Employed Doctors Are Sitting Pretty

(MoneyWatch)  Well, physicians in private practice may be singing the blues, but employed doctors are doing just fine, thank you. Despite the economic downturn, in 2008 they received an average salary increase of 4.4 percent for specialists and 4 percent for primary-care physicians, according to Sullivan, Cotter and Associates' 2008 Physician Compensation and Productivity Survey Report.

Nearly three-quarters of the survey participants handed out raises to their employed physicians, about the same percentage as did in 2007. But 10 percent of participating organizations cut doctors' salaries last year.

Productivity incentives are still the norm for employed physicians. While there has been an increase in the percentage of organizations providing quality incentives, they still average only about 2-3 percent of compensation. (Apparently, somebody forgot to send around the memo about the national campaign to improve quality.)

Altogether, 257 organizations participated in the survey, which generated compensation data for more than 41,000 physicians.

Data isn't out yet on 2008 compensation for members of the Medical Group Management Association, which includes groups of three and above. But for 2007, primary-care doctors in MGMA member groups got a 6.3 percent bump in compensation, and specialists received 3.2 percent more than in 2006. This despite cost growth that, MGMA said, continued to outpace the increase in practice revenues. How can doctors make more if overhead is eating up a higher portion of revenues? One possible explanation is that primary-care physicians earn more in larger groups, on the average. The big groups can pay more because they have specialty revenues, ancillary services and, in some cases, the support of a hospital system. This is undoubtedly one of the reasons why an increasing number of doctors in little practices are fleeing to the relative safety of hospital groups. And as they do, the median compensation of primary-care doctors rises.

If this explanation is accurate, it would also help to explain why employed physicians are doing so well in the midst of an economic crash.