COVID-19 recovery: Physician compensation and productivity’s slow road back to pre-pandemic normalcy

As COVID-19 hospitalization rates have declined and public health restrictions have been lifted, businesses are resuming operations and individuals are shifting from their “new normal” to something more akin to pre-pandemic normalcy.

While COVID-19-related hospitalizations and deaths peaked in early 2021, 2020 is considered the height of the pandemic’s effect on businesses due to government restrictions on in-office work, requirements for social distancing, and the share of the population that self-quarantined to avoid infection. The pandemic’s effect on businesses of all types also was most prominent in 2020, as many businesses closed, instituted remote work, or changed their business model from in-person contact to internet sales. 

Medical groups and hospitals had similar mandates which substantially affected how they interacted with patients, as many healthcare facilities had to redirect resources from elective procedures to refocus staff and resources on COVID-19 patients.

The effect of COVID-19 in 2020 on physician compensation and medical group operations was described in two MGMA Connection articles — one describing how productivity declined and practice expenses increased during 2020,1 the other how practices responded to the pandemic-imposed restrictions to preserve their economic viability.2 The articles focused on how some physician specialties, principally primary care, were much less affected by the pandemic than the surgeons and medical subspecialists who faced severe limitations as hospitals closed operating suites and ambulatory surgery centers (ASCs). 

MGMA’s annual survey results from medical practices of all types, published via MGMA DataDive, provide significant insight into how medical groups responded to the pandemic. The recently released 2022 MGMA DataDive Provider Compensation (featuring 2021 compensation and productivity data) helps detail how, in 2021, independent practices recovered differently than their peers in practices that were part of a hospital or health system.

Table 1 displays medical compensation for physicians in seven specialties who practice in physician-owned and hospital-/health system-owned practices. As diverse as the specialties are in clinical practice and in their compensation levels, they share a common theme: Compensation in 2021 has fully recovered from the impact of the pandemic and, in many cases, it increased significantly. 

Figures 1 and 2 show the same information: They provide a visual comparison showing how compensation dipped for most specialties in 2020 from 2019 levels before rising again in 2021. The decrease in compensation during the height of the pandemic was most pronounced in the surgeons, radiologists, and medical specialists practicing in physician-owned groups.

Since physician-owned medical groups function as independent businesses, their physician owners essentially are compensated by the net of total revenue minus expenses. These doctors were substantially affected by the shifts in patient services and the closing of ASCs and hospital operating suites, which reduced revenue, while increases in practice operating costs lowered the residual profits available to pay physician owners.

The figures also illustrate how physicians in hospital and health system practices were somewhat insulated from the effects of COVID-19 on their compensation. Since physician compensation is essentially subsidized from revenues received elsewhere in the system, these doctors experienced less of an impact on their compensation; in most specialties, income levels were relatively consistent since 2019.

Compensation data from 2021 show that primary care physicians, diagnostic radiologists, general surgeons, and urologists in physician-owned practice had greater compensation than their peers in hospital-owned practice. There are a multitude of reasons for the difference, including receiving net revenue from ancillary services, infused drugs, and the facility fees associated with practice-owned ASCs, but the effect of ownership is the most probable influence.

Essentially, physicians in physician-owned practices had greater productivity than physicians in hospital practices. Table 2 shows that in 2021, physicians in physician-owned practices outproduced their peers in hospital practices in six of the seven specialties. To better understand the table, the percentage is the ratio of median work RVUs (wRVUs) in the two settings; for example, orthopedic surgeons in physician-owned practices reported 10,083 median wRVUs, which is 111% of the 9,075 median wRVUs reported in hospital-owned practices. 

Table 2 also provides insight into the long-term trend of how physician productivity compares in hospital- and physician-owned practices over the past 15 years. Some of the fluctuation is directly attributed to the level of productivity, but some of the difference is due to how physicians in hospital and health system practices are compensated. Just as Table 1 shows how physicians in hospital-owned practices were somewhat insulated from the effects of the pandemic, it also shows that median compensation for these physicians was much more consistent year to year than physicians in the same specialty in physician-owned groups. 

Table 3 completes the picture. It shows how physician compensation in physician- and hospital-owned practice compares over the 15-year period. Viewed in the context of the wRVU percentages, it is apparent that hospital systems partially subsidize noninvasive cardiology and orthopedic surgery physicians, as their compensation levels are substantially greater than their wRVU production would provide in physician-owned groups. The 15-year chart also shows how, historically, hospital systems defined the market level for compensation based on physician-owned group compensation levels and that physicians in hospital practices were paid slightly less than their peers in physician-owned groups. In more recent years, as greater percentages of physicians are in hospital practices, the definition of market rate has shifted to the compensation paid by hospitals, with only a minority of physicians in some specialties practicing in independent practices.

There is no doubt that COVID-19 will continue to affect American business and that many of our current economic problems, ranging from supply-chain fiascos to employment shortages, and rising inflation are related to the COVID-19 pandemic. This same certainty implies that physicians and hospitals will continue to be influenced by the operational and financial shifts that occurred as a result of the pandemic.

Improvement is underway, but the process will be slow. Some specialties and some settings will recover sooner than others and, in the long run, the healthcare environment of the future will be very different than the past.

Notes:

1. Gans D. “COVID-19 misery: How the pandemic affected physician compensation.” MGMA Connection, July 2021. Available from: mgma.com/dm-july21.
2. Gans D. “COVID-19 misery: How the pandemic affected practice financial performance.” MGMA Connection, October 2021. Available from: mgma.com/dm-oct21.