Trend could prove unfavorable to independent clinical laboratory companies

More physicians now join hospital-owned practices than any other type of practice. That’s one conclusion reported in a survey conducted by the Medical Group Management Association (MGMA). This is a trend that may have negative implications for independent clinical laboratory companies and pathology groups that provide medical laboratory testing to office-based physicians.

In the MGMA survey, higher compensation packages offered by hospital-owned practices were cited as one reason why growing numbers of physicians choose a hospital-owned practice. The survey also determined that physicians believe they will have a better chance for reimbursements in hospital-owned practice settings, compared to other practice models.

Meanwhile, first-year compensation packages continue to show wide variation for single-specialty versus multi-specialty practices, as well as between specialists and primary care physicians. It is a bothersome trend, since the proportion of graduating physicians selecting primary care has declined in each year of the past decade.

Understanding Disparity on Physicians’ First-Year Compensation

According to “Physician Placement Starting Salary Survey: 2010 Survey Based on 2009 Data,” which was created through a collaboration between MGMA and the National Association of Physician Recruiters (NAPR), first-year guaranteed compensation for primary care physicians averaged $160,000 in 2009, while specialists received around $230,000. The report also indicated that first-year compensation for specialists in single-specialty practices has decreased by 2.1% since 2006, while first-year compensation for primary care physicians in single-specialty practices jumped 17.4% during the same period.

Higher compensation packages offered by hospital-owned practices

Higher compensation packages were offered by hospital-owned practices.

However, in multi-specialty practices, first-year compensation for specialists increased 3.2%. And though lower than single-specialty practices, first-year compensation for primary care physicians in multi-specialty practices increased by 14.3%.

“Physicians are moving to hospital-owned practices for a number of reasons,” said Brenda Lewis, President of B.E.L. & Associates, Inc., and MGMA survey advisor committee member, in an MGMA press release. “There is uncertainty of reimbursement for the future. Physicians are looking to sustain income to pay office overhead and have a paycheck to take home, and those with large Medicare populations are more likely to want to move to hospital-employed positions.”

3,500 Healthcare Providers Participated in the MGMA/NAPR Survey

The MGMA/NAPR survey was comprised of data compiled from the accepted offers of 3,500 providers across America. The report was based on:

• Specialty

• Practice type

• Geographic region

• Practice model

• Practice size

Also included were:

• Bonuses

• Tail coverage

• Loan forgiveness

• Vacation

• CME time

The Massachusetts Medical Society (MMS) published a review of the MGMA/NAPR survey in their newsletter, which The New England Journal of Medicine (NEJM) posted on their career center website.

According to the review, “Economic pressures are complicating employers’ decisions on the best structures of offers [to graduating physicians]. They must be competitive while still minimizing the group’s risk and taking into account financial parameters.

“Decisions are equally complicated for job-seeking physicians who are balancing the need to reduce high debt, but still face the uncertainties of the housing and employment markets. The results of this study will help groups to learn what is being offered and determine the right mix of compensation, benefits, and incentives,” the MMS review concluded.

The MMS review’s author Tammy D. Jamison, Director, Physician and Executive Recruiting, Lehigh Valley Health Network, and President of the NAPR, wrote that the physician recruiting market is being affected by “shortages,” and healthcare organization are being driven to offer higher and higher compensation packages to remain competitive.

“In fact, in some specialties, graduating fellows are being offered the same or more than experienced physicians,” wrote Jamison. “Specifically, fellows in infectious diseases and hematology/oncology are being offered more than their practicing colleagues. This is happening most notably in hematology/oncology, with median compensation offered to fellows at $350,000 and $300,000 to newly hired, experienced oncologists. Similar trends are noted in emergency medicine and neonatology, though the differences are slight.

“There are also differences in compensation level based on the type of model a physician joins, whether a single or multispecialty group practice or an employed hospital group. With the exception of only three specialties—surgery, GI and endocrinology—starting salaries were the highest for physicians joining employed hospital practices. Many recruiters have commented on the increasing number of physicians who chose employed hospital practices over private practices,” concluded Jamison.

MGMA will be publishing its 2011 Physician Placement Starting Salary Survey (based on 2010 data) shortly. Dark Daily will extend its coverage of this trend when the 2011 survey is released.

Unfavorable Trend for Independent Clinical Laboratory Companies

In the meantime, clinical laboratory managers and pathologists should recognize that an increasing proportion of graduating doctors are not accepting “partner-track” positions at private medical groups. Rather, they are opting to take salaried positions at hospital-owned physician practices. Effectively, this trend means that there will be fewer physicians practicing in private practice settings.

Because a hospital-owned physician practice will typically use its hospital’s clinical laboratory for its medical laboratory test referrals, this trend may lead to a measurable reduction in the number of physicians practicing in private medical groups. In turn, that points to a decrease in the number of office-based physicians that can direct their patients’ medical laboratory test referrals to independent clinical laboratory companies.

—Michael McBride

Related Information:

MGMA Physician Placement Report: 65% of Established Physicians Placed in Hospital-Owned Practices (MGMA Press Release)

Physician Placement Starting Salary Survey 2010 Report Based on 2009 Data

MGMA Physician Placement Starting Salary Survey Highlights (NEJM)

The Dark Report Pathology Compensation Trends Recording