Intense competition for physician services, failing economic conditions, crushing medical school debt, and myriad other positive and negative forces are having a curious side effect: More young doctors are considering rural areas for their first place to practice.
But the biggest news relating to how doctors are being paid is that compensation for 11 of the specialties tracked in
Modern Physician's 16th annual Physician Compensation Survey are not keeping up with the rate of inflation—calculated at 3.8% for 2008.
Unlike other recent years, no specialty saw a double-digit percentage increase in pay. Other significant trends are playing out as well and, with cash being in short supply, hospitals and physician practices are being forced to get “creative.”
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This creativity has manifested itself with increasing physician employment to go with growing use of compensation packages that include guaranteed income, signing bonuses, training stipends, education debt forgiveness and even temporary housing while former homes sit in a stagnant real estate market.
“I think one of the biggest prevailing themes that we see is the continued push with hospital-employed models—that has been an increasingly significant volume of work we're doing,” says Tommy Bohannon, senior director of recruiting and development training with Irving, Texas-based Merritt Hawkins & Associates.
He notes how, in a 2005-06 survey, 23% of his company's searches for physicians and certified registered nurse anesthetists involved hospital employment. For the period from April 1, 2008, to March 31, 2009, that figure was 45%.
“They're seeking shelter with the employed model, so they can do what they've been trained to do—practice medicine,” Bohannon says.
Also, while this year's compensation figures may seem depressed, Brad Vaudrey, a director at RSM McGladrey, in the Minneapolis office of the Bloomington, Minn.-based firm that conducted the compensation survey for the American Medical Group Association, says that the short-term future offers anything but relief. “I think it will be interesting to see what happens because the economic hit came so quickly at the end of the year, surveys may not have captured its effects,” Vaudrey says. “Next year, we'll probably see lower-than-inflation increases for the most part.”
The Modern Physician survey tracked physician compensation in 23 specialties using information from 14 healthcare search firms and medical organizations. New this year are data on compensation for intensivists and neonatologists, who are making an average of $279,853 and $260,829, respectively.
Of the 21 other specialties tracked by the Modern Physician survey, 10 saw average increases in compensation over the rate of inflation, while 11 were below. This included three specialties that saw decreases in average compensation: Plastic surgery compensation was down 7.7% to $384,490 from $416,361; anesthesiology was down 1.5% to $357,162 from $362,719; and radiation oncology fell less than 1% to $420,006 from $422,269.
Last year, obstetrics/gynecology and psychiatry saw decreases. The average pay rebounded somewhat for these physicians, with compensation for OB/GYNs increasing 4.4% to $277,269 from $265,618; and compensation for psychiatrists rising 3.1% to $203,160 from $197,058.
In the 2007 survey, three specialties saw double-digit compensation increases (oncology, 13.9%; pathology, 12.7%; and psychiatry, 10.9%). Last year, only one specialty registered a double-digit increase: plastic surgery, whose compensation rose 10.9%. But this year, all increases were kept in single digits.
Dermatologists saw the biggest percentage increase, with their average compensation rising 6.7% to $353,695 from $331,567. They were followed by orthopedic surgeons, whose pay increased 6.5% to $465,785 from $437,336.
Orthos topped the list as the highest-paid specialists. According to the survey, their pay ranged from $363,600 to $615,637. Invasive cardiologists were next, with an average pay of $452,842 (up 2.4% from last year), and a range from $387,600 to $496,068. Radiologists had the third-highest compensation, with the average pay being $436,500 (up less than 0.2% from last year), and a range in compensation from $391,000 to $483,000.
Despite growing attention to the need to strengthen the delivery of primary care, primary-care docs finished on the bottom of the compensation ladder. Family medicine specialists had the lowest pay with an average of $181,536 (up 4.5% from last year), and ranged from $166,848 to $212,032. Second-lowest were pediatricians, whose average compensation was $183,834 (up 6.5%), and their pay ranged from $150,000 to $217,000. They were followed by internists who had an average compensation of $196,495 (up 5.7%), and whose pay ranged from $179,958 to $222,377.
“Rural areas and smaller cities—depending on the impact the economy is having on them—they are being extremely creative” in their recruiting, says Kathy Murray, senior director of key accounts at St. Louis-based Cejka Search, adding that this is especially true for specialists such as orthopedic surgeons whose procedures are major cash generators. “They are bringing in significant amounts of revenue into a hospital system, and they are going to do whatever it takes to get them there.”
Murray says that this includes recruiting doctors earlier in their training and keeping the physicians' families happy.
“If it's a two-income family, I've seen organizations help the spouse look for a position,” Murray says. “A physician can generally practice any place. Their family, though, has to be happy or it becomes a retention issue.”
Quality of life and work-life balance also come into play, and one area where this becomes a heated point of compensation negotiations is payment for on-call services.
“It's a very contentious issue,” Murray says. “Some organizations simply are not going to pay for call. Others, especially if they have a Level 2 trauma center, they have to have those trauma surgeons on call to maintain that designation.”
According to a survey done by Dallas-based recruiter the Medicus Firm, while only about 5% of physicians in general would prefer to live and work in a small town or rural community, almost 40% of doctors-in-training would prefer such an environment.
“Maybe the perception is they can go there and make more money,” says Jim Stone, a managing partner with Medicus. “In general, residents and fellows are more concerned with immediate financial requirements because they have loans to pay back.”
Vaudrey says that these young physicians may not be off-base. “One thing we see is the higher-compensation areas are not necessarily the highest cost-of-living areas,” Vaudrey says. “Your traditional cost-of-living index is not the best measure of compensation.”
Lauren Hughes, M.D., president of the American Medical Student Association and a recent graduate of University of Iowa's Carver College of Medicine, says that she's looking forward to practicing in a rural area and was surprised to hear 40% of her peers may also be looking to do so. “That strikes me as quite high—not that I question its accuracy—but it's higher than what I've experienced anecdotally,” Hughes says. “If that's the case, however, that's exceptionally encouraging that 40% are interested in rural practice.”
Bohannon says debt-forgiveness incentives are commonly used by rural facilities. “That remains the best way for a rural hospital to attract young physicians,” he says.
But Hughes says that attracting physicians to rural areas with signing bonuses and debt forgiveness is only half the battle. “The challenge is to get them to stay after the payback period.”
A native Iowan, Hughes says that challenges rural healthcare organizations face include a lack of continuing medical education, nursing and information technology support structures, and often a lack of quality schools or employment opportunities for a physician's spouse.
“There are quite a few significant disincentives for practicing in rural areas,” Hughes says.
Despite these disincentives, Hughes says that a rural practice is in her future, and she's not discouraged that her chosen specialty—family medicine—is compensated at a lower level.
“I wouldn't be happy doing anything else but this particular field,” Hughes says. “At the end of the day, I'll still make an excellent living, and I'll be in the upper bracket of wage-earning in American society.”
That said, when Hughes is done with her training she will have hefty bills to pay. “I myself am just over $200,000 in debt—which is fairly cheap compared to some of my colleagues at private colleges,” Hughes says.
Murray says that recruiters are starting earlier than ever to hire residents, and most are hired months before their training ends.
Hughes agrees that recruiting seems to be starting earlier than doctors-in-training expect, but adds that this comes with a mixture of aggravation and comfort.
“It's pretty surprising to a lot of folks how early negotiations begin,” Hughes says. “For a lot of folks, the negotiation process is a little harried, but I think for (others), just knowing they have a job is a big relief.”
One tool being used to bring free-agent physicians into the fold is the signing bonus. Merritt, Hawkins reports that such bonuses were offered to physicians in 85% of their 2008-09 searches, compared with 74% and 58% in preceding years. The company reports that the average bonus is $24,850, but Murray says it's not unusual for orthopedic surgeons and other high revenue-generating specialists to get bonuses of up to $100,000.
Bonuses also may involve “being creative with housing assistance,” Bohannon says. He adds that, “More hospitals are providing mortgage assistance and short-term housing while they (physicians) sell their old homes.”
Irving, Texas-based Martin, Fletcher reports that hospitals may offer to make 12 months worth of mortgage payments while their new doctors are trying to sell their old houses or offer temporary housing until their property sells.
The economy also has affected older physicians.
“Physicians can't retire now,” Murray says. “Physicians who have retired are looking to get back into the workforce and looking to work as locums to supplement their retirement income.”
While the presence of older physicians hasn't lessened the demand for younger doctors, it has caused a few of them to reassess their long-term plans, Hughes says.
“I haven't heard many rumblings among my peers that this will cut down on their job opportunities—especially when there is a physician shortage,” Hughes says. “Rather, there is some concern that they will have to work longer than they had planned to originally.”
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