5 Significant Factors That Affect Physician Compensation

Calculating physician compensation has always been one of the principal challenges facing the health industry. Given the sheer complexity and variability of physician compensation, especially with the health industry’s protracted shift from volume to value, it’s no easy to task. But to achieve long-term success in the healthcare sector, getting physician compensation right is critically important.

For one thing, physician compensation can potentially exert significant influence on physician productivity, sometimes in an almost directly proportional relationship.

It can also affect the recruitment of healthcare providers, which is already a strenuous process. Every recruitment has a unique offer or commitment attached to it. Hence, keeping track of all such commitments made by the HR department and ascertaining value-based compensation becomes tough on the part of the medical groups and health organizations.

Recent studies reflect on the need for healthcare organizations and medical groups to adopt consistent, structured, and strong physician pay practices and technologically intelligent processes to ensure compliance, accuracy, and transparency for physician satisfaction and retention.

Physician compensation can widely vary depending on several factors

1. Specialty

A recent study by researchers from the University of California Davis School of Medicine revealed that primary care physicians earn low wages out of all specialty counterparts: “Wages of procedure-oriented specialists were approximately 36 to 48% higher than those of primary care physicians.”

In broad categories of practice, it’s the surgeons who earn the most. A better understanding of specific subspecialties revealed a greater disparity. The highest wages for subspecialties went to neurologic surgeons and radiation oncologists.

2. Group Type

Physician compensation further varies with the group type. Specialists like cardiologists, neurologists, gastroenterologists, etc. earn higher meridian salaries while working with single-specialty groups. On the contrary, general and trauma surgeons, internal physicians (medicine) earn more when working with multi-specialty groups.

3. Geography

Physician’s geographic location always has been a major differentiator owing to the higher cost of living in certain areas of the country. As Today’s Physician writes, “Physician pay shows so much variation from region to region that looking only at national data can be misleading.”

For instance, studies suggest that the southern United States has the highest salaries for anesthesiology, cardiology, emergency medicine, gastroenterology, and ophthalmology while Midwest U.S has the highest salaries for neurology and orthopedic surgeries.

4. Growth of Income

The growth of income over the years, at times, also determines the compensation of specialties. Higher-income growth ensures higher compensation.

5. Departmental Rank

A higher rank in the department clubbed with years of experience, can affect physician compensation considerably. As per studies, high ranking physicians in academic settings earn around 30% more than primary care professors.

6. Other Factors

The above factors aren’t the only ones that affect physician compensation. For example, external events like the COVID-19 pandemic can even have an impact. According to research from the Medical Group Management Association, nearly two-thirds (62%) of healthcare leaders report that compensation at their organizations has been impacted by the pandemic.

Strong compensation practices can manage all of these factors.

While national data remains to be the foremost factor in deciding physician compensation, meridians are in the process of becoming less meaningful in recent times. Local variables such as payer reimbursement, clinician supply and demand, and incentives are making compensation calculations ambiguous. With strong practices, processes, and enforcement of technology, medical groups, and health organizations can overcome these challenges and ensure accurate and legally compliant compensation calculations.