging and radiology."
Technological advances can help pad physician incomes by making their professional skills more valuable, but they also reward physician owners whose group practices invest in hot new medical equipment that consumers demand.
Other nonprofessional services included in total cash-compensation calculations and reported on tax filings include incentive pay, honorariums for giving speeches or other public appearances, profits from business ventures and research stipends. Many of the larger cardiology groups have sizable research departments in addition to imaging centers and the like, Stech says, which often supplement physician income.
The MGMA figures for group practice physicians historically have ranked them among the top salary earners because doctors who own a piece of a practice are able to boost their income in other ways. Their hospital-employed peers-without as many opportunities to generate extra income, such as those specialists sampled in many other surveys included in this report-tend to be on the lower end of the pay scale. Also, the MGMA conducts a separate survey for academic physicians whose practices-and thus their compensation figures-are not comparable with private physicians sampled in its main survey.
The 13 surveys represented in this report use different methodologies, track different pools of physicians and poll a large range of sample sizes, which accounts for the wide range of data represented.
The discrepancy in pay and charges for cardiologists also could mean they are seeing fewer patients while generating higher profit margins. The same is true for ophthalmologists who are benefiting from medical advances in laser eye surgery that net higher margins and can be performed on an outpatient basis.
Physicians with another high-flying specialty title-orthopedic surgeon-earned average salaries between $307,000 and $497,000, among the highest-paid of all specialties. Averages for the specialty are not included in the chart but were provided to Modern Healthcare for the report.
"If they're making less than $300,000, they're in a highly capitated area," Marc Bowles, vice president of physician searches for Delta Medical Consulting in Dallas, says of orthopedic surgeons, who routinely secure 10% signing bonuses.
Wages for physician titles vary widely by specialty and increase with the number of years of experience, according to the MGMA survey. For example, the median income for family practice doctors with one or two years' experience was $130,000, while family practitioners with eight to 17 years under their belts made a median salary of $158,527, a difference of 22%.
The salary gap is wider for higher-demand specialists. Cardiologists, for example, see a median income of $218,156 when first starting out, while commanding a hefty median increase to $358,403, up 64%, later in their careers, according to the MGMA.
As they age, physicians seek to balance their professional careers with family and other personal pursuits. "It's kind of a migration toward a better quality of life," Bowles says.
Doctors often pay their dues early in their careers by working 18 to 20 hours per day, seven days a week, then make a transition to fields in outpatient care and other less-demanding work, Bowles says.
Delta is working with a teaching hospital in Ohio to put together a hospitalist program, bulking up the number of hospitalists at the facility to a dozen or so, to free up specialists for other duties and shorten their workweeks.
Mandates limiting resident workweeks also are increasing the demand for hospitalists to fill in the gaps.
According to Modern Healthcare's survey, hospitalists earned an average of $139,900 to $186,500 per year, up an average of just 1% for all respondents-with pay percentage changes running the gamut from a drop of 8% to an increase of 7%-but Bowles expects to see their pay surge in years to come as demand grows.
Average hospitalist pay rose to a high of about $181,000 in last year's survey, from a high of about $159,000 in 1999, the first year Modern Healthcare began tracking the title.
Linked to productivity
Many firms cited in the survey also say doctors' earnings are tied to productivity.
"Physician salaries are leveling off to some degree," says Joe Goddard, president and managing partner of Goddard Healthcare Consulting, another participant in this year's survey. He says that trend could be tied to recent gains in the stock market that raise their overall income.
The market rebound "took some of the heat off them," Goddard says. "They no longer feel pressured to work 15-hour days."
With the malpractice insurance crisis threatening to erase those income gains, many survey firms also report that recruitment efforts now regularly include extending so-called tail coverage-or insurance to cover gaps as physicians change policies to take on new jobs.
Investment gains also could lead to earlier-than-planned retirements for older, more experienced doctors, Goddard says, which raises the issue of future physician shortages and what that demand will do to physician salaries in the years to come.