Physician, Practice Administrator Compensation Outlook ‘Flat’

July 28, 2011

As practices struggle to do more with less money, they’re making some difficult budgetary decisions - among them, compensation cuts.

As practices struggle to do more with less money, they’re making some difficult budgetary decisions - among them, compensation cuts.

“Flat or declining revenues in the face of continuing increases in operating costs are forcing many practices to sell or close,” MGMA president and CEO William F. Jessee, said in a statement. “For those that are able to survive, compensation levels are generally flat or declining.”

Just how flat are they? For administrators in practices of seven to 25 physicians, median compensation increased in 2010 - but by less than one percent. Compared to other administrators, that was a good raise. For administrators in practices of fewer than seven physicians, median compensation decreased 3.9 percent. 

The data comes from the MGMA’s Management Compensation Survey: 2011 Report Based on 2010 Data.

On the physician side of things, our recent blog relating to the MGMA’s Physician Compensation Survey, shows that primary-care physicians are faring better for salary increases than most specialists.

Still, these physicians are making compensation sacrifices along with their practice managers. Their compensation growth was minimal in 2010 - less than four percent for family, internal, and pediatric/adolescent physicians.

It’s difficult to gauge the current state of physician and practice manager salaries. But, if the compensation rate follows the trend of the past two years, it’s probably still relatively static. Our 2011 Staff Salary Survey found that 40 percent of practices cut or froze staff salaries in 2010. That number had risen six percent since 2009.

So what can physicians and practice managers do about flat compensation rates?

Some of the options practices could consider are implementing new reimbursement models to increase productivity through bonuses based on relative value unit (RVU) productivity measures; joining an ACO to participate in shared savings programs; or implementing a patient-centered medical home model.

All of these options could positively influence a practice’s revenue.But they come with other costs: complicated new reimbursement formulas, lack of independence and autonomy, adjustment to a very different type of work environment.

It appears that most practices would rather see how health reform initiatives play out before making any big changes. A majority of our 2010 Physician Compensation Survey respondents told us that in the next five years they expect to continue practicing medicine as they have in the past.

And that may be a good idea. Factors like the shortage of primary-care physicians could increase these physicians’ salaries; a 10-percent bonus for Medicare services provided by primary-care providers could boost revenue; the HHS proposal to simplify the claims process could eliminate revenue losses due to unnecessary administrative tasks.

Still, a key aspect of all of these options is that they are indefinite. They all could increase revenue. It’s still unclear if they would.

Right now there’s certainly no “right” strategy for all practices to follow. But at least there are lots of options.

What is your practice doing to deal with "flat" or "declining" compensation levels? What approaches are you taking? Join the conversation below.