Comp remains low for pediatricians, surges for subspecialists

Physician Compensation Report, December 28, 2006

Compensation in pediatrics is currently headed in two directions. On one hand, compensation for general pediatricians mirrors other primary care specialties--it has increased steadily but slowly, with median levels yet to break the $200,000 mark.
General pediatricians earned a median total cash compensation of $167,178 in 2006, an increase of 3.7 percent from the previous year, according to the 2006 Medical Group Management Association’s Physician Compensation and Production Survey.

However, it’s a different story for pediatric subspecialties, such as pediatric oncology, cardiology, neurology, or orthopedics.

Pediatrics subspecialists sometimes earn $100,000 more than their general pediatrician counterparts, and compensation for certain subspecialties is growing rapidly as communities seek expert care for children with unusual conditions.

Pediatric cardiologists had a median compensation of $273,331 in 2006, earning $106,153 more than general pediatricians, according to the MGMA survey.

Compensation in the subspecialty leaped from $208,626 in 2004, a 31 percent increase. Compensation in general pediatrics, on the other hand, grew only 5.2 percent during that same period.

Similar growth can be seen in other pediatric subspecialties. Pediatric oncology, for instance, saw a 20 percent compensation increase between 2004 and 2006, jumping from $167,817 to $201,021.

A portion of these compensation differences is due to variations in the type of work each specialty performs.

Subspecialists benefit from high-paying procedures and specialty work, whereas general pediatricians focus almost exclusively on cognitive and preventive care, which are typically less lucrative.

High costs, low reimbursement
Like in many specialties, rising costs and stagnating revenues are dampening compensation growth. However, pediatricians face unique challenges because of their patient base and the procedures they perform.

In particular, general pediatricians have been hit hard by the recent immunization crisis, according to Chip Hart and Tim Proctor, consultants with Physician’s Computer Company in Winooski, Vt. There has been a surge of new vaccines, and many payers have failed to recognize the total costs of providing them, causing physicians to lose money.

“Insurers want to pay for vaccines at the lowest cost, without a recognition of the total cost of providing that vaccine, such as overhead, storage, administration, etc.,” says Anne Francis, a pediatrician in Rochester, N.Y. “It’s one of the things that’s driving people away from pediatrics.”

But pediatricians’ reimbursement woes are not limited to immunizations.

Private payers tend to reimburse pediatricians at a lower rate than they do other specialties, in part because pediatricians historically have not been as business-oriented as some other specialists, Hart says.

However, pediatricians are beginning to realize their role in the market and their importance to payers, and Hart expects general pediatricians to become more business-savvy.

“Pediatricians, more than any specialty other than maybe obstetrics, bring patients to an insurance plan,” he says. “People don’t choose their insurance plan based on the quality of its brain surgeons. They choose based on whether or not their pediatricians participate. Historically, pediatricians haven’t taken advantage of that.”

Declining numbers of patient visits
For pediatricians facing high costs and reimbursement problems, patient volume and efficiency are incredibly important. However, ambulatory encounters have dropped nearly 7 percent since 2004, according to MGMA survey results.

Demographics are partly to blame. Pediatrics does not face the same degree of growing patient demand and physician shortage as do specialties that treat a high proportion of elderly people.

In fact, birth rates in many areas have slowed down or even declined.

“In the Rochester area, we’ve noticed a drop in the birthrate in the past 10 years, and that does affect the number of patients available and limits the number of new practices that can be started,” Francis says.

Another factor limiting patient visits is the advent of high-deductible health plans and health savings accounts.

Faced with the high deductibles, some parents aren’t taking their children for optional care or preventive visits as often, Hart says.

“You have parents looking at their nine-year-old saying, ‘He looks fine, he doesn’t need to go in for his annual physical’ because of the high visit rates they have to pay,” he adds.

Although pediatricians have yet to gauge the full effect, retail clinics could exacerbate the drop in patient visits if the convenience and lower costs of retail-clinic care lure enough parents, Francis says.

Growing groups
To deal with the high costs of setting up new offices and buying new, expensive vaccines, and to gain leverage when negotiating with payers, many general pediatricians in physician-owned, single specialty groups are consolidating into larger groups, either through mergers or successful group expansions.

The shift is being driven partly out of necessity and partly because of a change in physicians’ attitudes, says Francis.

“Older physicians were raised in an era when independence and free thinking were encouraged. I think the younger physicians now are being trained to work more collaboratively, and you’ll see more and more of them going into larger groups.”

The emergence of “super groups” may boost reimbursement specialtywide, as these larger groups negotiate with payers and raise the bar for all pediatric practices, Hart says.

Pediatricians in larger groups will have better access to technology and infrastructure that is often too expensive for pediatricians in small independent practices.

Physicians without resources such as electronic health records, which often require significant investment, may struggle to keep up in the coming years, Francis says. “Investment in infrastructure will be a key to success in pediatrics down the road.”
Elyas Bakhtiari is the editor of Physician Compensation Report. He may be reached at ebakhtiari@hcpro.com. This story first appeared in the December edition of Physician Compensation Report, a monthly newsletter by HCPro Inc. For information on all of HCPro’s products, visit www.hcmarketplace.com.