Perfect Storm Ahead? Will Physician Pay Raises Shrink as Productivity Flattens?

Recent medical group compensation and productivity data surveys fielded by AMGA suggest trends for practices to watch.

AMGA has been collecting data on clinician compensation and productivity since 1986, well before the RVU system was in place. They’re used to seeing ups and downs as the market has changed and as new technologies have shifted patients across subspecialties. When AMGA crunched the data submitted by 270 practices this year, they found compensation has been climbing, slowly but steadily, even as the productivity measures of work RVUs and median net collections have flattened. More than three-quarters of the 140 specialties included in the survey experienced increases in compensation while the weighted average change in median work RVUs was up only 1.5 percent. AMGA says this trend began emerging a few years ago and it may signal a “perfect storm” on the horizon.

Many practices have managed to continue increasing the cash compensation they pay to physicians by consolidating and ramping up efficiencies, explains Wayne Hartley, MHA, vice president of AMGA Consulting. So far groups have been “finding dollars” so they can remain competitive at recruiting and retaining physicians, Hartley says, but “the cost curve will only bend so much.

“Where groups historically may have been able to do 3 or 4 percent annual pay increases, that’s starting to slow down,” he notes. “We’re going to see a much more moderated effect, meaning increases of 1 to 2.5 percent for a lot of specialties."

Hartley studies AMGA’s data from the perspective of 20 years’ experience in healthcare operations and physician consulting, including several years as a practice administrator and service line executive, and eventually director of operations, at Minneapolis Heart Institute (part of Allina Health). He talked with Cardiovascular Business about the implications of the survey findings for cardiologists and their practices.

Has AMGA noted “perfect storms” in past years’ surveys?

Think back to the mid to late 1990s, when there were changes with Medicare funding. There were times when reimbursement wasn’t increasing at the rate inflation was. Much like organizations are doing now, they looked at their cost structure and tried to figure out where to find savings so they could remain competitive with their physician pay levels.

Today, organizations understand it’s about the value, not just the volume, of services. They know outcomes must be there to maintain the revenue streams from payers who are putting a lot at risk around pay-for-performance incentives. Groups are concerned about being able to continue giving 3 to 4 percent increases year over year.

AMGA points out that 51 percent of specialties reported a decrease in median net collections this year. Cardiology seems to have been on the other side of that data point, with increases of about 5 percent over 2016 for both general cardiology and interventional cardiology. (Cardiac/thoracic surgery median net collections were down 0.7 percent.) Do you expect cardiology to be immune to flattening productivity?

I suspect cardiology will continue to benefit from the fact that there’s high demand for the service because a lot of Americans have cardiovascular disease. That level of demand might not be there for all specialties.

Are physicians satisfied with their compensation levels?

This survey didn’t measure that, but I can tell you anecdotally that a lot of physicians are more concerned about maintaining their current income than getting a large increase or market adjustment. Most physicians understand what’s happening in the industry. They realize there’s a need for more efficiency and for looking at things other than productivity for reimbursement and compensation.

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Based on what you’ve seen in AMGA’s data in recent years, should cardiology practices or clinicians be adjusting their behaviors, policies or approaches to compensation?

The issue that comes up is a desire to moderate the differences in compensation among the general cardiologists, interventional cardiologists and electrophysiologists in a group. They want to work together as a team, but in the market data there are substantial differences in the compensation levels and work RVU productivity levels among the subspecialties. They want us to recommend a more equal pay arrangement, but there are challenges. Productivity is still playing a big role in what you can pay while still observing fair market value. There are options, but it’s work that must include legal and compliance experts.

My advice to cardiologists is, think about metrics where payers are putting reimbursement at risk, such as heart failure and atrial fibrillation. Ask yourself what might need to change to meet those metrics and appropriately maximize revenue under the payer contracts. It’s going to require teamwork between primary care and cardiology to determine who manages acute episodes vs. chronic care needs. We see different models of how groups manage complex patients, but primary care and cardiology need to work together to ensure patients don’t fall through the cracks. If you’re not meeting the metrics in the value-based contract, it will impact reimbursement, which will impact compensation eventually.

When AMGA analyzed the work RVU trends, many specialties saw only +/- 1 percent changes over last year. In some cases, the trend started three years ago. What do you predict for the future?

There were years where the vast majority of specialties were up more than 1 percent. That flattening of productivity stands out, plus groups are telling us that collections aren’t keeping pace with expectations around compensation. We predict there are going to be smaller increases and the focus on productivity will switch to achievement of value-based metrics. We’re not predicting a drastic cut of 5 or 10 percent pay cuts for everyone. But we are entering a time where compensation increases may be very moderate.

How do you see compensation models changing?

Some groups we’ve worked with recently have said, “RVUs are still important. We have to maintain access and productivity and RVUs can help.” But some aren’t counting each and every RVU. They're setting RVU ranges, with pay increases linked to each range. They're giving physicians opportunities to earn more, but they want them to do the right thing for the patient and follow the practice model without worrying about each RVU. That’s how they are evolving with the market.

In many fewer cases, groups are going to a predominantly salary-based model where there is still stratification of pay based on productivity, minimally to stay within fair market value but also to maintain the practice’s financial viability.

A lot of groups are looking forward to a day when we’ve perfected approaches like panel size that take into account factors such as the gender and acuity of patients and they'll be able to use such measures vs. pure RVUs.