Physician compensation trends could face years of uncertainty
The need for clinicians is increasing dramatically. New searches for physicians from hospitals and medical groups reached a 34-year record in the fourth quarter of 2021, said Tom Florence, president of permanent employment for physicians at staffing firm Merritt Hawkins/AMN Healthcare. Demand was maintained in the first two quarters of 2022, he said.
“Even during COVID, none of the main factors causing a shortage of doctors has disappeared,” Florence said.
The US population is aging and patients are delaying treatment during the pandemic, Florence said. As a result, more doctors will be needed to treat increasingly complex cases.
In a 2021 report, the Association of American Medical Colleges predicted a shortage of 37,800 to 124,000 doctors by 2034.
“Volume is back. We are adding doctors. We are not laying off or laying off anyone. We need to grow,” Florence said.
As demand grew, so did doctors’ compensation, although not enough to outpace inflation. Average wages rose 3.8% in 2021, according to Doximity’s 2021 Physician Compensation Report, compared to a 12-month inflation rate of 6.2% as determined by the consumer price index.
Despite economic conditions, doctors can almost always expect at least some increase in base compensation from year to year, Halverson said.
However, overall industry averages can be misleading. According to Modern Healthcare’s 28th Annual Physician Compensation Study, which analyzes data from eight surveys of consulting firms, annual specialty compensation levels ranged from -13.8% for cardiologists to 20.7% for plastic surgeons.
“In the geographic region and in some specialties, we are seeing supply and demand issues,” Halverson said.
However, he says, “There is usually a floor that people don’t go under. Even when there is a surplus of doctors in the market, compensation usually does not go down, or goes down much more slowly than it goes up.”
The experts also noted that the numbers do not tell the whole story of remuneration trends, especially when it comes to changes in pay structures.
According to a 2022 RAND Corp. study, performance-based compensation remains the most common form of payment for 80% of primary care physicians and 90% of specialists. But a growing number of employers are trying to downplay the role of performance-based metrics (the relative cost of labor units known as worker RVUs) in their compensation plans, said Dave Hesselink, head of consulting group SullivanCotter.
While RVUs likely won’t go away entirely, the variability in patient numbers during the pandemic has led employers to question whether they should be the primary mechanism for determining compensation, he said. Instead, they include elements of value-based payment, such as linking service fees to quality.
Florence’s attributes are moving away from performance-focused models towards the need for physicians.