Shifting a greater proportion of physician pay toward outcomes-based incentives is part of the effort to promote higher quality and lower costs. But growing evidence has shown such efforts will require improving the practice of primary care, which may be facing a shortage at crisis levels, according to recent projections.
Boosting those numbers won’t be easy, because starting salaries among primary-care specialties were fairly stagnant in 2018, which marked a reversal of recent trends that had seen compensation for primary-care physicians rise over the past five years.
Singleton said he did not expect salaries for primary-care physicians to go much higher in the current reimbursement environment despite demand being as great as it’s ever been. A huge factor is the fact that there are simply fewer employers available to hire primary-care physicians than there was a decade ago due to an increasingly consolidated market. “If your community needed 100 primary-care physicians to meet your need, if you went back 10 years ago, there would be 40 or 50 different entities recruiting to meet that need,” Singleton said. “Fast forward to today where many of those entities have been consolidated, and you may have five or 10 different entities recruiting to meet that need.”
Yet, having fewer entities has not reduced the level of competition for physicians in the rural sector. Among rural providers, the demand for primary-care physicians as well as other specialties has been so high that hospitals in those areas have traditionally offered higher starting salaries and other incentives compared with urban facilities to recruit physicians, such as student loan forgiveness, relocation bonuses, and more flexible work schedules.
But according to Jamie Thomas, executive vice president for physician placement firm Medicus, the gap in starting physician salaries between rural markets and hospitals in urban areas has narrowed as urban providers have begun to offer starting salaries and benefits that were once solely used by rural providers to attract candidates.
Thomas said urban markets have increased their compensation levels to physicians over the past 18 months while many rural providers have been unable to keep pace. “Typically, an urban market would be well below a rural market in salary offering and potential,” Thomas said. “What we’ve seen over the past year is that kind of evened out a little bit.”
Singleton said many rural providers are finding it increasingly difficult to continue to offer competitive salaries because of limited budgets. “Unfortunately, the bar to successfully recruit physicians to rural areas keeps getting set higher,” Singleton said. “For a lot of metro and suburban hospitals, the ceiling is higher, and now there often is little to no difference between what rural and metro facilities are offering.”
Few specialties highlight how the pay gap between rural and urban providers has narrowed more than within primary care. Thomas estimated rural providers were offering starting salaries that were on average 20% higher than could be found in urban markets in 2016. By 2018, Thomas estimated the disparity had been cut by nearly half to about 12%, with signs that the gap will continue to narrow.
Gary Campbell, CEO of Johnson Health Center, a federally qualified health center in Lynchburg, Va., said the landscape for clinical talent has shifted to where larger health systems have begun to adopt the recruitment tactics that smaller providers like Johnson have relied on for years to compete.
Since Johnson Health Center is in an area designated as having a provider shortage, it qualifies to offer student loan forgiveness to physician candidates under the federal loan repayment program that pays off up to $50,000 of loans for two years of full-time service.
But larger health systems within Johnson’s service area have begun to offer similar incentives and can offer larger awards according to Campbell. Without the federal program, Campbell said Johnson would lose a significant edge.
“When hospitals are getting into ambulatory care, we can’t compete with those salaries,” Campbell said. “Everybody wants talent.”
Physician Compensation: 2019
Largest medical schools, 2019