The rising cost of labor is among the core concerns at healthcare organizations across the U.S., including on the physician side.
Kaufman Hall's May "National Hospital Flash Report," which is based on data from more than 200,000 providers, found that on the physician side, labor expenses accounted for 84% of total expenses in the first quarter.
The American Medical Group Association, a trade organization that represents multispecialty medical groups and integrated health systems, also recently released its Medical Group Compensation and Productivity Survey, which concluded that physician pay and productivity trends are unsustainable.
In conversations with Becker's, leaders with AMGA Consulting discussed the physician pay landscape. Here are six takeaways:
1. Significant productivity increases are driving compensation increases across specialties. The AMGA's latest survey, which is based on data for 189,000 providers in more than 190 specialties, found primary care physicians' median compensation increased 3.6% while medical specialties saw a 5.1% pay bump and surgical specialties had a 5.5% raise.
At the same time, the survey found that in a rollup of the top three specialties in primary care (family medicine, internal medicine, and general pediatrics and adolescent medicine), productivity increased at a rate of 4.6% (5,840 wRVUs in 2023 to 6,108 wRVUs in 2024). And in a rollup of the top three medical specialties, which include more than 2,000 providers per specialty, median compensation climbed 8.2% while productivity increased 8.9%.
2. Net collections are not keeping up with necessary compensation growth. Overall median net collections climbed 4.3%, which is below the increases seen in compensation (5.3% overall), according to the AMGA survey.
Fred Horton, president of AMGA Consulting, said in a news release, "The big challenge is how to maintain a provider supply when you continually ask providers to do more to fund increases, rather than funding such increases with collections that keep pace with inflation. This trend of production driving increases in compensation is not sustainable."
3. There is no perfect solution to help organizations achieve value. However, based on the experiences of Mr. Horton and Mike Coppola, COO of AMGA Consulting, for executives working for health systems, the ability to compete and perform in value is driven by the infrastructure, irrespective of the compensation plan.
"We still see a high number of organizations that are in value, but they pay based on wRVUs, productivity, or activity, such as panel size at the primary care level," Mr. Horton said. "But to say that you're going to just put in place a total base salary type environment and expecting it to help you transition to value is a dangerous approach. What we've seen is the ability to pay a base salary or straight salary is really linked to whether you have a highly standardized environment, as opposed to whether you're in value or not in value."
3. Hospitals continue to allocate an increasing share of their revenue to employee compensation, including pay and benefits for physicians. The Medicare multiplier, which is used to determine payment rates for services provided by physicians to Medicare patients, has decreased. For 2024, the Medicare Physician Fee Schedule conversion factor has been set at $32.75, a decrease of $1.14 (or 3.34%) from the 2023 conversion factor of $33.89.
"So reimbursement is stagnant. It used to be that less than 50% of net revenue went to physician compensation. And today, it's closer to 60%," Mr. Horton said.
That is why Mr. Coppola recommends that healthcare executives ensure structures are in place to support desired levels of productivity among physicians.
4. Incentives for physicians have remained relatively flat over the past several years, with sign-on and recruitment bonuses typically ranging from $20,000 to $30,000, according to the AMGA. Additionally, multispecialty medical groups and integrated health systems use student loan forgiveness as an incentive. Recently, the AMGA has observed an increase in organizations using tenure-based retention bonuses, though more so for nurse practitioners and physician assistants than for physicians.
5. Some organizations are considering retention bonuses for physicians based on experience, according to AMGA representatives. They noted that historically, physician compensation has been flat, with no differentiation based on years of service. Physicians may begin with a base guarantee that may exist for two years before transitioning to a standard formula that does not increase with seniority.
However, "over the last couple of years, we have seen organizations start to question that, I think because of the recruitment, retention challenges," Mr. Horton said. He said some organizations are now considering retention bonuses if the physician has been with the organization five, 10 or 15 years.
6. Physician unionization is on the rise. Unionization continues to gain traction among physicians as they seek representation at the bargaining table. Nationally, the number of medical residents in unions has grown from 17,000 to more than 32,000 in about three years, per CalMatters.
In the last six months, residents at Kaiser Permanente hospitals in Northern California, University of Chicago Medical Center and McGaw Medical Center of Northwestern University in Chicago voted to unionize.
Most recently, in a first in Delaware, attending physicians at ChristianaCare locations in Delaware and Maryland voted to join the Doctors Council, an affiliate of the Service Employees International Union.
According to the AMGA, a primary driver of the trend is not necessarily wages but rather issues related to support staff and decision-making affecting their practice. The trade association expects the trend to continue given the financial challenges and the need for adequate support staff, and that a majority of physicians are employed by corporate entities, such as a health system or private equity-backed group.