Data Mine: Urban mythbusting

Healthcare is not immune to having “urban myths” — widely held beliefs that usually have little supporting evidence but are totally wrong. Some healthcare myths are easily disputed: Science tells us that carrots do not improve night vision, coffee does not stunt growth and eating an apple a day doesn’t necessarily keep the doctor away.  

Other healthcare myths are more difficult to refute. If the facts conflict with the belief, people often don’t change their beliefs — they just look for new facts. One such myth addresses the relative productivity of physicians in health systems and those in physician-owned practices. The popular impression is that doctors who are employed by hospitals do not work as hard as physicians who own their own practice.

This belief — that physicians in hospital and health system-owned practices are less productive than doctors in physician-owned practices — is so widespread that it is constantly repeated as truth and is the basis for how many hospital executives relate to their employed physicians.

Fortunately, unlike personal opinions, there are definitive data that can validate or refute what happens in health system-owned practices. MGMA DataDive Provider Compensation has the largest database of physician productivity metrics in healthcare and summarizes information for physicians in all specialties by practice ownership.

Table 1 compares productivity and compensation reported by physicians in health systems and in physician-owned practices in the three principal primary care specialties of family medicine (without OB/GYN), general internal medicine and general pediatrics. Compare this information with that reported in three medical and surgical specialties. Of the possible productivity measures, work RBRVS RVUs are considered the most accurate measure of provider effort, because, unlike other productivity metrics such as gross charges or collections, it uses the RBRVS scale1 that measures the relative degree of provider effort, skill, risk and time for each procedure attributed to the providers.

In the three primary care specialties, the data clearly refute the myth that physicians who are part of health systems have lower productivity than their independent practice colleagues: 
•    Hospital/IDS-owned practice physicians in family practice report 3% greater work RVUs than those in physician-owned practices
•    Pediatricians report 2% higher work RVUs 
•    Internists report just under 1% greater productivity. 

The data for the medical and surgical specialists is mixed, as noninvasive cardiologists had 11% greater work RVUs, while orthopedic surgery had 4% lower productivity and urology reported 5% fewer work RVUs.

Individuals who have held on to this urban myth should not feel too ashamed. Examining past years’ information, primary care physicians in hospital-based practices reported lower productivity than those in independent practices as recently as 2014.

This raises a question: What happened? Again, MGMA DataDive provides insights when examining the type of compensation formulas in the responding practices. While independent practices are still more likely to base provider compensation on productivity, an increased percentage of health systems have adjusted their compensation methods to use productivity as the dominate methodology. With similar incentives, the results are comparable. Additionally, physicians who practice in health system-owned practices often report that their administrative responsibilities are a fraction of what independent practice physicians report, providing more time for patient care. Whereas independent practice physicians have dual responsibilities of clinical services and owning and managing a complex business, even with professional management, doctor-owners often must take time away from their clinical schedules for administrative responsibilities.

The second portion of the table reports median compensation for these same specialties; for many observers, these results will be as unexpected as what is reported for productivity. While the primary care physicians reported lower levels of productivity, family medicine and internal medicine reported greater compensation (with pediatrics being just slightly lower) than peers employed in health systems, while the medical and surgical specialists were just the opposite, with much higher compensation levels than independent physicians.

For insight into these differences, look beyond compensation and production data. Most health systems have compensation methodologies based on the locally defined “market” so their physicians are paid a competitive wage with physicians in private practices and those employed by other health systems. For the primary care physicians, where there is a large supply and relatively little financial margin in the practice, the market-based compensation will parallel but seldom exceed private practice. In the medical and surgical specialties, the health system enjoys the benefit of ordered ancillary services and the facility payments associated with inpatient admissions. Since health systems need to recruit and retain specialists in a very competitive market, they usually establish a base salary that competes well with what the doctors would earn in other settings and provide generous bonus opportunities that raise compensation levels.

In physician-owned practices, we observe a different situation: The practice owns laboratory and other ancillary services, and the margin generated by these services is part of the practice owners’ revenue pool. The added practice revenues more than make up for the lower level of production in the owners’ personal compensation.

Figure 1 provides further insights, reporting the median-compensation-to-work-RVU ratio for these specialties. Primary care physicians in physician-owned practices have a much greater ratio, while the opposite occurs in the medical and surgical specialties.

The standard for patient care is for medical decisions to be “evidenced based” with clinicians using their professional judgment to assess a patient and to evaluate the medical research to determine the appropriate treatment. The standard for management decision-making is similar. Instead of making business decisions on beliefs and urban myths, practice executives need to base their management decisions on actionable data, critical thinking and the evidence that the decision will result in the desired outcome.

Dig deeper

MGMA DataDive is the premier data benchmarking tool in healthcare. Access the industry’s largest benchmarking datasets in topics such as compensation, operations and cost and revenue. For more information on how MGMA DataDive can help your organization, contact sales@mgma.com or call 877.275.6462, ext. 1801.

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MGMA Consulting provides practices with solutions to their operational issues, including physician compensation models and examining revenue cycle to improve financial performance. Learn more: Call 877.275.6462, ext. 1877, or email consulting@mgma.com.

Note:

1. Centers for Medicare & Medicaid Services. “July 2017 updates for the Medicare Physician Fee Schedule per CR 10104.” Available from: go.cms.gov/2TERCH1.