Why more practices are giving physicians raises

May 14, 2018

Greater competition for services and other factors are resulting in pay raises-and other benefits-to physicians at many practices.

After several years of not giving raises, things have turned around for Bender Medical Group, Inc., in Fort Collins, Colo.

John L. Bender, MD, MBA, the CEO of the physician-owned group, says his practice reviews physician salaries at the end of each year. It has given physicians raises since 2014, after several years of being flat. The average salary increase over the three-year period was around 16 percent for a full-time employed family physician. 

Production was up, mostly as a result of implementing medical scribes to take notes while the physician talks with and treats the patient. “This boosted provider bonus payouts as revenues increased from team productivity,” Bender says.

But not all physicians in the group received raises. “Raises are still about recognizing what value a physician brings to the table and what they can negotiate,” Bender says. “It’s important for a physician to know their revenue numbers, and to also understand how he or she contributes to the organization’s overall efforts.”

Similarly, Shannon Davis, the office manager for Littlerock Family Medicine, a private practice in Tumwater, Wash., was able to give the entire team raises this year after a few years of not being able to due to limited resources.

“Staff members in our billing department worked hard to recoup as many outstanding payments as possible and chased denials from insurance companies, making raises possible,” she says.

These two practices reflect data from the 2018 Physicians Practice Staff Salary Survey, indicating that more practices plan to give raises beyond cost of living this year. According to the data, 42 percent said they plan on increasing annual salaries, up from 34 percent in 2017.

Competitive hiring environment

Phillip Miller, a vice president, with physician job search and staffing firm Merritt Hawkins and Staff Care can certainly attest to the competitive market for physicians.

“Over the past 30 years, a multi-billion dollar industry has grown up around physician recruitment and staffing,” he says. “Just about every hospital as well as larger medical groups have their own in-house physician recruiters and may also use outside recruiting firms.”

Bender can attest to this. “We saw increased marketplace pressures from two local health systems that heavily recruit family physicians, as well as a downturn in the availability of resident physicians to rotate through our clinic,” he says. “That compelled us to bargain harder to retain our current staff.”

Merritt Hawkins’ 2017 Survey of Final-Year Medical Residents indicates that 76 percent of physicians about to finish residency receive 50 or more recruitment offers during their training; 55percent receive more than 100 recruitment offers.

For this reason, paying higher salaries to retain physicians has become a priority for practices.

About 13 percent of primary care physicians relocate every year, according to the data firm SK&A. “Offering competitive compensation is one way to prevent physicians from exploring greener pastures,” Miller says.

Furthermore, a growing number of sites of service are vying for the same physicians-including hospitals and hospital systems, medical groups, urgent care centers, Federally Qualified Health Centers, retail clinics, and insurance companies.

Demand for care

There are many other reasons why more practices are giving physicians raises, such as a growing need for care. “Demand continues to be strong for primary care physicians,” says Miller. For 11 consecutive years, family medicine has been Merritt Hawkins’ most requested search assignment, which is unprecedented in its 31-year history. Internal medicine has consistently been its second or third most requested specialty.

Demand is driven in part by U.S. population growth, which grew by 28 percent from 1987 to 2010 when it reached 310 million. The U.S. Census Bureau projects it will to grow to 383 million by 2040. An aging population is also a contributing factor-approximately 10,000 baby boomers turn 65 every day, and people in that cohort visit a physician at three times the rate of younger individuals.

In addition, emerging value-based delivery models that feature team-based care are primary care driven, with these physicians being both gatekeepers and the key coordinators of care who help ensure quality and cost effectiveness. “These models typically are implemented by large, integrated health systems that may require dozens of primary care physicians to be effective,” Miller says.

Another reason why demand for care has increased is because about 91 percent of Americans now have health insurance-the highest rate ever. “The robust employment outlook across the nation and the Affordable Care Act have created an environment in which a lot of people have access to insurance,” Miller says.

When the individual mandate goes away in 2019, he expects premiums to increase and more people to be uninsured. Nonetheless, demand for doctors will remain high because it is mostly driven by older Medicare patients.

Physician shortages

In light of increasing demands, physician shortages are growing. The Association of American Medical Colleges (AAMC) predicts a shortage of up to 104,900 physicians by 2030, with about 43,000 of them in primary care.

“Shortages are driven in part by rising demand, but also in part by a constrained supply of physicians,” Miller says. “Supply is inhibited by the long-standing cap on what the federal government pays for graduate medical education, but also by changing physician practice patterns. Younger physicians prefer a controllable lifestyle with set hours and vacations, reducing overall physician full-time equivalents.”

The AAMC projects that physicians who are 35 years old or younger today will work 13 percent fewer hours than previous cohorts as a result.

Other financial perks

In addition to increased salaries, physicians are receiving other financial benefits. Miller says signing bonuses are common and are offered in 76 percent of Merritt Hawkins’ search assignments. Continuing medical education, moving allowances, health insurance, and malpractice and disability insurance are also common. Educational loan forgiveness is offered in nearly one-quarter of searches.

As a small independent clinic, Davis says the practice can’t compete with the big health powerhouses in terms of salary. “So we compensate with offering scheduling flexibility and maximizing the number of patients primary care physicians see to two per hour,” she says. “If [physicians] are motivated solely by money, they will seek work at a bigger outfit. By sharing the additional income we recover with staff members, it shows that we appreciate them.”

The pitfalls of not giving raises

With so much competition, a conspicuously low salary can lead to turnover. “It should be stressed, however, that compensation alone cannot buy physician engagement or long-term commitment,” Miller says. A practice’s quality, including schedules, numbers of patients seen, group governance, quality of the clinical staff, and level of communication are more important.

The risk of not giving raises can result in losing a physician, and sometimes staff will follow them.

“Non-compete clauses are becoming harder to enforce, because courts tend to rule them as restraint of trade, so it is not just about losing the physician, it’s about losing the patient base as well, and perhaps even the entire care team,” Bender says.