On the lookout: A tight physician market in a post-COVID-19 world calls for competitive compensation

The year 2020 has been a remarkably challenging period for the healthcare industry, with intense pressure on physicians during the COVID-19 pandemic. Doctors have learned to cope with new safety protocols, while much of the industry has absorbed the financial impact of reduced elective procedures and patient volumes. And those providers on the frontlines of acute care have worked tirelessly helping patients in need, risking their health in the process.

In an average year, approximately 6% to 7% of the physician workforce changes jobs or location, meaning approximately 50,000 physicians will accept new positions in 2020 alone.1 Even in today’s softer recruitment environment in which more doctors are temporarily available, hiring remains a sizeable investment — up to $250,000 for a single candidate when you factor marketing, sign-on bonus, relocation stipend and other expenses.2 Interview costs alone can total approximately $30,000 per candidate.3

It’s also a time-consuming ordeal, requiring 7.3 months on average to fill a family medicine role and 7.9 months for a surgical specialist such as a cardiologist, according to Jackson Physician Search’s Recruitment ROI Calculator. Respectively, those vacancies can lead to $503,000 and $1,607,000 in lost revenue for a medical group.

Demographic trends are contributing to a growing doctor shortage: Some estimates suggest that 30% of the physician population is at or near retirement age. Combine that with the prohibitively large costs involved in training to be a doctor and decades of student loan debt, and we are seeing an ever-increasing void in the specialist community.

As the business of healthcare returns to relative normal, it is the ideal time to resuscitate your physician recruitment process. Searches have decreased as much as 25% to 50% for some healthcare organizations and medical groups. Operational cutbacks and mandates to cancel or delay elective surgeries have meant that overall revenues are down, making recruiting of non-essential employees a lower priority. But essential physicians remain in high demand.

The COVID-19 crisis will not affect demand in the long term, and while many doctors are understandably concerned about the safety of relocating at this time, the surplus of physicians is already being depleted and levels should return to normal by late fall. If you wait until January or February to redouble your recruiting efforts, hoping for some additional stability in our unpredictable world, your practice may end up behind, especially as you hope to find qualified candidates in competitive specialties.

Broader trends for physicians as employees

Justin Chamblee, CPA, senior vice president with the Coker Group, a healthcare consulting firm, sees the COVID-19 pandemic accelerating the trends of even more physicians moving beyond the self-employed, private practice model. While hospital employment is the most common place to shed the risk of private practice, alternative options are available. The growth of private equity and venture capital investment in healthcare, not to mention the pandemic’s increased focus on telehealth, have created new opportunities for physicians.

According to MGMA CEO and President Halee Fischer-Wright, MD, MMM, FAAP, FACMPE, more than $60 billion in private equity purchases in the medical group market took place in 2019, up from $22.3 billion in 2018.4 As investors recognize the revenue generated by specialty medical practices, lucrative options have become available for highly trained physicians.  

“We’ve seen an uptick in the number of physician deals in this environment, with even more physicians moving into an alternative setting beyond private practice,” Chamblee said. “Rather than bearing full practice risk, they understand the benefits of working for others, relative to the value of autonomy in individual practices. In specialties such as cardiology, the pendulum has shifted and physicians are now mostly aligned with health systems.”

This is a virtual reversal of the climate felt before the Obama administration, during which the majority of physicians owned practices or operated as independent contractors. More and more, physicians have sought hospital employment to escape the fluctuations of running their businesses. The income security and predictability of work hours, not to mention less stress from practice management or exposure to government regulation, has made it more attractive for many physicians to work as employees.

Also, with the Centers for Medicare & Medicaid Services (CMS) acting quickly to allow full reimbursement for telehealth visits during the early days of the pandemic, we’re hopeful at the time of this writing that those policy changes will be made permanent. Telehealth’s long-awaited popularity and acceptance has created many new working options for doctors.

An almost half-year-long lull in the hiring market for some medical group and healthcare facilities now means physician candidates will have even more choices in finding the best fit for their profession and lifestyle.

How to compute a fair deal for candidates as compensation rises

MGMA’s 31st annual Provider Compensation and Production Report found that average total primary care physician compensation rose 2.6% from 2018 to2019, reaching $273,437. Overall, compensation for most physician specialties continued to increase. Urgent care and pulmonary specialists led these salary increases, from $259,661 to $277,393 and $385,024 to $406,245, respectively.5

Some specialists who are paid on volume (wRVUs) may end up making less money overall this year, as elective surgeries have been postponed and patient care has become more complex. But as volumes begin to return, 2021 will certainly be better.

It is expected that compensation will continue to trend higher as our national physician shortage worsens and will lead to more competition for qualified candidates. I personally believe we will see an environment in which demand is so great that physicians become the equivalent of free agents in professional sports, with bidding wars for their talent. Roadblocks such as the Stark Law will also become a discussion point to ensure physician income and security.

Evaluating and benchmarking compensation data is always a challenge, especially with the unusual circumstances experienced during the pandemic. The disruptions in productivity and non-emergency workflow during the first half of 2020 will likely produce compensation data as unusual as this year’s pandemic-impacted professional sports statistics.  

 Chamblee said it will be interesting to see if survey data for physician salaries ends up being lower this next year as a result of budget cuts and delays in elective surgeries, as wRVUs flatten and organizations reexamine their value-based care arrangements, or if compensation will remain consistent as post-pandemic disruptions fall by the wayside.

A recent MGMA webinar entitled, “Interpreting Compensation Data for Physician Recruitment Success,” suggests that the accuracy of compensation data varies widely, with MGMA’s data generally being considered the “gold standard” for accuracy. As a result, it’s critical that healthcare administrators utilize the most accurate compensation data, such as MGMA DataDive Provider Compensation, to create their compensation offers.

It is also important to understand total cash compensation (TCC) and formulate plans that include every aspect of compensation; a fair market value (FMV) opinion may also be necessary as an objective measurement of the compensation offer.

Increasingly, salary is just a portion of a compensation package, as employers look to remain competitive and build a long-term relationship with physicians. Medical groups may want to consider options including student loan forgiveness, a housing allowance, sign-on bonuses or even time for sabbaticals or research projects. Other perks such as low-interest loans, deferred compensation, personal financial advisors or even tuition assistance for a physician’s family are also common offerings.

As regular volume returns across segments of the healthcare world, medical groups will need to address their staffing shortages. We anticipate that there will be a huge rush in the latter part of 2020 to fast-track and incentivize hiring, especially as healthcare administrators consider the extra time required for onboarding, including relocation and licensing for out-of-state practitioners.

That’s why now is the ideal time to get back on track with recruitment if you hope to meet your 2021 staffing plans and revenue goals. COVID-19’s impacts will continue to reverberate through the industry, but the time and money required to find new talent remains unchanged.

Notes:

1. Jackson Physician Search. “Interpreting Compensation Data Sources for Physician Recruitment Success.” July 8, 2020. Available from: bit.ly/3fSjO3q.
2. Ibid.
3. Schutte L. “Understanding the Real Costs of Recruiting and Retaining Physicians,” Recruiting Physicians Today, May/June 2012. Available from: bit.ly/2vaWigi.
4. Shryock T. “Private equity in healthcare.” Medical Economics. Nov. 12, 2019. Available from: bit.ly/2DPPPvV.
5. MGMA. “New MGMA Research Finds Physician Compensation Increased in 2019.” May 20, 2020. Available from: mgma.com/phys-comp2020-pr.