What physicians make (and why)

Nothing looms quite as large for your future as negotiating the best compensation package possible.

By Chris Hinz | Fall 2018 | Feature Articles

 

Negotiating compensation requires an understanding of the value of your skills and an assertive approach. Both helped Theresa Rohr-Kirchgraber, M.D., further her career. -photo by Rebecca Shehorn

Negotiating compensation requires an understanding of the value of your skills and an assertive approach. Both helped Theresa Rohr-Kirchgraber, M.D., further her career. -photo by Rebecca Shehorn

Obviously, you want a nice financial payoff for your skills. After all, they’re worth top dollar by every professional measure. But there are big picture realities to consider, too. Specialty, practice type and geography have already shaped your final offer in ways that you might or might not have suspected. How do they move the dial up or down?

Words like value and supply versus demand come immediately to mind. They’re the underlying drivers that make these three factors so important in what you’re able to earn. They’re also key to many of the compensation surveys administrators use as one critical tool in designing how much you’re going to make.

“It’s not just a random executive pulling a number out of a hat and offering it to a physician in hopes that he or she will take it,” says Jon Appino, principal of Kansas City, Missouri-based consulting firm Contract Diagnostics. “It tends to be very purposeful and calculated from the employer’s perspective on what administrators are offering most of the time.”

As to the specific roles of specialty, practice type and geography, let’s take a closer look.

Specialty

The specialty you’ve chosen will be the biggest determinant of your compensation by far. Even though primary care physicians and their non-surgical specialty colleagues are well-paid professionals, providers in procedure-rich specialties tend to rise to the top of medicine’s financial hierarchy.

Why? They experience the highest reimbursement rates for the complex tasks they perform, which ultimately is reflected in their pay. Simply put, if you’re in orthopedics, anesthesiology, cardiac and other surgeries, what you do will likely put you in the cat bird seat in commanding a top salary. Of course, other forces, such as supply and demand, can help shape any package. At its core, however, compensation is often less about the number of patients that you see and more about the nature of your services and the value assigned to them.

RVUs lead the way

Wherever you are in your medical career, you can’t underestimate the role of two acronyms — RBRVS and RVU —in how much you’re ultimately paid for your work. Shorthand for resource-based relative value scale and relative value unit, both terms have been integral to most physician practices since 1992, when the Centers for Medicare & Medicaid Services (CMS) launched RBRVS to bring consistency to the way that it pays physicians and health facilities for their services.

By assigning specific values—the RVU part of the system—to every CPT (current procedural terminology) code, Medicare, Medicaid, and some private insurers alike have a standard methodology by which to issue reimbursements.

But how do those values eventually turn into compensation? Hiring entities have their own formulas for parlaying work product into salaries and productivity bonuses. Many still use volume-related metrics such as number of patients or the amount of fee-for-service collections to craft a plan. As more payers rely on RVUs in calculating reimbursement, however, those values become increasingly critical compensation measuring sticks. If your package depends on RVUs, you want to make sure you understand the particular schema, given the plethora of complicated methodologies using them today.

In determining production and incentive bonuses, employers are primarily interested in physician work or wRVUs because they account for the time, training, technical skills and judgment a physician employs in diagnosing and delivering care. Other components—practice expense or peRVUs and malpractice RVU or mRVUs—are baked into the reimbursement pie to account for the higher direct, indirect and liability costs of providing the service.

“This is all about the effort expended in order to provide a service,” says Fred Horton, president of AMGA (American Medical Group Association) Consulting. “We’re not going to pay you based on some other type of overhead or malpractice methodology. We’re going to pay you based on your work.” Adds Travis Singleton, senior vice president of Dallas-based physician recruiting firm Merritt Hawkins: “The net outcome is to equate difficulty and value to what the physician does.”

Winds at selective backs

Even within a specialty, your ability to command top dollar is still a mixed bag depending on other forces. Being a pediatric neurologist, for instance, may increase your compensation into the medical subspecialty realm, but not into the procedural realm. As to other specialties, supply and demand is the focus. Pathologists, for instance, have been harmed lately by a difficult market. Appino can only speculate as to the reasons—perhaps technology has improved efficiency or training has produced too many. Yet with fewer job openings now than in the past, employers have the upper hand. On the other hand, rheumatologists and other short-supply specialists such as neurologists and urologists are definitely seeing an uptick in their financial outlook. With an aging population demanding their skills, in many cases they can write their own tickets.

And what about primary care? You’re likely still bringing up the compensation rear, even with promises since RBRVS originated in the 1990s that your field would one day be rewarded equal to that of procedural-based groups. Citing AMGA survey comparisons of 20 specialties between 2009 and 2017, Horton notes that orthopedic surgery still holds the top place with family medicine, internal medicine and pediatrics anchoring the bottom. “Basically, they haven’t moved at all,” he says. “The wealth hasn’t really been redistributed as promised.”

That doesn’t mean, however, that there aren’t promising exceptions. As a residency program faculty member with Jacksonville, Florida’s St. Vincent’s Family Medicine Center, Robert Raspa, M.D., is in charge of 30 family medicine physicians, with 10 not only graduating each year, but also heavily recruited for their skills.

New physicians may need to be assertive about their worth even as they’re being wooed. Theresa Rohr-Kirchgraber, M.D., preaches the value of assertiveness to her residents and fellows as the executive director of the Indiana University National Center of Excellence in Women’s Health.

Rohr-Kirchgraber, who is also the Barbara Kampen Scholar in Women’s Health, doesn’t have to look further than her own experience as an example.

Board certified in both internal and adolescent medicine, she went to bat for herself after discovering that her primary clinical appointment in pediatrics was costing her thousands of income dollars. Although she held a secondary appointment in internal medicine and saw mostly adult patients, administrators weren’t keen on upsetting the parity applecart with her pediatric colleagues by just changing her status but keeping her in the adolescent division.

It took some negotiating, but Rohr-Kirchgraber succeeded in switching the appointments. In practical terms, she now has fewer interactions with her adolescent medicine colleagues, but she’s finally on par salary-wise with other internists. “We’re always trying to be nice and helpful because we’re just so grateful,” she says. “But we have to recognize that we bring a completely different set of skills to the group. We need to understand our worth.”

Practice type

The majority of newly recruited candidates—some estimate as high as 70 percent—will join hospitals, medical groups, urgent care centers, clinics and other structures as dedicated hires, not necessarily future owners. What does employment specifically mean for your compensation package? For starters, you may not be bearing the brunt of the business responsibilities shouldered by your self-employed colleagues, but you’re also likely to experience a lower average income as a price for the freedom.

At least one survey, Medscape Physician Compensation Report 2017, demonstrates that while increased numbers of physicians are choosing an employed position, they’re also likely to earn less than their self-employed counterparts. The 2017 results reflect overall differences of 28 percent between the $343,000 average earnings per year of providers willing to take on the business demands of private practice and $269,000 for their employed peers.

Whether you’re hired by a health system or perhaps even a group, your compensation will be built initially on a base salary, which provides a predictable income level for your clinical services. The package will also include an incentive bonus that rewards your productivity and, in some cases, the standard of your work. Beyond the type and volume of your services, you may have to demonstrate your worth via quality outcomes plus other harder-to-quantify measures such as patient satisfaction and corporate citizenship.

More than likely, however, you’ll be rewarded based on some sort of volume metric. Even though there’s wide variety in the incentive models and formulations used today, there’s a better-than-average chance that your plan will revolve around RVUs.

“We can say that we want to move to quality, but fundamentally mathematics still work on volume,” Singleton says. “To me, RVUs are the bridge from volume to value. It’s the best we have at the moment.”

The nuanced ins and outs

It’s incumbent on you to understand the parameters of your specific plan, given the potential nuances. For instance, depending on the formula, the incentive portion of your deal may involve a modest kick-in for the first and second years while you develop sea legs and a following. After that, your salary may be gradually reduced or even eliminated, leaving you dependent solely on whatever productivity and/or earnings structure your employer has in mind.

Whatever the case, you need transparency. Too often, say experts, physicians look at the numbers and just assume what’s behind them rather than understanding where they come from or how they’re set. “One of the things that continues to amaze me is how many physicians can’t recite how they’re being paid,” says Horton, noting his surprise at job incumbents who don’t know the ins and outs of their original compensation packages. “They’re able to tell me how much they make but they can’t necessarily articulate the mechanics. And that’s really important.”

Geography

In medicine, like business, location is often everything—including playing a role in what you can earn, especially given supply and demand for your skills. When considering the trifecta of factors—compensation, location and practice type—that are key to any job decision, Appino suggests prioritizing the two most important ones since you likely can’t have all three.

Why so? Popular places to live and work may not offer the best shot at the best deal. If you’re willing to accept a smaller package, by all means hang tough for that idyllic place you’ve always associated with a great life. But if money is a priority, you might need to open your eyes to areas of the country that hadn’t been on your radar.

It takes more than compensation to make a physician happy in a new job. “Our feeling is that if you want to attract good people then you have to give something better than anyone else,” says Salim Surani, M.D. -photo by Dustin Baker

It takes more than compensation to make a physician happy in a new job. “Our feeling is that if you want to attract good people then you have to give something better than anyone else,” says Salim Surani, M.D. -photo by Dustin Baker

Mega trends at work

Regional analyses from the Merritt Hawkins 2017 Review of Physician and Advanced Practitioner Recruiting Incentives confirm that physician salaries tend to be highest in the Midwest and Southeast. Both areas are top pay strongholds, say the authors and other experts, because of a healthy dose of fee-for-service medicine, good payer mixes with comparatively high reimbursement rates and a large number of productive, independent physicians. There’s also a lower physician-per-capita ratio.

Conversely, physician incomes tend to be a bit suppressed on the West Coast because it’s typically the highest capitated market with the most managed care, says Singleton. Likewise, lowered physician incomes on the East Coast, particularly the Northeast, also reflect a relatively high prevalence of managed care/capitated compensation plans as well as competition.

That’s not to say there aren’t pockets that run counter to existing trends; just that you should be aware of umbrella forces driving compensation where you might want to work and live.

Final thoughts

Whatever your specialty or skills, you’ll need facts on hand to achieve a financial payoff that befits your experience and skills. By knowing how specialty, practice type and geography move the dial on any offer, however, negotiations may no longer loom quite so large.

 

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