For medical groups and integrated health systems, a perfect storm is gathering.
While medical group costs—including compensation—continue to rise, productivity and collections are generally flat, according to AMGA’s 2017 Medical Group Compensation and Productivity Survey. These trends are driving enhanced efficiency and consolidation, but the cost curve will only bend so much. Absent pricing power, medical groups are likely to recalibrate compensation for select specialties.
The report, based on a survey of 269 medical groups representing more than 102,000 providers, shows that:
- Compensation rose for 77% of the 140 physician specialties AMGA tracks. The overall weighted average increase in median compensation was 2.9% for 2016, similar to the 3.1% increase in 2015.
- At the same time, 51% of the physician specialties reported a decrease in their median net collections in 2016. Net collections represent the actual dollar amount collected for professional activities after all discounts from gross charges are applied.
These trends help explain the drive among health systems to enhance efficiency, in part through the mergers and acquisitions sweeping through markets across the country. These measures, however, can only bend the cost curve so much, and because physician compensation is a major cost center, many systems are facing added pressure to raise prices or curb compensation.
The trends vary widely among specialties. The AMGA compensation report contains data for 140 physician specialties and 28 other provider specialties, including data on compensation, net collections, work RVUs and compensation-to-productivity ratios. There are wide variations within provider groups.
- Primary care specialists saw an increase of 3.2%, similar to the increase of 3.6% in 2015 data.
- Other medical specialties saw an average increase of 2.8%, comparable to 3% in 2015.
- Surgical specialties saw an average increase of 2%, down from a 3.6% increase in 2015.
- Specialties experiencing the largest increases in compensation in 2016 were ophthalmology surgery (7.7%), cardiac/thoracic surgery (7%), hematology and medical oncology (6.7%), allergy/immunology (5.9%) and pulmonary disease (5.6%). Those experiencing the lowest increases or decreases include emergency medicine (-2%), general surgery and orthopedic surgery (-0.2%), infectious disease (0.8%) and rheumatologic disease (1.1%).
- Primary care specialties saw a decrease of 4.7% for 2016, which is a significant change from the 2.5% increase in 2015.
- Other medical specialties saw an average increase of just .02%, compared to a .07% increase in 2015.
- Surgical specialties also saw a decrease of 2% for 2016 as compared to a .07% increase in 2015.
- Specialties experiencing the largest increases in net collections include infectious disease (9.8%), otolaryngology (5.9%), cardiology - cath lab (5.2%), cardiology (4.9%) and ophthalmology (4.8%). Specialties experiencing the largest decreases in net collections include radiology - non-interventional (-11%), anesthesiology (-9.2%), rheumatologic disease (-6.5%), urgent care (-4.7%) and hospitalists - internal medicine (-4.6%).
A look at long-term trends related to heart and vascular specialties illustrates the squeeze created by compensation and collections. The heart specialties traditionally have been a major revenue generator for medical groups, as net collections have generally exceeded compensation. But from 2009-2017, the gap between compensation and collections has narrowed significantly and when projecting five years into the future, the average compensation will exceed the net collected outpatient dollar generated by 14.2%.
Note: Specialties included are: Cardiology - General, Cath, Echo, Nuclear, Electrophysiology Pacemaker, Cardiac/Thoracic Surgery and Cardiovascular Surgery.
The picture is similar, but not quite as dire in the orthopedic specialties. When we look at all orthopedic specialties and subspecialties, the compensation to net collection percentage increases from 58.6% in 2009 to 69.6% in 2017. The picture continues to worsen when we trend the data to 2022, as depicted in the graph below.
Note: Specialties included are: All Orthopedic Medical and Surgical Specialties including Joint Replacement and Sports Medicine.
As noted in a past Hospital Impact post, medical groups are increasingly tying compensation to the value of services their physicians deliver. However, value-based incentives do not provide shelter from the coming storm because they restructure, not reduce, compensation. If compensation continues to rise and productivity remains flat, physicians in select specialties could soon see their bargaining power diminished.
Tom Dobosenski is the president of AMGA Consulting.