Starting Physician Compensation, Value-Based Pay On the Rise

July 17, 2019 - Starting physician compensation for medical specialists was mostly up from 2018 to 2019, while the salaries of primary care physicians plateaued, according to a recent Merritt Hawkins report.

The physician search and recruiting firm’s 2019 Review of Physician and Advanced Practitioner Recruiting Incentives showed that most specialties saw year-over-year increases in starting physician compensation, with increases ranging from 20.0 percent for urology to 0.5 percent for hematology and oncology.

In general, medical specialties experiencing the greatest demand also saw the largest boost in starting salaries, revealed the data from a sample of over 3,000 physician and advanced practitioner recruiting engagements.

The analysis found that 78 percent of the recruiting assignments in the last year were for medical specialists, with psychiatry, OB/GYN, radiology, and a slew of other “ologies” (i.e., neurology, gastroenterology, urology, and cardiology) accounting for a significant portion of the recruiting assignments.

As noted above, urology had the greatest increase in starting physician compensation with 20.0 percent from 2017/18 to 2018/19, followed by invasive cardiology (9.8 percent), anesthesiology (8.9 percent), emergency medicine (8.5 percent), neurology (5.3 percent), and psychiatry (5.0 percent).

Physicians practice invasive cardiology also reported the highest average starting salaries at $640,000. Orthopedic surgeons had the second highest average starting salaries at $536,000, followed by gastroenterologists at $495,000, and urologists at $464,000.

On the other end of the spectrum were family physicians. The primary care physician was at the lower end of the starting physician compensation scale with an average starting salary of $239,000. The 2018/19 average starting salary for family physicians represented an 8.3 percent decrease compared to the previous year.

Starting physician compensation for other primary care physicians were also on the lower end. The average starting salary for internal medicine physicians was $264,000 in 2019, a 1.2 percent increase compared to the previous year.

Merritt Hawkins noted that the starting salaries for the two primary care specialties are “in a holding pattern” after plateauing for the second consecutive year.

“[C]ompetition for primary care physicians remains robust but is not at the same level of two or three years ago as signaled by the declining number of family medicine and internal medicine searches Merritt Hawkins has conducted over the last several years,” the firm wrote.

“In addition, starting salaries for physicians typically have a ceiling since primary care physicians generally do not perform the high-dollar procedures on which many healthcare facilities still depend,” the report continued. “There is not as much latitude to increase their salaries as there is in the case of some specialists, as procedures continue to be economically rewarded above consultation in today’s healthcare system.”

Pediatricians were the only primary care specialty to see significant increases in physician compensation. Average starting salary for pediatricians was $242,000 in 2018/19, a 5.2 percent increase over the previous year.

While most physicians saw growth in their starting compensation in 2018/19, many also reported earning a production bonus. Seventy percent of searches for physicians included a salary with a production bonus, and of those bonuses over one-half (56 percent) were tied in whole or in part to value-based metrics, such as patient satisfaction and outcome measures.

The percentage of production bonuses tied to value metrics increased from 43 percent the previous year and 39 percent two years ago, Merritt Hawkins reported.

On average, the total physician compensation tied to value was 11 percent in 2018/19. But that percentage is up from 8 percent in 2017/18.

Volume-based production metrics still dominated the production bonus methodology. Seventy percent of bonuses used a formula with relative value units, and that percentage is up from 50 percent in 2017/18. Organizations also more frequently used net collections and number of patients seen to determine bonuses in 2018/19.

“The resurgence of volume-based metrics to determine physician production bonuses underscores the priority healthcare facilities place on rewarding physicians for seeing patients and performing a high volume of work, both to meet patient need and to ensure adequate reimbursement,” the report stated.

In addition to production bonuses, healthcare organizations are also using signing bonuses, continuing medical education (CME) funds, and medical education loan repayment to recruit physicians. The report showed:

• 71 percent of recruiting assignments offered a signing bonus, with the average bonus totaling $32,692
• 98 percent of incentive packages offered a CME allowance, averaging $3,620
• 31 percent of search assignments included medical education loan forgiveness compared to 18 percent the previous year and 25 percent two years ago, with the average amount of loan forgiveness being $101,571, up from $82,833 the previous year and $80,923 two years ago