Low reimbursement depresses compensation

Pediatric medicine

Low reimbursement depresses compensation

With their reimbursement rates often driven by Medicaid, pediatricians are among the lowest paid of all physicians. And although career satisfaction remains high, continued financial pressures may lead to a pediatrician shortage, especially outside of large metropolitan areas.

According to MGMA’s 2008 Physician Compensation and Production Survey, the median compensation for pediatric/adolescent medicine was $182,727, up 4.89% from the previous year and 15.03% from 2003. That’s slightly more than the 2007 median compensation for all primary care: $182,322.

The overall number can be misleading. For one thing, it encompasses some stark disparities: Median pediatric cardiology compensation is $269,859, whereas for child development, it’s $148,978. In addition, perhaps more than any other specialty, compensation varies by location, says Beth A. Pletcher, MD, pediatric geneticist at the Institute of Genomic Medicine in Newark, NJ, and chair of the American Academy of Pediatrics’ Committee on Pediatric Workforce.

Small gains

Historically, pediatric comp has been lower than most other specialties. However, it may be gaining a little ground, and it is now on par with internal and family medicine, says Jeff Laub, director of pediatrics at Salt Lake City–based CompHealth Permanent Placement. Not only has pediatric compensation increased, he’s also seen sign-on bonuses and stipends for residents.

The Merritt Hawkins & Associates (MHA) 2008 Review of Physician and CRNA Recruiting Incentives found that search assignments for pediatricians, which had been flat or declining for about a decade prior, increased from 2006–2007 and 2007–2008. Moreover, the 2008 report found that this increased demand is having some effect on the financial incentives being offered to recruit them.

Nevertheless, the numbers remain relatively low: The average offer made to certified RN anesthetists in the 2008 review period was $185,000, compared to $159,000 for pediatricians, according to MHA.

Compensation challenges

“Pediatrics continues to be one of the lowest compensated specialties, and I really do not see anything on the horizon that will change that reality,” says Fredrick T. Horton, president and CEO of Horton, Smith & Associates, a physician recruitment firm in Overland Park, KS. “Pediatricians tend to perform mainly cognitive services in their practices and, as such, will see continued low reimbursement and, therefore, low compensation.”

Horton points to the following two trends in particular:

  • Limited ancillary income. Compensation is increasingly driven by the ancillary revenue physicians are able to produce, explains Horton. But generally, in primary care and pediatrics in particular, there’s little opportunity to generate ancillary revenue.
  • Flat reimbursement. “We see a continuing trend of limited increases in most of the services and fees that are reimbursed,” Horton notes. “The macro trends of flat-to-moderate increases in Medicare have a downstream impact on commercial payers, thus leading to an overall market basket of payers providing limited, if any, increases in reimbursement.”

Medicaid issues

Pediatricians face more reimbursement challenges, says Pletcher. Because of how Medicaid is calculated, comparable services provided to children are reimbursed at a lower rate than are those for seniors, she says.

On average, Medicaid compensates at 72% of Medicare. And the Medicaid rate varies dramatically state by state. For example, in New Jersey, where Pletcher is based, the rate is only 34%. So, at least for pediatricians who care for numerous Medicaid patients, compensation may be well under the median, even for their specific region. Private payers, following suit, tend to reimburse pediatricians at a lower rate than those in other specialties.

Another issue is vaccinations. Pediatric practices often lose money on vaccines. They have to pay more than retail-based clinics that buy them in bulk, Pletcher says. Often, the reimbursement rate doesn’t cover the vaccine and related costs.

Such factors may contribute to fewer pediatricians, or at least reduced access, Pletcher says. “There is a point at which one can no longer practice good medicine when the patient volume needed to sustain a practice reaches a critical level,” she says. Small practices without outside support may be forced to limit or turn away patients with Medicaid or Medicaid-managed care insurance. “This isn’t a theoretical any more, but a reality,” Pletcher says.

Horton expects compensation issues to shrink the pool of pediatricians. However, unlike the situation with specialties, the shortage won’t be caused by the demand issues associated with the large number of aging baby boomers, but rather by the overall reimbursement picture.

“Primary care and all cognitively oriented specialties will be challenged by the flat to moderately increasing payment trends, which tend to result in a limited number of physicians choosing those areas of medicine,” Horton says.

Increasing numbers of pediatricians are considering early retirement, Pletcher says.

But more significant is the issue of access. Regardless of the total number of pediatricians in practice, access remains a concern in many areas of the country, Pletcher says.

As with other physicians, pediatricians are attracted to the big city. As they finish training, they are more likely to move to large metropolitan areas. Lifestyle issues, not demand, drive the distribution. The situation is even worse for pediatric subspecialists who are generally located in those areas, Pletcher says.

Pletcher points to another interesting trend: Demand is increasing for male pediatricians. She says according to the American Board of Pediatrics, 68% of pediatricians entering the work force in 2007 were women. Increasingly, practices are looking for men.




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