Pandemic may pound lopsided physician pay model into shape

Empty doctors’ offices. Closed emergency departments. Postponed surgeries.

As the COVID-19 virus spread across the country, so too did its effects on medical providers. Fields that historically have been in high demand saw furloughs, while others saw pay cuts and even layoffs as elective procedures were restricted and patients delayed care to minimize exposure to the virus.

Physicians were not immune. Many saw pay or benefits cut. Among them were doctors at Mayo Clinic in Rochester, Minn., which in late April cut physician pay by 10% and physician executive salaries by 15% to 20%, depending on the position, a system spokesperson said. Those reductions lasted just shy of two months.

More broadly, an estimated 18% of physicians treating COVID-19 patients experienced furloughs or pay cuts, while 30% of those not treating COVID-19 patients had their pay reduced or were put on furlough, according to a report by physician staffing firm Merritt Hawkins and the Physicians Foundation.

While it’s hard to predict exactly how the mass reductions will affect long-term physician compensation, pandemic-driven changes in compensation could be harbingers of larger changes in the industry, experts say. If the current surge continues and another mass cancellation of elective procedures occurs, health systems will be less likely to be able to protect physicians financially, said Dave Hesselink, principal at SullivanCotter, a workforce consulting group.

For years, physician compensation had crept upward, and 2019 was no exception. Last year, most specialties saw a 2% to 3% gain, yet there weren’t corresponding productivity increases, Hesselink said.

Many employers that previously considered shifting away from fee-for-service and productivity-based models now may make that leap. Already in 2020, some of the larger health systems have started asking how to realign their compensation models now that volumes have crashed, Hesselink said. “One’s got to consider, as we worry about the economic fragility of the system, ‘Can we really sustain the end result of that model?’ ” said Mark Ryberg, a principal at SullivanCotter.

Travis Singleton, executive vice president of marketing and sales for Merritt Hawkins, said if large hospitals were ever going to move to quality, “now is the time to do it, if for no other reason than they kind of have to.”

“When you shut down those procedures overnight, we saw specialist income fall to the floor because they’re so dependent on procedural income,” Singleton said. And it leaves an opportunity to move to value-based models, in which “the primary-care provider is the quarterback of the system,” he said.

However, not all health systems are looking into new models, said David Wildebrandt, managing director of consulting firm BRG’s healthcare performance improvement practice. Many of his clients are primarily focused on recovering patient volume and finding ways to operate more efficiently throughout the pandemic.

Looking back at 2019, it was a decent year for most types of doctors, according to Modern Healthcare’s 27th annual Physician Compensation Survey, which analyzes compensation levels from surveys of 10 placement firms.

This year’s results are expected to be particularly useful. As systems decide how to best handle physician compensation moving forward, they will need to rely on data from before the pandemic to inform decisions, experts said. The next two years will likely be volatile, and 2019 data can serve as “an anchor point,” Hesselink said. “This is really the last stable set of market data we have collected,” he said.

In 2019, the overall average of the reported median physician compensation rose 2.7% from the previous year to $412,294. Urologists saw the largest year-over-year gains, recording an 8.8% increase to an average compensation of $484,130, according to the survey. Pathologists’ compensation, meanwhile, took the biggest hit, falling 0.7% to an average compensation of $347,037.

In 2019, to combat the supply and demand mismatch, health systems continued to offer incentives to physicians like academic or leadership roles, more paid time off, productivity bonuses and reimbursements, according to Pinnacle Health Group, a physician recruiting group. Others dramatically increased student loan forgiveness programs and signing bonuses and offered flexible work schedules like four-day work weeks, according to Gallagher, a compensation consulting firm.

SURVEY: Physician Compensation: 2020