Why Physician Productivity, Compensation Are Leveling Off

Compensation per relative value unit was higher than average, but 2017 was the first year in more than a decade that physician compensation increased by less than 2%.

Physician compensation and productivity were listless in 2017, bucking a decade-long trend that saw annual increases between 2% and 3% in both metrics, a survey shows.

The findings by AMGA Consulting showed median physician productivity declined by a weighted average of 1.63%, while compensation increased only 0.89%.

Compensation per relative value unit was higher than average, but 2017 was the first year physician compensation increased by less than 2% in more than a decade, the survey showed. 

"Given the marketplace dynamics, there are several factors that we believe are contributing to this year’s results, including continued effects of EHR's, the aging provider workforce and the continued shift in the marketplace from volume to value," AMGA Consulting President Fred Horton, and COO Wayne Hartley said in an email exchange with HealthLeaders Media.

The weighted average change in median compensation in all medical specialties during 2017 was +1.2%. Weighted average change in median work RVUs was -1.5%, and compensation per work RVU was +3.3%.

For primary care, the weighted average change in median compensation in 2017 was +0.8%. The weighted average change in median work RVUs for primary care was -0.2%, and the weighted average change in compensation per work RVU was +2.3%.

Horton and Hartley say compensation is declining because of productivity declines.

"While compensation plans are shifting to include non-productivity metrics, the vast majority of production-based specialties still have a significant portion of compensation tied to their production (85% typically)," they said.  

Horton and Hartley said productivity declines to not appear to be linked to the growth of the employed physician model.

"We have analyzed past years' data related to productivity and compensation levels of independent vs integrated groups. In general, there is relatively the same level of production and similar levels of compensation," they said.  

It's not clear if the survey findings are a one-year anomaly or the start of a new trend.

"We believe it is too early to tell, however, regardless, it is a signal that operational efficiencies must be addressed," Horton and Hartley said. "The detail of the survey leads to a conclusion that compensation is flat or declining, production is flat or declining and compensation per unit of production is increasing."

"In this situation, a healthcare organization will pay an increased rate of compensation for each unit of production, however there are fewer units available to cover expenses and since each unit is paid at an increased rate, there is also less margin on those units as in the past. Less throughput and lower margin for that throughput, equate to worse financial performance, unless operational efficiencies can be created to make up for the margin decline. It is a significant wake up call to address operations and focus on execution of the creation of efficiencies," they said.

Squeezing the Turnip
 

Travis Singleton, executive vice president at physician recruiters Merritt Hawkins, and who did not participate in the survey, says the AMGA findings are not surprising.

"This is in part a case of getting the behaviors you reward," Singleton says. "If you reward documentation and process, rather than number of patients seen or volume of patient care delivered as measured by RVUs, that's what you will get."

Singleton says a growing number of productivity bonuses feature value-based metrics, which include quality documentation, adherence to treatment protocols, etc., while de-emphasizing number of patients seen and RVUs.

"Last year, 43% of contracts we saw with production bonuses featured a valued-based component, up from 7% in 2011," he says. "Value is harder to measure than volume and this may be reducing comp based on what now is considered "productivity.' It's no longer see more patients, rack up more RVUs, get more pay."

Singleton said some studies suggest that physician productivity may be close to topping out. He said a 2016 survey Merritt Hawkins conducted for The Physicians Foundation found that 80% of doctors are either at full capacity or are overextended, and only about 20% said they had the time to see additional patients.

"You can only squeeze so much juice out of the turnip," he says.

Horton and Hartley say the stagnant compensation and productivity metrics for physicians reflect a "very unsettled environment" as the healthcare sector transitions to value.

"Organizations must prepare for the shift by putting in place new systems and support to prepare for the shift. So, you have an unsettled operating environment and some degree of confusion on if the focus should be volume or value," they said.

"The degree integration has occurred over the past 5-10 years is significant," they said. "There are organizations with multiple EHRs, specialties that consist of several previously competitive practices and so on. More emphasis on operational capabilities, than on acquisition and growth, will likely be the next required phase."