Physician compensation is rising but not keeping pace with inflation, MGMA survey finds

Despite physician and advanced practice provider productivity continuing its post-pandemic recovery, compensation gains are being outstripped by the most severe inflationary growth in decades, according to a new report.

Provider compensation increased across the board, with primary care physicians (PCPs) receiving the biggest increase last year. Growth in median total compensation for primary care doctors doubled from 2021 to 2022—from pay growth of 2.13% to 4.41%. But these gains were eclipsed by the rate of inflation at 7% and 6.5%, respectively.

Surgical and nonsurgical specialists saw their change in median total compensation cool slightly in 2022, dropping from 3.89% for surgical specialists in 2021 to 2.54% in 2022, and from 3.12% for nonsurgical physicians in 2021 to 2.36% in 2022, according to the Medical Group Management Association's 2023 provider compensation and production report.

The report reflects data from nearly 190,000 providers at more than 6,800 organizations and highlights the impact of staffing shortages and inflation on physician compensation trends. MGMA's data provides a snapshot of the industry as well as strategies healthcare leaders should consider to move forward. 

APP compensation experienced a moderate uptick within the last year, ranging from 4.08% to 9.22% depending on the specialty.

"While provider compensation is trending upward, unpredictable economic conditions continue to hamper salary growth and productivity," said Halee Fischer-Wright, M.D., president and chief executive officer at MGMA in a statement.

While healthcare providers have stretched their teams to meet rising patient demands amid staffing shortages and intense competition for workers, the dollars they earn for delivering high-quality care aren’t stretching as far as they once did, MGMA executives wrote in the report.

Compensation growth varied across specialties over the past three years.
Family medicine physicians (without obstetrics) saw compensation increase by 10.57% while urgent care doctors only saw a median compensation increase of 0.13%.

Productivity remained relatively flat or only slightly increased relative to pre-pandemic benchmarks, with the biggest change in work RVUs posted in dermatology, hematology/oncology, and family medicine (without OB). 

Staffing has been the biggest challenge for medical groups over the past two years, impeding progress in productivity and compensation. In an April 2023 MGMA Stat poll, medical leaders ranked staffing as the top roadblock to higher productivity.

Productivity is a challenge across the industry, but physician-owned practices report higher levels of productivity in collections, total encounters, and work Relative Value Units (RVUs) compared to their counterparts at hospital-owned practices. The difference in total collections ranges from $96,580 to $172,221 between PCPs, surgical and non-surgical specialists, and APPs.

According to the report, medical practices are evolving their staffing models and finding innovative solutions to address a difficult labor market, such as embracing the APP's role in healthcare practices. The most common specialties where APP utilization was reported were primary care (especially family medicine and pediatrics), pulmonology, urology, GI, urgent care, cardiology and surgical specialties. The most common reasons for increased APP use involved normal practice growth or the need to update staffing models amid difficulties attracting physicians—especially in rural care settings—amid higher rates of doctors retiring, the report authors noted. 

Additionally, medical groups are leveraging flexible or part-time physician roles, as well as contract and locum tenens work, according to the report.

Competition for physicians and APPs has been intense since the beginning of the pandemic and now in an era of staffing shortages. The survey data indicates that 46% of physicians and 18% of APPs were offered a signing bonus as part of the contract offer or negotiation, highlighting the "new normal" in the competitive arena of provider recruitment.

The report data also indicate a steady shift toward salary-based models and a corresponding decrease in production models since 2020.

"Evidence of growing use of salary-based compensation models aligns with the broader trend of consolidation of medical practice ownership toward hospitals and integrated delivery systems, whereas the receding number of independent groups, in which pure productivity models have historically been more common," the report authors wrote.

Permanent hires remain in short supply for America’s medical groups, with demand for contract and locum tenens work remaining steady in the early months of 2023. MGMA Stat poll in February asked medical group leaders how their levels of contract and locum tenens work would change in 2023 versus 2022. A solid majority (52%) said they expect those levels to stay the same compared to last year, while almost 3 in 10 (29%) expect to use less contract/locums work, and only 20% reported an expected increase in the year ahead.

An MGMA Stat poll in May also points to the slow adoption of value-based care throughout the industry nudging more medical groups toward incorporation of quality metrics in their comp models: 47% of medical groups tie quality performance metrics to physician compensation plans, according to the poll, versus 53% that do not. This represents a 5-percentage-point jump from a similar poll conducted in May 2022. 

Among practices not faring as well in the November 2022 polling, practice leaders told MGMA that their top barriers included lack of provider availability due to staffing shortages, especially among physicians, nurses, and support staff, fueled either by burnout or lower-wage workers leaving for other industries and increased administrative burdens from prior authorization causing disruption in care delivery. Practice leaders also said they encountered higher levels of patient no-shows that left unfilled appointment slots in provider schedules.

Conversely, practices that were on course or ahead of their goals noted several factors that aided them throughout 2022, according to the report. Some practices saw improvements simply by making the investment to hire more providers and add new service lines and other providers said they made changes to phone systems to reduce administrative work and improve scheduling.

Other strategies that practices cited include focusing on culture and incentives to positively drive productivity, as well as the implementation of dashboards and scorecards to set expectations and a stronger focus on calling no-show patients, monitoring daily schedules and recruiting new patients.

"Healthcare leaders must develop proactive plans and strategically budget for recruiting and retaining the future of their workforce—and this data will help them connect the dots as competition for talent escalates in the face of inflation," Fischer-Wright said in a statement.