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MGMA Report Links Physician Compensation to Practice Ownership

HealthLeaders Media Staff, October 28, 2010

Hospital ownership can make a significant difference in both revenues and compensation, a report from the Medical Group Management Association finds.

Physician group practices owned by a hospital or integrated delivery system (IDS) have lower per-physician revenues than do their counterparts practices not owned by hospitals, MGMA's Cost Survey for Integrated Delivery System Practices: 2010 Report Based on 2009 Data finds.Practice losses in groups owned by a hospital or IDS often arise from accounting systems that reallocate income and cost; thus, they tend to have lower revenue figure, according to MGMA.

The median total medical revenue for a multispecialty hospital-owned practice was $448,597 per full-time-equivalent physician, $350,011 lower than in not-hospital-owned groups ($798,608).

Those findings—and MGMA's explanation—make sense, Beth Ward, executive vice president and chief financial officer for Wellmont Health System tells HealthLeaders Media. "Hospital-based physician's revenues are accounted for in the hospital—technical—revenue stream and not the physician—professional—revenue stream. The numbers are not a surprise. The rationale and reasons stated are sound and appropriate," she says.

The report also found differences in compensation between owned and not-owned practices.

Specialists physicians working in multispecialty hospital-/IDS-owned practices earned 19.85 percent less in total compensation than those in multispecialty practices not owned by a hospital or IDS-owned practices. Specialists in hospital-/IDS-owned practices earned a median total compensation of $294,984, compared to $353,549 for those in practices that were not owned.

Primary care physicians working in multispecialty "owned" practices reported median total compensation of $192,116. Those in multispecialty not-owned practices earned $179,688 in median total compensation.

The need for primary care coverage and referrals in a hospital-/IDS-owned system may contribute to the overall difference in compensation," Jeffrey B. Milburn, MBA, CMPE, MGMA Health Care Consulting Group said in a prepared statement. Such data will help practice managers striving to benchmark their financial performance, he added.

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